Ethereum is the most successful blockchain out there, most of the useful applications in the crypto community are using it. But Ether token (ETH) isn’t even close to it in terms of the market appreciation. Why? And what does that mean to Ethereum future?
Ethereum is much younger than Bitcoin, but it has already become one of the most prominent elements of the crypto industry.
Many popular tokens are based on Ethereum (the most popular stablecoin – Tether, for example). And the rise of NFT is nothing else but a pure Ethereum blockchain triumph.
But as usually there are some spots on the sun. Including unlimited token release, burned coins, and protracted transition to Proof-of-Stake protocol. Ether token cannot be directly associated with Ethereum success.
And some critics say ETH itself is not a coin to put high hopes on.
Ether founder Vitalik Buterin thinks the future of Ethereum can be ‘dystopian’ because of the ETH whales, who can drop the vision of the community.
So what Ethereum performance to expect this year? Is it safer to keep your money in BTC? Let’s try to gaze into Ethereum future.
Bitcoin vs Ethereum
Ether’s value has increased from $0.311 to the highest point of $4800 at the end of 2021.
Despite its decline to $2200 at winter ETH still represents a lifetime return on investment (ROI) of about 707,296%.
All the Ether DeFi and NFTs applications, high gas (transactions) fees on the network, and slow transition to ETH 2.0 update made this crypto extremely complicated and volatile.
Far more plain and transparent Bitcoin sometimes showed even better performance in terms of its value. And market capitalization with everyday volumes of trading says BTC as crypto is still at least two times more popular than ETH.
But is it legit to compare Bitcoin to Ethereum?
“Bitcoin to me is more of a commodity, like gold, for example – it’s more of a medium of exchange, almost than Ethereum, which is actually infrastructure for people to build apps on top of,” says Urvashi Barooah, principal at Redpoint Ventures.
There are also questions about the transactions speed and energy efficiency of the chain. Ether is considered to be more technological than bitcoin, and this should help Buterin’s coin to win in the long-time prospect.
Nevertheless, utility versus reliability is the main question in BTC/ETH battle.
Right now Ethereum is in transition to ETH 2.0, which means changing its consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
PoW became too ponderous for the Ether platform because of the high gas fees and carbon footprint. It is a dominating trend in the crypto world now – to complain about all those miners, who consume too much electricity and buy all the GPUs they can reach.
So Ethereum switching to PoS might sound like a great idea in terms of cleaning the reputation.
But being one of the most popular and approachable cryptos for mining, some experts are afraid of ETH to drop hilariously after this transition.
Because of the comparatively slow transactions, Ether network has quite high gas fees. And this is the main argument for all the ETH critics.
In the Bitcoin network, fees are set proportionally to the size of the transaction in bytes. The bigger transaction needs a higher fee. Sounds reasonable, right?
On the contrary, the Ether gas fee depends on the quantity and complexity of all the operations in a smart contract. That means transaction fees can be unpredictable and actually unfair. So the gas fees and transition to PoS can be a huge problem for Ether scalability.
To solve this problem Ethereum uses a coin burn mechanism, which helps to limit the growth of the ETH amount in circulation. Burned tokens don’t have access keys, so nobody owns them. Thus the burn mechanism is some weird way of simulating the fight against inflation.
There is one more threat to Ethereum future.
I mean so-called ‘Ethereum killers’, which are described as ‘the third generation blockchains’. Those tokens should offer more decentralization, scalability, low transaction fees, and better smart contract implementation. As you see, the Ether platform is not able to provide all these features right now.
It’s kind of funny that the most successful ‘Ethereum killers’ – Solana, Cardano, Polkadot, etc. – were created by some of the Ether co-founders. Today these PoS tokens have much higher transaction speeds and lower fees than Ethereum.
Ether price prediction and Ethereum future
Despite all the Ether problems, experts promise a successful future for the coin’s value. At least this year.
“Ethereum has over 90% of the NFT market. This is going to be a very important year for Ethereum, a kind of a make-or-break year,” – says Henri Arslanian, the global crypto leader in PwC . He also points that with prices rising investors will need to see improved demand and functionality.
According to Coinpedia data, a successful upcoming transition to Ethereum 2.0 can brake the $8000-$12 000 ETH price gap.
But that looks a little bit fantastic at the moment, assuming how slowly ETH rises in comparison to BTC in March. We are not even close to $4,800 that we saw in November 2021.
“I believe Ethereum can go to $8000. Ethereum is the clear leader but other blockchains are onboarding new users at a faster pace due to Ethereum’s high gas fees and low transaction speed,” Token Metrics founder Ian Balina thinks.
So we can only expect the long-awaited Ethereum 2.0 would change the network significantly. Hopefully in a better way.