Ethereum (ETH) has increased nearly 153,000% since its inception in 2015 and is presently priced at $4,892 as of November 2021. With the cryptocurrency market as a whole falling, however, the world’s second most valuable digital asset is now trading for $1,077 per token.
A $5000 per token price would result in a 364 percent return from today, and it would mark a new high for this popular cryptocurrency. Let’s look at why such a ambitious goal is feasible, as well as what could get in the way.
A large ecosystem of use cases
Smart contracts are a form of digital contract that runs on the Ethereum blockchain, which Bitcoin does not have. A smart contract is a type of computer program that executes if certain criteria are fulfilled, allowing two persons who don’t know each other to interact and transact with one another without the need for a trusted third party. It was an historical breakthrough that resulted in Ethereum being dubbed the world’s first decentralized computer.
Ethereum, on the other hand, has created actual-world applications thanks to its practicality and flexibility. Decentralized apps (dApps) are being developed to challenge a variety of sectors. An example of a major category of dApps is non-fungible tokens (NFTs) and decentralized finance (DeFi) protocols, both of which are quite popular.
Before the recent market downturn, services such as Uniswap, a decentralized exchange for purchasing and selling cryptocurrency, and Compound, a lending and savings platform similar to a traditional bank, were becoming increasingly popular in the DeFi space. Despite the fact that the market for NFTs has dried up considerably, this technology’s potential is tremendous.
Ethereum, of course, is the most popular of the blockchains when it comes to these emerging use cases. It has by far the most active developers working to improve the network, which is a significant competitive advantage in the cryptocurrency space.
Watch out for its competitors
Investors looking for Ethereum to reach $5,000 per token should be aware of “Ethereum killers,” which are blockchains attempting to address the same issues as Ethereum. The two blockchains in this category, Cardano and Solana, are both trying to improve upon Ethereum’s shortcomings in terms of speed and scalability.
Ethereum, like Bitcoin, uses a proof-of-work consensus algorithm. To validate and add more transactions to the network, it requires a large amount of computational power. It’s not only energy intensive, but it’s also slow. Today, Ethereum can only handle about 13 transactions per second.
The proof-of-stake algorithm used by Cardano and Solana is called PoS. This energy-efficient method allows real owners of the tokens to stake their assets and validate transactions. It’s much quicker and more environmentally friendly.
Fortunately, Ethereum has a solution in the works. The Merge will raise the network’s capacity by adding a new beacon chain to the mix, at which point the whole network will be proof-of-stake. Shard chains may also be included as early as 2023. This implies that additional blockchains will operate in conjunction with the main Ethereum network, alleviating congestion, throughput, and costs.