ETH is the most famous cryptocurrency after Bitcoin but significantly differs in its abilities. While Bitcoin is just a form of digital money, Ethereum is a decentralized platform for applications and smart contracts, which opens huge opportunities for developers and entrepreneurs. Over the last years, interest in Ethereum has grown incredibly fast. Many investors consider this cryptocurrency to be one of the most promising assets for long positions. Such solutions, like the exchange of XMR to ETH, would be constructive for those aimed at benefits in the future from this cryptocurrency.
1. Shift to Proof of Stake
This reported first major factor, which will ascertain the prosperity of Ethereum in the near-term future is the transition of this network from a consensus mechanism called Proof of Work into Proof of Stake. This has been labeled Ethereum 2.0, which first began in December of 2020 with the release of the Beacon Chain and is still very much a work in progress. The eventual transition into PoS will eventually make the network much greener, given that energy costs for mining are cut while simultaneously providing more scalability for the network.
Furthermore, PoS will open new opportunities for ETH holders who will participate in staking and get their rewards for participation in maintaining the network. New users and investors will be attracted, which will increase demand for ETH and accordingly increase its price.
2. Development of DeFi and NFT markets
Another catalyst in Ethereum’s growth is the fact that it’s right in the middle of the action in both the DeFi sector and the NFT market. DeFi empowers users to obtain loans, invest funds, and execute other financial dealings free from traditional banks, using only smart contracts. Most DeFi projects actually have Ethereum as their backbone, making it quite a needed asset for both users and developers alike.
Another field in which Ethereum is dominating is that of NFTs. Unique digital assets, representing art, music, and games, are traded on the Ethereum blockchain in their majority. As their popularity keeps on growing, so will the demand for ETH, since to be able to buy and sell these tokens, one needs Ether.
3. Scaling with Layer 2 Solutions
In the last years, one of the principal problems for Ethereum has been network congestion and the high fees for transactions, especially with this boom of DeFi and NFTs. However, to solve these issues, the development and implementation of Layer 2 solutions like Arbitrum and Optimism are already active. Layer 2 solutions enable transactions to go through much quicker and at cheaper prices while relieving the Ethereum main network.
As these go mainstream, Ethereum will be in a place where it can accommodate hundreds of thousands more transactions at nearBottom costs. In effect, this makes it more appealing to the interests of both businesses and users.
4. Institutional Investments
More and more institutional investors take interest in Ethereum each year. While large companies invested in Bitcoin in the past, now the tendency is not just to invest in ETH actively but also to diversify their portfolio by investing in a number of leading virtual assets. This is well explained by huge potential for Ethereum in many industries: financial, real estate, media, and art.
Considering that the network is still in development and the number of users is growing, more institutional investments in Ethereum will further lead to more growth of the asset price.