2022 has been a rocky road for cryptocurrencies, to say the least. Most of the main players in the industry, such as BTC, ETH, DOGE, etc., are sitting in a price slump far from the spectacular highs they achieved in 2021. Combine this with a series of controversies rocking the crypto sector, such as the collapse of FTX, and it has been a year that’s far from positive.
However, in recent months, some major cryptocurrencies have begun to display a comeback in terms of price and have regained ground in the markets. One of the most striking comebacks has been staged by the native Ether token of the Ethereum network. From a miserable dip to $876 in June, it has recently worked its way back up and almost hit $1,700 per token.
The Ether token is the main crypto asset used for transactions on the Ethereum blockchain, the world’s leading decentralised platform that allows people to develop applications and currencies using blockchain technology. Originally created by Russian-born and Canadian-raised genius Vitalik Buterin, Ether has gone on to become the world’s second-largest cryptocurrency after Bitcoin.
Blockchain is Shifting
Blockchain technology is increasingly playing a vital role in various aspects of mainstream life, from daily transactions to the operations of major industries ranging from tourism to aviation. Put simply, the blockchain is a network of online ledgers that are neither owned nor controlled by any centralised authority.
The main facets of blockchain technology centre on automated smart contracts that serve to make traditional centralised third parties and intermediaries, such as lawyers and central banks, completely redundant in people’s financial transactions. In a world where central banks are becoming increasingly unpopular, Ethereum has found a welcome home amongst many tech-savvy people worldwide.
Since its launch in 2015, Ethereum’s native Ether token has gone on a fascinating price journey that has seen it surge from being practically worthless to being worth just shy of $5,000 per token. Its price performance has been good enough to rival Bitcoin in recent years.
But in recent months, one of the biggest factors influencing Ethereum’s price rise has been the long-awaited project called Ethereum merge which works to revolutionise the foundations upon which the network operates completely.
Previously, Ethereum operated using a proof-of-work (PoW) consensus mechanism. This method of operation involved countless miners worldwide utilising an array of high-powered and energy-consuming computers to compete with one another to solve a series of complicated mathematical equations. In return for successfully completing these equations, miners were rewarded with Ether.
However, Merge has seen all of this change through the transition to a different consensus mechanism called proof of stake (PoS). The energy-slurping computers are made redundant here as this method involves all transactions being validated on the Ethereum blockchain through a network of Ether investors who have demonstrated their devotion to the network by owning a minimum of 32 ETH.
The reason behind this shift is to boost the overall security of the Ethereum network by providing those who use it with an economic incentive via proof-of-stake. In theory, it means those who have invested so much into the network are highly unlikely to do anything to harm it and will, instead, strive towards making it better.
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Becoming More Environmentally Friendly
One of the biggest criticisms of cryptocurrencies in recent years is their dramatic energy consumption. Bitcoin mining, for example, was notorious for the fact that it was eating up the same amount of power in a day that the average household in the United States was using over 50 days.
But the Ethereum Merge is a great step in the right direction towards major cryptocurrencies becoming more environmentally friendly. When the Merge has been successfully laid out and completed, it’s estimated that the overall energy consumption on the Ethereum blockchain will plummet by an incredible 99%!
Ethereum is the world’s leading blockchain and the go-to network of choice for most people seeking to build decentralised projects and carry out transactions. So, to put this 99% energy drop into comparison, that’s the same as the annual power consumed by the nation of Chile!
Some of the bolder crypto experts on the scene have claimed that this step towards being a powerful and environmentally friendly cryptocurrency could pave the way for Ethereum to sidestep Bitcoin and become the biggest crypto asset in terms of market cap. In cryptocurrency lingo, this event is known as “flippening”.
It might sound extreme, but it’s not that far-fetched. After all, Ethereum is worth around $204 billion at the time of writing. On the other hand, Bitcoin has a value of over $396 billion. To delve into this topic further, let’s pit Ether and BTC against each other and see how they compare head to head!
Bitcoin and Ethereum: Head to Head!
Since the birth of Bitcoin in 2009, the general public has tended to have a love-hate relationship with the main cryptocurrencies that are sometimes compared to Marmite. You either love it or you hate it!
It’s only natural, as the mainstream press has worked hard to promote the “bad reputation” surrounding cryptocurrencies. Bitcoin, in particular, was the first crypto on the scene and the first asset to get hit with a tarnished reputation.
Initially, many unaware people were told that Bitcoin was a shady currency with the sole aim of helping criminals move money and avoid the law. This meant it was often associated with dubious acts like drug dealing, money laundering and, of course, Pyramid Schemes.
However, the truth couldn’t be more different. In reality, Bitcoin has provided a revolutionary method for people to access a thriving financial system, use a currency that isn’t controlled at a state level, and negate the need for central banks and other intermediaries. This has equally led to it being able to pave the way for billions of people who are classed as the unbanked to access the global financial market, trading over borders, and make online payments. In places like Africa, this has had a particularly powerful impact.
But bad news sells, as it always has, so the bad reputation sadly persists. The array of controversies to hit the crypto industry in recent months, such as the collapse of major exchanges and even cryptocurrencies imploding (in Terra Luna's case), really haven’t helped the situation.
The biggest fallout from this negativity is that it deters large financial institutions from investing serious amounts of money into the decentralised currency space, despite the immense technological benefits that blockchain technology and decentralised assets can offer.
But back to Ethereum! Following the shift to the Proof of Stake consensus mechanism, it’s becoming a common prediction that Ethereum will convince mainstream financial institutions to begin investing money into the space. In fact, it’s already happening.
This Merge has dealt a major blow to the argument that cryptocurrency is damaging to the world and is environmentally unsustainable. As the Merge continues to push forward, it will no doubt conquer other common arguments against crypto and thus convince a wider array of investors to get on board.
Staking Ether
In the new Proof of Stake consensus mechanism, those who wish to become a validator on the Ethereum network must stake a minimum of 23 ETH. However, this is far from cheap and is out of bounds for more people’s budgets.
However, this doesn’t mean it’s not possible. This is crypto, after all, and it’s a hub of innovation! Following the Merge, a range of firms has come into the fray to offer various systems that allow those seeking to invest in Ethereum to pool their funds together to participate in the network’s validation.
One of them is the biggest crypto exchange in the world, Binance, and is currently offering a generous 6% yield each year for those who stake their Ether using the platform. If this continues, it will mean staking Ether will become a win-win scenario for many and a fantastic method of earning passive income. Yet again, another example of how Ether and digital assets, in general, will become more mainstream and widely accepted.
In addition, this will only highlight cryptocurrency's various benefits, from increased financial freedom to its roles in humanitarian aid. For example, following the outbreak of the war in Ukraine, crypto was a huge resource used by the Ukrainian government and various NGOs to raise significant funds in a time of crisis.
What Does the Future Hold & Is There Uncertainty?
But after all, cryptocurrency is still a relatively new concept and is still finding its feet. So overall, it’s difficult for us to predict the future of Ethereum following the Merge accurately. One aspect of the blockchain powerhouse many people are eyeing anxiously is the speed and scalability it will be able to offer.
Since its launch, Ethereum has had a bad reputation surrounding the slow speeds and high costs surrounding its transactions. In 2021, when the network was at its all-time high, some transactions came with thousands of dollars worth of fees. This raised concerns that Ethereum was struggling to meet the demands required to be a scalable platform fit for mainstream adoption.
The bad news, at least in the short term, is that the Merge will only impact transaction fees slightly. The good news is that another update is coming to tackle the issue. After all, the Merge is merely one upgrade out of a set of planned upgrades that will eventually transform Ethereum into Ethereum 2.0.
In summary, the Merge may not be an upgrade to fix all the problems the crypto industry is currently facing. Still, it has been a major boost in bettering the overall reputation and image of the crypto industry and has played a significant part in seeing prices rise again, as well as drawing a number of new investors to the space.
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