Bitcoin has had a record breaking 2020, but Ethereum is close on it’s tail. It broke it’s previous all-time high on January 19, 2021 and it shows little signs of pulling back. Although Bitcoin is the most well-known name in cryptocurrency, Ethereum is picking up steam. It’s development is gearing up for the launch of Ethereum 2.0. spreads are wider than Bitcoin and has broken away from the original cryptocurrency in terms of its pricing relationship. Here are several reasons why Ethereum is increasing it’s market cap and bound to make waves in 2021:
Increasing Institutional Support
There has been an sharp increase on Ethereum purchasing from institutional investors. Larger balances for wallets are a sign that people are storing Ether as an investment, rather than using it as a currency or swing trading. Institutional investors could be stockpiling assets to reduce supply, thereby increasing demand. This along with setting pace that institutional support is growing like no other. It also continues a trend where wallets are moving away from smaller holders and accommodate larger transactions with ease.
Just like ICO (initial coin offerings) were huge in 2019, the latest buzz-word is DeFi, or “Decentralized Finance”. Almost all DeFi tokens and networks are supported on the Ethereum network. DeFi applications, such as decentralized exchanges, and tokens are just another step for consumers relieving their obligations to financial services offered historically important institutions. This will probably face it’s own share of lawsuits, similar to ICOs; but Ethereum’s whitepaper specifically encourages the Ethereum network for the ability for it’s use to run decentralized applications. Although some apps do run on Bitcoin, they are generally just for proof that it’s possible. Bitcoin’s whitepaper, and therefore it’s mantra, is not aligned to DeFi as strongly as Ethereum network is.
The Ethereum network ushered in a type of cryptocurrency 2.0; where the viability of a cryptocurrency was not its fungibility, borderless nature, but rather an economic evolution. Bitcoin is important, it proved that cryptocurrency worked. Ethereum demonstrated that cryptocurrency could be more than a “currency”. It serves to become economy that cannot be manipulated or controlled, decentralization is key, but applications utilizing this was crucial to the evolution. It does this through a variety of unique features.
Agile Development Rivals Bitcoin
The Ethereum network has consistently integrated key developments at a quicker pace than Bitcoin. Bitcoin’s development team sticks to the Bitcoin whitepaper, and typically requires a larger majority for major changes to the Bitcoin network. In the near future, Ethereum 2.0 is being rolled out with several key features that will make it extremely competitive.
Proof of Work Transition
Arguably the most important change coming to the Ethereum ecosystem is the transition from a proof-of-work protocol to proof-of-stake. The development team is planning to integrates this into Ethereum 2.0 as a part of the Serenity change. This has several pros and cons: The first pro is a vastly reduced electrical consumption associated with mining. The flip side of this is that miners will have to change their equipment to support the algorithms. However, this could result in the reduction of centralized mining operations. Allowing consumers to pick up that crucial role, similar to the early days of Bitcoin mining. The largest pro has to be staking…
Although staking is currently possible with different DeFi tokens, none are close to Ethereum’s network stability and market cap. Staking allows people to earn interest simply for holding the cryptocurrency which helps to support the network by confirming transitions in a similar way to mining. This is similar to how a savings account accumulates interest. So simply holding a cryptocurrency for staking will help the network funciton with the added benefit of encouraging holders to gain interest on their deposits. It’s a win-win.
Ethereum and Ether Bright 2021 Vision
All the above improvements to Ethereum has only increased adoption and media attention, while countless ICOs have dissolved. Ethereum’s network has supported many Dapps, and continues to encourage developers and institutions to push the boundaries of the cryptocurrency decentralized revolution. For further reading on Ethereum 2.0, please check out BitcoinSuisse’s great article about the anticipated changes for Ethereum 2.