on the crypto
Since its creation in 2015, Ethereum (quotation ETH) has made significant progress. However, if we dig a little deeper into why Ethereum was able to post a 13.000% increase, there are three reasons why the world's leading smart contract blockchain could be just getting started and continue to reward investors in the coming years.
1. Work in progress
To start with, we can't talk about Ethereum without talking about one of the unique aspects of this cryptocurrency: It is constantly evolving. Ethereum's ultimate goal is to become "powerful enough to help all mankind" and it has a concrete and detailed roadmap to get there.
In recent years you may have heard of the London hardfork, The Merge and Shanghai. All are nicknames given to updates that add new features to the Ethereum blockchain so it can be more effective at supporting a growing user base without sacrificing speed or increasing network fees.
These updates are just baby steps towards realizing Ethereum's ultimate vision. In fact, Ethereum is only 60% complete. After the highly anticipated merge went live in September, the co-founder of Ethereum found that there is still 40% to go before the blockchain reaches its full potential.
2. Ethereum enters a new era
While the merger dominated the headlines for most of 2022, there was an earlier and more important update that attracted little attention. Known as the London hardfork, this update went live in August 2021 and laid the groundwork for The Merge. Arguably, it could end up doing more for the price of Ethereum than The Merge itself.
With the implementation of the London hardfork, Ethereum has become a deflationary asset. The details can be a bit complex, but in essence the London hardfork has arranged that as Ethereum usage increases, more ether (the native cryptocurrency of the blockchain) is burned and removed from the circulation. Before the London hardfork, Ethereum's annual inflation rate was around 3,5%. However, now Ethereum is actually deflationary and boasts a rate of -0,48%.
The new “burn” feature causes the rate of ether entering circulation to not only slow down, but sometimes even reduce the total supply. Following the London hardfork, the price of Ethereum has entered a new era, which will be subject to limited supply and growing demand.
3. The one and only leader
These updates, and those to come, will likely only increase Ethereum's hold on the world of decentralized finance (DeFi), a lucrative and thriving sector of cryptocurrencies and blockchain technology that is dominated by Ethereum. At one point, Ethereum supported more than 90% of the entire DeFi economy. While this share has declined with the rise of new DeFi-friendly blockchains, they have little chance of undermining Ethereum as the DeFi leader.
Today, Ethereum accounts for almost 60% of the total value of DeFi, worth over $30 billion. The closest competitor is Tron, with just $5 billion.
Since Ethereum is still a work in progress and continues to evolve to meet the needs of its users, any other blockchain looking to surpass Ethereum is likely to face an increasingly difficult task. With each new update, Ethereum will become more useful and closer to its ultimate vision of supporting the world.
It is this combination of proven dominance and a clear vision for the future that makes Ethereum unlike any other cryptocurrency today. If it achieves its ultimate goal of "supporting a digital future on a global scale," it could heal investors for decades to come.
