Ever since its inception in 2009, Bitcoin has been the leading cryptocurrency. It has kept its place as the most traded and valuable crypto based on market cap. At the same time, Ethereum has been the only crypto asset to keep it as an ideal alternative.
Ethereum comes with various unique features and consistent network developments that makes it valuable. There are even possibilities that it might beat Bitcoin in the long run. The possibilities make it sensible to know, is Ethereum a good investment in 2021?
Follow through to understand everything about Ethereum and why you should invest in the platform.
What makes Ethereum unique?
Even though Bitcoin was the first cryptocurrency, it led to the creation of other altcoins. These are all the cryptos after BTC that look to improve on the first network. Ethereum remains unique due to its role as more than just a cryptocurrency. Other than being used for payments or storage of value, it also supports the creation of other crypto assets.
Ethereum provides a platform where anyone can create a crypto project using blockchain technology. It, therefore, comes with a wide range of use cases. Some of the special features on Ethereum include;
- Ether – Ether (ETH) is the blockchain’s native currency. It is the economic fuel that keeps the Ethereum network as it facilitates payments in the network and exchanges with other assets.
- Smart contracts – these are computer programs that facilitate trade and exchange assets between different parties. The parties come up with conditions, and the deal completes when they are met. Smart contracts are usable in the transfer of digital assets, money or property. Instead of looking for a third party like a lawyer, you use smart contracts to confirm deals.
- Decentralised applications (dApp) – the Ethereum network provides a platform for developers to create applications. These applications don’t depend on a single individual for updates and data storage. Instead, the whole network participates in data storage and retrieval.
- Ethereum virtual machine – this is the system within the Ethereum platform that deploys smart contracts. It allows the users to code in any computer language before it translates to the one application on the platform.
- Decentralised Autonomous Organisations (DAO) – decision making organisation with several entities can be complex, however not with DAO. It offers a platform where everyone in the organisation can contribute to decision making. It enhances democracy through voting and better developments as everyone feels part of the team.
- Decentralised finance (Defi) – these are the platforms that use blockchain technology to offer financial services like the other traditional finance. Whether you are looking to get loans and other credit facilities you can rely on Defi. All the Defi run on the Ethereum network.
- Non-fungible tokens (NFTs) – NFTs are the tokenised digital assets like music, videos and art collections. Through tokenisation, you get ownership rights of a unique item that you can store and sell later at a profit.
Most of these Ethereum features are disruptive to the current world. Smart contracts for example can apply in any industry like real estate, insurance and finance. These features like NFT and Defi have rallied investors to the Ethereum platform. As most people embrace blockchain technology, the applications will become more relevant.
With increasing investor interest in Ethereum, the value rises. That is why if you are thinking, should I invest in Ethereum 2021, you need no invitation.
Ethereum 2.0 and the impact on the value
Even though Ethereum comes with massive use cases that make it an ideal investment, it is planning for more. The platform is on a network upgrade that seeks to make it more secure and faster. The upgrade is called ETH 2.0.
The major upgrade on the new platform is the change of the mining protocol. Currently, the network uses the proof-of-work (PoW) consensus protocol to verify transactions and mine new blocks. This protocol is energy-intensive and means only powerful machines can verify transactions.
ETH 2.0 uses a proof-of-stake (PoS) consensus protocol for transactions verification. Instead of relying on powerful computers to solve puzzles, the protocol relies on the assets on accounts. The more assets one has, the higher voting power they command in the verification process.
Participating in the mining process comes with rewards in the form of ETH. However, the asset holder does not have to actively participate in the transactions. They only need to allow the system to access their assets. That way one does not need any special knowledge or facilities to earn.
The ease of getting rewards is likely to attract more investors willing to spend more on purchasing the available assets. The increased demand comes with higher values. This makes Ethereum a long term prospect and an ideal investment in 2021.
Bitcoin getting out of favour
For a long time, Bitcoin seemed unbeatable. As the leading crypto, Bitcoin has been the asset leading the pack. It would determine the crypto market movement and create a ripple effect on all the other assets.
The rise of Bitcoin has been due to its relevance. It is the most adopted cryptocurrency both for retail and institutional investors. In the wake of the coronavirus pandemic, Bitcoin became known as the “digital gold” due to its rise while the traditional stocks tumbled. The coin became more resilient as it became more mainstream.
Once accepted as a means of exchange and a medium of exchange, various merchants started accepting it for payments. Bitcoin ATMs became more available and some countries declared it a legal national currency.
All this might be changing thanks to Bitcoin getting out of favour.
One of the leading concerns with Bitcoin is the environmental impact. The network relies on the energy-intensive PoW protocol for mining. In the earlier days, Bitcoin mining was simple; it was possible from any computer. However, the system works such that the more miners available, the harder the mining difficulty. Bitcoin attracted a large number of miners, hence it needed special ASIC machines to solve the arithmetic puzzles. These machines take up too much power. Studies revealed Bitcoin mining consumes more power than some countries like Argentina and Malaysia.
As the world becomes more environmentally conscious, they are moving away from Bitcoin. Tesla, one of the leading companies to accept Bitcoin payments, banned its use. China has already intensified its crypto activities crackdown with environmental concerns one of the reasons behind it.
With no plans right now to address these environmental concerns, Bitcoin will keep on losing users. Now guess who is the beneficiary of these losses? Ethereum with its new PoS is the gainer.
Banks Showing major interest in Ethereum
The other reason why Ethereum is a good investment in 2021 is the interest from banks. Commercial banks are the custodians of financial services. They never take up any financial service provisions without the surety of its demand from clients and viability.
For a long time, most banks and other financial institutions have been all about Bitcoin. They have been offering Bitcoin and other derivatives to crypto investors. However, various banks are currently showing interest in Ethereum. They are likely setting themselves up to take advantage of the future Ethereum value rise.
The banks are planning to use the new PoS staking to offer the clients better services. Firms like Bison Trails and Blockdaen already have in place systems to offer banks the Ethereum running platforms. At the same time, banks in Switzerland are already offering Ethereum staking services. The Digital Asset Bank Sygnum is the leading bank to offer the services, where it expects runs of 6.5% to 8% per annum. Various banks like SEBA bank will soon start offering similar services.
Ethereum good investment 2021 FAQs
How do you buy Ethereum?
Buying Ethereum is such a simple task. You only need to join a reliable cryptocurrency exchange. You then verify your identity by providing the requested details. Once confirmed you can fund the account using various options like bank transfer, credit cards or web payments.
You are now free to purchase the ETH token from the platform. After which you will store them in a wallet of your choice.
Is Ethereum Classic a good investment in 2021?
Even though Ethereum is an ideal investment, not everyone can afford it. That is why it is okay that you might consider Ethereum Classic a good investment in 2021. Yes. It is a good investment due to its association with Ethereum.
Ethereum is the original Ethereum. It came about following part of the team deciding to create another network after an earlier hacking. However, most of the operations remain the same. Anyone who cannot access Ethereum can opt for Ethereum Classic. It thus will have an increased demand, making it a good investment.
What are some of the risks of investing in Ethereum?
Understanding that Ethereum is a good investment in 2021 is not enough, you have to understand the associated risks. Some of the risks of Ethereum investments include volatility, new regulations, the threat of online hacking and competition.