Ethereum was created back in 2015 by Vitalik Buterin, a software programmer, and Joe Lubin, the founder of the blockchain software company ConsenSys. Within six years of its launch, the Ethereum protocol has emerged as one of the most widely adopted blockchain protocols, currently supporting multiple businesses and financial services. Ether (ETH) is the native cryptocurrency of the Ethereum protocol, which as of Friday, March 25, is priced over $3,000 (roughly Rs. 2 lakh) with its market cap exceeding $374 billion (roughly Rs. 28,50,029 crore).
I am bullish on ETH for 2022. I expect that in 2022, ETH will surpass its previous all-time high (ATH) of $4,891 (nearly Rs. 4 lakh) which was set on November 16, 2021.
Before we dive in, you need to remember one thing — Ethereum is not a blockchain. It is a protocol (a set of rules or procedures).
When you browse the Internet, you may have noticed that website URLs begin with an ‘HTTP' or ‘HTTPS'. That's hypertext transfer protocol. Emails use simple mail transfer protocol, post office protocol. All the coolest tech stuff run on protocols.
Ethereum is a protocol and multiple independent blockchains run on it.
The most important is ‘Ethereum Mainnet'. That's where actual-value transactions occur on the blockchain.
Ether (ETH) is the native crypto of the Ethereum Mainnet. As of now, the Ethereum Mainnet runs on proof-of-work, just like Bitcoin, and many other cryptos.
Then there are test networks — Görli, Kovan, Rinkeby, and Ropsten. We can ignore them for now.
And then there is ‘Beacon Chain'. This is the base on which the Ethereum ecosystem hopes to become secure, sustainable, and scalable.
As of now, the Beacon Chain runs in parallel to the Mainnet and uses proof-of-stake.
It is expected that over the next few months, the Ethereum Mainnet will ‘merge' with the Beacon Chain.
And when this happens:
Ethereum Mainnet will move to proof-of-stake
In a proof-of-work blockchain, miners usually sell some of the newly mined cryptos to pay their bills. But in a proof-of-stake blockchain, holders can get paid to validate transactions. This incentivises the ‘holding' of crypto and is good for the price.
Ethereum mining will stop and this will save the world a lot of energy
It is predicted that the Ethereum energy consumption will reduce by 99 percent.
It is hoped that once the environmental impact of Ethereum reduces, more financial institutions will want to use the Ethereum ecosystem and thereby buy more ETH.
Since a technical upgrade in August last year, over $6 billion (roughly Rs. 45,709 crore) worth of ETH has been burned and the issuance of new ETH has already slowed down. I believe that after the merge, ETH will become a ‘deflationary crypto' — one with a reducing supply.
This will give ETH a new use case — as a ‘store of value'.
More DeFi protocols will shift to Ethereum
The Ethereum Mainnet is the most popular Decentralised Finance (DeFi) blockchain with 577 active DeFi protocols and a Total Value Locked (TVL) of $124 billion (roughly Rs. 9,44,668 crore). In comparison, the number two DeFi blockchain, Terra, has 26 active DeFi protocols and a TVL of $27 billion (roughly Rs. 2,05,693 crore).
This massive difference in TVL shows how popular Ethereum is for DeFi, despite the high gas fees.
I believe that more DeFi protocols would move to Ethereum after the merge and this would further pump up ETH prices.
Rohas Nagpal is the author of the Future Money Playbook and Chief Blockchain Architect at the Wrapped Asset Project. He is also an amateur boxer and a retired hacker. You can follow him on LinkedIn.
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