Invested $100 in Ethereum half a decade back? Discover your current worth.
Ethereum, often referred to as the world's computing platform, has revolutionised transactions by enabling them without the need for expensive middlemen. This digital asset's smart-contract functionality has given birth to decentralised finance (DeFi) protocols, non-fungible tokens (NFTs), and a multitude of other decentralised applications (dApps).
However, Ethereum's current network faces challenges in terms of speed and cost. With only 13 transactions per second (TPS) and an average transaction cost exceeding $13, its growth and potential to disrupt the status quo could be hindered. But fear not, for Ethereum is undergoing a series of upgrades to address these issues.
The most significant upgrade, The Merge, was completed in September 2022, marking the transition from the current Proof-of-Work (PoW) consensus mechanism to Proof-of-Stake (PoS). This shift is expected to be completed in 2023, subject to development setbacks and roadblocks.
Following The Merge, Ethereum will undergo incremental upgrades. Pectra, scheduled for May 2025, will introduce flexible gas fees and scalability improvements through technologies like Proto-Danksharding and Verkle Trees. These advancements are expected to reduce costs for Layer-2 users and increase transaction speeds by about 10x on Layer 1.
Fusaka, expected for late 2025, will activate Peer Data Availability Sampling (PeerDAS) which will allow validators to verify data off-chain without downloading full datasets, reducing resource use and costs. It will also include updates to the Ethereum Virtual Machine (EVM) for more efficient smart contract execution.
Gloas-Amsterdam, planned for 2026, will reduce block slot times to six seconds and increase the gas limit significantly to improve scalability and cost-effectiveness further.
These upgrades aim to deliver much faster, cheaper, and more energy-efficient transactions compared to the legacy PoW consensus, while maintaining security and decentralization. The PoS mechanism alone reduces Ethereum’s energy consumption by over 99% relative to PoW. New techniques also facilitate scaling Layer 1, enhancing the network’s ability to support mass adoption of decentralised apps and services.
Ethereum is a key player in the push towards the crypto industry's transition from a speculative arena to one with growing real-world use cases. With over 2,960 dApps on its platform, spanning categories like gaming, social media, identity, and insurance, Ethereum continues to be a significant force in the crypto world.
As the world's second-most-valuable cryptocurrency, with a market cap of $358 billion, Ethereum (ETH) operates on a programmable blockchain, allowing for the development of smart contracts. It boasts a deep developer network, with over 4,000 active developers working on it in December 2021, more than any other cryptocurrency.
A small allocation (1% to 2%) to Ethereum in a well-diversified and long-term focused portfolio is suggested, given its potential growth due to the increasing use cases of cryptocurrencies. The Ethereum network's outlook remains positive, as it continues to evolve and adapt to meet the demands of a growing user base and a rapidly changing digital landscape.
- The expected completion of The Merge in 2023, a significant upgrade to Ethereum, will transition the network from the Proof-of-Work consensus mechanism to Proof-of-Stake, aiming to deliver faster, cheaper, and more energy-efficient transactions.
- Pectra, scheduled for May 2025, will introduce flexible gas fees and scalability improvements, reducing costs for Layer-2 users and increasing transaction speeds by about 10x on Layer 1, contributing to the decentralized finance (DeFi) growth and investing opportunities in the technology sector.
- Fusaka, expected for late 2025, will introduce Peer Data Availability Sampling (PeerDAS), reducing resource use and costs while upgrading the Ethereum Virtual Machine (EVM) for more efficient smart contract execution, setting the stage for future innovation and potential investment in this dynamic digital asset.
