Blog: The future of Ethereum
Ethereum is currently the second-largest cryptocurrency in the world. New and innovative applications are continually being published in the Ethereum blockchain. Ethereum’s position as the most popular platform on the market has been strong throughout its history. Even today, most of the new cryptocurrencies entering the market are built in the Ethereum blockchain. This article aims to discuss Ethereum and the factors influencing its future.
What is Ethereum?
Ethereum is one of the oldest and most popular cryptocurrencies in the world. Ethereum’s blockchain began operations in 2015, and over the years, a huge and active developer community has grown around Ethereum. Ethereum’s operating principle differs very much from Bitcoin. Bitcoin is a payment network protocol and a value-transfer unit inside that system, while Ethereum can be considered a complete ecosystem.
Ethereum is a decentralized platform with its own blockchain, where it is possible to program almost anything. The potential of Ethereum is tremendous, and many of today’s most significant innovations related to blockchain technology have been made using Ethereum’s blockchain.
When looking at Ethereum, it is good to remember that Ethereum refers to the entire ecosystem of Ethereum. It is possible to invest in Ethereum by purchasing a cryptocurrency called Ether (ETH). The primary use of Ether is to act as a virtual “fuel” for the Ethereum platform. If someone wants to build its own application in the blockchain of Ethereum, it needs a certain amount of Ether. Ether is also used to pay for transactions made in Ethereum’s network and the use of smart contracts created in Ethereum’s network. The popularity of Ethereum also directly affects the value of Ether. If Ethereum’s ecosystem grows in the future and the use of applications built on it grows, this will naturally have a positive effect on Ether’s value.
Next, we will talk about the key factors affecting the future of Ethereum.
The popularity of Ethereum among institutions has grown tremendously. Ethereum is currently the only cryptocurrency besides bitcoin that has also entered the portfolios of large institutions. An excellent example of this is a company called Grayscale, where the value of an Ethereum trust is many times higher than all other altcoins combined.
In February 2021, CME Group launched first Ethereum futures. Ethereum futures are sure to grow in popularity among institutions and large investors this year as well.
DeFi (Decentralized Finance) is an entity that is very closely related to the Ethereum ecosystem. DeFi is a generic term for various services using blockchain technology to build a whole new financial sector. Most of the world’s most popular DeFi services do not have their own blockchain, and they are built on the top of the Ethereum platform.
The number of different DeFi services is currently growing rapidly, and growth is expected to accelerate in the near future. We are not far from the time when DeFi includes all the similar services that traditional banks currently offer. The open market enabled by DeFi is also much more efficient than the traditional banking system.
The term digital revolution describes DeFi. This is by no means an exaggeration, as DeFi allows billions of people outside traditional banking systems access to banking services, as well as a more efficient and open market for those covered by traditional banking services. The cryptocurrencies led by Ethereum are by far DeFi’s most essential pillars. Without cryptocurrencies and blockchain technology, there would also be no DeFi services.
DeFi is currently developing at a tremendous pace. DeFi enables that way we use services familiar from traditional banks will be emphasized in the future. DeFi already includes several services familiar with the traditional banking world. In the future, we may be in a situation where the traditional banking world offers significantly less variety of services than the various DeFi services built on distributed blockchains. The numerous opportunities offered by DeFi and the explosive growth in popularity also promise good for the future of Ethereum.
Ethereum 2.0 is a long-awaited update to Ethereum that aims to solve Ethereum’s scalability problem. The success of DeFi services has again recently highlighted the limitations of Ethereum’s network. As the use of Ethereum’s network increases, transaction costs will also increase. In the future, Ethereum 2.0 is expected to provide a solution to this problem and raise Ethereum’s scalability to the required level.
Because of Ethereum 2.0, Ethereum is moving to use the Proof of Stake consensus algorithm instead of the current Proof of Work. Moving to the Proof of Stake means that in the future, maintenance work of the Ethereum blockchain will be done by staking instead of mining.
Ethereum 2.0 is a crucial part of considering the future of Ethereum. If Ethereum can solve Ethereum’s scalability problem and huge transaction costs, Ethereum’s success will most likely continue in the future. If, on the other hand, Ethereum 2.0 experiences significant delays or goes completely wrong, it will open the door to Ethereum’s competitors.
Ethereum is currently by far the largest and most popular ecosystem in the cryptocurrency market. The number of DeFi services users is growing rapidly, and institutional investors have started to acquire Ethereum for their own portfolios. Ethereum’s scalability problem has been discussed for a long time, and hopefully, Ethereum 2.0 will provide a solution to this problem. From Etherum’s point of view, it’s better the sooner the much-awaited 2.0 version gets out. At present, Ethereum is superior to its competitors in terms of market value and number of developers. Although Ethereum has its own challenges, its future looks very bright.Mikko Soon Cryptocurrency specialist