Is Ethereum a good investment in 2022?

What is Ethereum?

Launched in 2015 by computer programmer Vitalik Buterin, Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (ETH), the native cryptocurrency of the platform, is the second-largest cryptocurrency in India as well as the world in terms of market capitalization, outranked only by Bitcoin.

Ether and Bitcoin both can be used as digital currency and stores of value. But what makes Ethereum more special is that it allows developers to build and run decentralized applications and smart contracts. Being a blockchain-based software network, it therefore has compelling use cases in a range of industries; gaming, music, entertainment, and decentralized finance (DeFi) to name a few.

Before diving into what 2022 will look like for Ethereum and whether or not it will prove to be a good investment, let us first have a quick recap of how 2021 was for Ethereum.

Ethereum’s 2021 Recap

2021 was the busiest year for Ethereum so far. In November 2021, the price of Ether jumped to an all-time high of over US$4,800. The ETH to INR rate was around ₨ 345,480 at that time.

Since Ethereum’s use cases are endless and are not limited to only being a store of value, it has witnessed a massive rise in its market capitalization.

In April 2021, the global market capitalization of Ethereum reached new heights – hitting 300 billion U.S. dollars. By August it was over 400 billion and had hit 500 billion by November. However, it closed the year at around 400 billion U.S dollars. Then, in January 2022, the Ethereum market capitalization again saw a dump and fell down to around 300 billion U.S dollars.

However, all that glitters is not gold. Ethereum has also received a major backlash from users and investors for several reasons. It seemed as if Ethereum had been a victim of its own success.

Let’s delve into why Ethereum received criticism from all around the world and how 2022 will bring a change to that scenario.

Ethereum 2.0: What 2022 holds in store for Ethereum?

From $0.311 in 2015 to an all-time-high of around $4,800 in 2021, the journey of Ethereum has been a roller coaster ride. However, it has had a difficult start to 2022 when the Ethereum price slide down to $2,200 in January.

Despite a rough entry into the year, most experts are bullish on Ethereum, expecting ETH to cross the US$10,000-mark by the end of the year, which is equivalent to approximately 76,000 INR at current rates.

Even at the time of writing, the Ethereum Price is Rs. 2,04,514 and has fallen down by 4.3% since yesterday. However, Ethereum (ETH) is on an upward monthly trajectory as it has increased around 20% from Rs. 1,79,718 in mid-January.

Much of the optimism surrounding the Ethereum network currently are related to a range of important updates Ethereum will release during the year – commonly referred to as Ethereum 2.0.

Let’s take a look at what changes will be introduced in the Ethereum network.

The most crucial change is the transition of Ethereum’s consensus verification mechanism from Proof of Work to Proof of Stake. Bitcoin and Ethereum currently use the proof-of-work (PoW) consensus mechanism. Unfortunately, since PoW networks require the use of energy-intensive mining processes to establish consensus, they have been singled out for criticism for their environmental impact.

For instance, the Ethereum network annually uses around 99 Terawatt-hours of electricity. To give you a perspective, this is more power than is required by the Philippines or Belgium. Therefore, the transition to Ethereum 2.0 is a significant event for users and investors concerned about environmental issues.

In addition to this, what made many Ethereum users unhappy in 2021 was its high transaction/gas fees and low transaction speed. This is an ongoing issue for Ethereum and is creating an open door for prospective Ethereum killers to onboard new users at a faster pace – which has seen many of them achieve major growth.

To address its energy usage and transaction speed issues, Ethereum began transitioning to the beacon chain proof-of-stake (PoS) consensus mechanism around the end of 2020. The end of the transition, sometimes referred to as ‘The Merge’ is expected occur close to the end of 2022.

Ultimately this transition will result in a reduction in transaction fees and energy consumption – bringing Ethereum into a more sustainable position longer-term – both from an environmental and economic perspective. Finally, some happy news for Ethereum lovers in 2022!

Moreover, for users who are worried if Ethereum’s transition will impact their work, a team member from the Ethereum network confirmed that the transition is designed to have minimal impact on how Ethereum operates for end-users, smart contracts, and dapps.

Future of Ethereum in 2022 and beyond

With the booming growth of decentralized finance (DeFi), NFTs, blockchain technology, Metaverse, and Web3, cryptocurrency has become a topic of household discussion in India.

With almost every company jumping on the crypto bandwagon and announcing its entry into the Metaverse, it seems 2022 will bring good times for blockchain networks. Ethereum already has several NFT and metaverse projects running.

With the increase in the adoption of Blockchain technology paired with continuous improvement in the Ethereum Network such as lower transaction fees and seamless working, the growth of the Ethereum Network may further surge in the future.

Assuming Ethereum 2.0 is successful, experts believe Ethereum’s chart will witness an elevation in the long run. On the other hand, when it comes to short-term sentiments, they are pretty bearish. It won’t come out as a shock if the chart keeps declining.

Ethereum has maintained its position as one of the leading smart contract platforms. What is yet to be seen is whether Ethereum 2.0 will continue to be one of the clear leaders in 2022 and beyond as well.

Editorial Note: This is a sponsored article. Opinions expressed are solely those of the sponsor and readers should conduct their own due diligence before taking any action based on information presented in this article.