Ether fans would probably argue it has a more altruistic purpose.
While Bitcoin is purely used as a store of value, the Ethereum blockchain network is used to facilitate smart contracts. The technology has facilitated now-familiar concepts like non-fungible tokens (NFTs) and decentralised finance (defi).
However, Ether has always played bridesmaid to Bitcoin in the cryptocurrency rankings.
The two assets are the most recognisable names but Ether has never managed to quite overtake the market capitalisation of Bitcoin.
But this might finally happen in 2022.
“If Ethereum flips Bitcoin in terms of market capitalisation, it will change the sentiment of the crypto market,” said Saxo Market cryptocurrency analyst Mads Eberhardt.
“We are arguably approaching the year with the highest probability of it happening since Ethereum caught up with Bitcoin’s lead in 2021 with more authentic use-cases and adoption.”
Ethereum 2.0 could be a game changer in 2022
According to Eberhardt, Ethereum’s major upgrade ETH 2.0 — released this year — could really secure the future of the cryptocurrency.
“To make a long story short, ETH 2.0 will make Ethereum significantly more scalable, more secure, and more sustainable,” he said.
“The latter is extremely important, as there is likely no future in proof-of-work, which is the current consensus mechanism of Bitcoin and Ethereum.”
The trouble with the current proof-of-work reward system is that the computers that do all the work on Ethereum currently require an enormous amount of power.
And that’s not sustainable in a carbon-aware world.
“It is simply too easy to heavily regulate the industry based on solely the sustainable argument while institutions have a good reason to keep a safe distance when the industry is not green.”
ETH 2.0 is due out in the first half of this year.
“Though please be prepared that we are possibly talking Q3, or maybe Q4, since Ethereum Foundation and its developers are known to postpone deadlines.”
Rise of layer 2 currencies
Both Ethereum and Bitcoin are known as layer 1 cryptocurrencies because they possess their own settlement layer.
But neither can get through thousands of transactions per second in their own right. And that’s where layer 2 cryptocurrencies come in.
“For crypto to gain global adoption, and be the settlement layer of the digital age, L2s are indeed needed as they presumably scale cryptocurrencies [indefinitely] in the future,” said Eberhardt.
“In 2021, L2s started to gain traction, but 2022 will likely be the year where they become a solid part of the crypto market, ultimately showing that cryptocurrencies can scale.”