Developers are choosing ethereum as the operating system of choice for blockchain apps because it has a first-mover advantage (founded in 2015), is decentralized enough compared with its competitors (roughly 9,000 computers operate the ethereum blockchain), and its implementation of smart contracts is best-in-class.
These advantages show up in the data… The market value of cryptos built on top of ethereum is already north of $40 billion. And of the top 84 decentralized finance (“DeFi”) projects, all but one are built on top of ethereum. In short, ethereum has clearly established itself as the platform of choice for blockchain app developers.
While ethereum is in the driver’s seat today, the amount of demand for its network is too high relative to its current capabilities, and it’s sending transaction costs soaring.
After being negligible for most of the past three years, transaction costs – known in the crypto world as “gas prices” – soared to nearly $40 per transaction due to the proliferation of DeFi projects built on top of Ethereum in late 2020 and into 2021.
While elevated “gas prices” are a good indicator of how strong demand is, it’s worrisome in the short term because it discourages further app-building on the ethereum blockchain – and opens up ethereum to competition.
The main issue is that right now, ethereum only supports around 25 transactions per second. This is 3 times the performance of bitcoin… but terrible when compared with credit-card giant Visa (V), which can process 2,000 to 10,000 transactions per second.
But innovation is just around the corner…
“Ethereum 2.0,” which is set to be released next year, will boost ethereum’s performance to 100,000 transactions per second.
And with ethereum able to confirm a transaction in just six minutes – versus bitcoin at one hour and Visa at 24 to 72 hours – ethereum 2.0 will clearly set itself apart from its peers.
The bump in transactions per second on ethereum 2.0 will allow the community of developers and apps built on ethereum to keep growing almost without limit. And as “gas prices” return to more normal levels, transactions – and demand for the ethereum crypto to pay for these transactions – will soar.
Commentators have speculated that the price of ethereum could go up potentially more than 20-fold.
As you pointed out, HVBTF derives a significant amount of its earnings from ethereum. As ethereum goes, so goes HVBTF.
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