The Volatile Nature of Ethereum..

What makes cryptocurrencies so exciting is their investment potential — and their volatility — we simply do not know what will happen next.

Ethereum has established itself as one of the top crypto coins, constantly in the top five most popular cryptocurrencies. This is with good reason, too — its taken on its own path and become remarkably incredible. Bitcoin has been used for payments for some time now, and that’s what everyone coveted, a decentralised currency with no middle man.

Ethereum has taken on a route that most of us would never comprehend. While Ethereum is used to process financial transactions, smart contracts and store data, it is a relatively new application regarding NFTs. This has made it unique and thrust it into the spotlight.

But what does this all mean for the virtual coin? Is it sustainable, a new potential bubble that will burst, or has this cemented its position and secured its future?

Volatility and Sustainability

Bitcoin’s concept and successful implementation was the banks worst nightmare. It had a monumental impact on the banking ecosystem, but the cryptocurrency bubble did not stop there. Bitcoin paved the way for the creation of many new cryptos, blockchains, digital currency — basically a brand new technology industry.

Banks denounce Bitcoin for many reasons; people are known to transfer out large sums of money, no longer holding it in any bank account. It also started a massive increase of ‘in and out transfers, money comes in, and the same amount immediately gets transferred to be converted into cryptocurrencies.

Bitcoin has its drawbacks though, let’s stay away from mainstream bank scaremongering and look at the technical disadvantages. First, the Bitcoin network can be notoriously slow, this gives it a scalability issue because the web can only process transactions at a limited rate. Another that people see as a possible drawback is that Bitcoins are limited. There are only 21 million available, and as of mid-2021, 18 million have already been mined. However, this hasn’t slowed down the digital currency’s popularity as a decentralised currency, which might benefit other coins such as Ethereum.

Cap, Bubble and Pop

These drawbacks of Bitcoin have given rise to other coins like Ethereum. While Bitcoins are limited, Ethereum is uncapped, this means that an unlimited amount can be mined. The economists might see this as a worry, but it is an incentive to use the coin, and predictions indicate that it will only increase value.

It was mentioned that the Bitcoin network is notoriously slow. It can process a maximum of seven transactions per second, though realistically, it’s more like 4. There is currently work on Ethereum 2.0, which will handle a massive 100,000 transactions per second. The constant development is another attraction to Ethereum. Bitcoin sees growth in a lightning network to support it, but this might still fall short of the Ethereum 2.0 network when it is released.

Ethereum 2.0 will be changing to proof-of-stake (PoS) instead of proof-of-work (PoW); currently, Bitcoin and Ethereum are both PoW. The issue with the current PoW is that it takes large computations to process anything on the blockchain. This is because of the hardware and power required to run mining rigs.

Ethereum will migrate to a PoS, which was always the intention. PoS solves numerous disadvantages of the current PoW.

• Better energy efficiency and no need to use vast amounts of energy mining blocks.
• Faster transactions, less congestion on the network.
• Reduced hardware requirements, you don’t need a massive rig for a chance to create blocks.
• More nodes on the network.

There are many more benefits, but these are the most prominent when changing to a consensus mechanism. This is more sustainable than Bitcoin, most notably the energy efficiency, which will reduce Ethereums usage by 99%!

Is it just another bubble within a bubble? We need to look more into Ethereum’s advantages and disadvantages to come to a conclusion about its place as a top crypto asset.

Advantages

Ethereum could be used as a currency if accepted by a vendor, it has a monetary value and all the other conditions. Also, the transactions mentioned earlier are almost ten times faster than Bitcoin, that number could also increase when Ethereum 2.0 is released.

The platform has other applications and uses. For example, recently, there has been a rise in NFTs (non-fungible tokens), these work on the Ethereum platform and are a significant game-changer for digital artwork. It also enables the deployment of smart contracts and Dapps. Dapps or decentralised applications can be built and run without downtime and robust against fraud or interference from a third party.

Ethereum uses a different blockchain to Bitcoin, the Ethereum blockchain is arguably more secure and has more applications. NFTs can be used to create unique and verifiable containers of data and value via the Ethereum blockchain. Dapps can be built on the blockchain and create banking apps, storage apps, anything you can think of.

Disadvantages

It’s not all good though, as with anything there are disadvantages. For example, Ethereum as a digital currency is quite hard to mine, its difficulty is rated at 10.45 TH/s. Moreover, the electricity consumption for this online currency is compared to others.

What this means is that there is considerable power required to solve blocks and process transactions. The electricity and energy spent maintaining this digital ledger are making a noticeable carbon footprint on their own.

This is worth mentioning as a disadvantage. If you are familiar with Ethereum, then you know about gas. Gas prices fluctuate considerably in certain times, if the network is busy, the fees for making a transaction are higher. This affects NFTs too, creating them costs gas and can ramp up a hefty price if processing at the wrong time.

Improvement

There is a considerable update for Ethereum right now, though, the transition to Ethereum 2.0. By 2022 we should see full coverage, which coincides with what the Ethereum developers estimated. The Ethereum network efficiency, scalability and speed will all improve drastically.

There will be more transactions per second (100k), and since the networks congestion will be lower, the high gas prices will be no more. Therefore, ETH 2.0 will decrease gas prices and be significantly cheaper and more sustainable for all involved.

Currently, the Berlin hard fork is an update that integrates a confirmed four EIPs (Ethereum Improvement Proposals); This went live on block 12,244,000 on the 15th of April. That is only the beginning though, a confirmed London hard fork on a huge scale will activate EIP 1559 sometime in July. This EIP 1559 is quite controversial and has been met with some disapproval.

Who on Board and Who Isn’t

Despite the potential of digital currency, the money invested and online wallets are as accessible as a bank account. There is a split in opinions from many big hitters like Bill Gates, Elon Musk and Warren Buffet. Bill Gates is seemingly “neutral” on cryptocurrencies, as he has stated recently.

Bill Gates has utilised technology that was developed by Ripple (XRP). So that neutral stance he is taking doesn’t mean he is against implementing the useful side of technology linked to some cryptos. Could he also turn his attention to Ethereum as it is essentially a platform for development and not strictly only a cryptocurrency.

Elon musk we all understand is entirely on board. He often tweets about three currencies in particular, he may seem eccentric, but he is a good businessman. He has invested a huge amount into crypto and fully believes in the application and potential of digital currency. He might joke around with Dogecoin, but he is very serious about Bitcoin and its place in the world.

Less celebrity but well known and veteran of the crypto world. Dan Morehead, the CEO of Pantera Capital, has put his full belief in Ethereum as a contender in the future with Bitcoin. He’s predicting a price point of $100k in the next ten years for Ethereum. This is a good sign that he sees the potential of the platform as a safe bet.

Summary

With all this in mind and the facts presented about Ethereum. Consider the effects on the banking economy, its practical applications outside being a currency, sustainability, and the carbon footprint on the environment. Do the advantages make this coin more promising and outweigh its disadvantages?

The question remains: will the hype be sustained?

Thanks to continued development and support from industry leaders, will all the advantages help the platform reach new heights? Or will the disadvantages, the refusal to acknowledge the coins as potential investments by some billionaires, and its effect on the environment become its downfall?

Picture provided by Executium — Unsplash