Ethereum, the investment asset of choice in 2021
Bitcoin is the grandfather of all cryptocurrencies and may be what many big-name investors are running towards right now. However, there are other great investment opportunities in 2021, one of which is Ethereum. Many people think that Ethereum is a cryptocurrency just like Bitcoin, but it’s much more than that. Ethereum is actually a decentralized platform that allows coders to create blockchain applications on top of it. The Ethereum Platform’s cryptocurrency is Ether, but there is much more to it than that. The vast opportunities that the Ethereum platform offers make an asset to watch out for in 2021.
Why Ethereum is the main asset for investors for 2021
The Ethereum platform was launched in 2015, and since then, it has kept steadily growing in transaction volumes and popularity. It is currently the 2nd cryptocurrency by market capitalization and has 12% market dominance, the highest of all altcoins. Even though Bitcoin has more than 5X market dominance, here are five reasons why the asset to watch out for in 2021.
1. The Ethereum platform has vast application possibilities
The Ethereum platform has high demand by coders who use it to build and launch decentralized applications and blockchain projects. Using the easy-to-learn Ethereum programing language known as Solidity, coders can use the Ethereum platform to write smart contacts. A smart contract is a legal or business agreement that is endorsed and placed on the Ethereum platform. A smart contract eliminates the need for a middleman like a bank, a broker, or a witness by facilitating the verification and execution of an agreement digitally.
Here are four reasons why smart contracts trump traditional agreements.
Faster – The execution of a smart contract is faster than a traditional contract as the computer protocol executes once the terms are met.
Safer – With manual contracts, there’s always a risk of external manipulation. However, with blockchain technology, the risks of manipulation are slim to none.
Backup – There are risks that contracts can be lost, for example, in the event of data loss. Using blockchain, documents are duplicated severally, meaning that you will always be able to find the records in the future if you lost yours.
Autonomy – One of the main reasons people love blockchain systems is that they are decentralized. This lack of brokers or intermediaries while still safeguarding the contract’s integrity can lead to significant savings in the long run.
2. Endorsement by investors
One of the reasons Bitcoin has shot up in popularity is that some big-name investors (both individuals and companies) are placing large sums of money behind them. The same trend is being seen with Ethereum. For example, Mark Cuban in the Defiant podcast says that he will be buying more Ether than Bitcoin in the future as he feels that it is a better store of value. Grayscale Investment Holdings, the biggest global crypto managers, had more than $3 million worth of Ether as of 18 February 2021. Such shows of faith proof Ethereum is the main asset for investors, and there is no doubt that more investors will start showing interest soon.
3. Lucrative growth rate
When the coronavirus pandemic hit, there was a market crash. Comparing Bitcoin and Ether’s prices in 2020 and 2021, one may falsely assume that Bitcoin has experienced a higher growth because it’s trading above $50,000 in March 2021. This, however, is not the truth. Whereas Bitcoin may have grown by about 700% in that period, Ethereum has grown by 1200%. What’s more, transactions on the Ethereum platform have grown significantly. In the third quarter of 2020, Ether’s transactions were 3.5 times greater than those of Bitcoin. According to Coin Telegraph, more than $1 trillion of transactions were recorded on the Ethereum platform in 2020.
4. Launch of Ether 2.0
If nothing else, the successful launch and execution of Ethereum 2.0 will make Ethereum the main asset for investors. Ethereum 2.0 is an upgrade to the Ethereum blockchain platform expected to make the network faster, safer, more efficient, and more scalable. For example, with the upgrade, the network will be able to process 100,000 transactions per second where it initially processed 30.
Besides the speed of transactions, one significant change that Ethereum 2.0 aims to make is to shift from the proof of work mechanism to the proof of stake mechanism. This feature alone will win many investors’ hearts, particularly those concerned with how energy intensive the proof of work mechanism is. According to data from 2015, one Bitcoin transaction used as much energy as 1.57 homes’ daily electricity usage. That makes it unsustainable in the long run.
Another additional feature in Ethereum 2.0 is sharding. These improvements to the Ethereum network are bound to lure in more investors in 2021 and beyond.
5. The development of DeFi
DeFi, short for Decentralized Finance, refers to different blockchain or cryptocurrency financial applications meant to disrupt financial middlemen like banks. Traditionally, if you bought your favorite coffee in your local Starbucks with your card, the money had to go through the bank, and they could stop this transaction or keep a private ledge of your transactions. Not only does this mean that you don’t have direct control over your own finances but also that your transactions may take a longer time.
DeFi isn’t just about paying for things. It can take the middleman out of different financial use cases, from betting to insurance. The Ethereum platform takes finance a step further through smart contracts. This means that you may use it to specify the conditions for a transaction to take place. If DeFi goes mainstream, it could launch Ethereum to unparalleled levels of popularity as many DeFi applications are being built on the Ethereum platform.
Bitcoin may be having its moment in the limelight, but there’s a high chance that Ethereum will overtake it in the future. This is because the Ethereum platform and network offer much more than just a cryptocurrency. Another reason to expect Ethereum to become the main asset for any investor in 2021 is that wise investors understand portfolio diversification. Many investors have already invested in Bitcoin, and when they start going for the next digital commodity with high potential, Ethereum will see an explosion in investors.