The cryptocurrency market and the demand for different cryptocurrencies have been growing in recent years, leading investors to start looking for the best cryptocurrency to invest in. Many investors ask the same question about Ethereum, which has enjoyed immense popularity even though it is considered number two to Bitcoin. This article looks at different factors that can help answer this question.
Historical Performance
Ethereum has performed very well since it was launched in 2014. It has provided amazing returns on investment for investors who gave it enough time to grow and for people to understand its utility.
Apart from what has happened in recent months in the overall crypto market, Ethereum has provided investors with a profit if they waited for long enough. Investors who bought it when it was at its peak could have netted more than two times their investments, with some seeing almost five times what they invested. You can see this for yourself by looking at Ethereum price history. Even though the price is down right now, those who wait long enough are likely to see their investments grow due to efficiencies in its performance led by recent improvements.
Ethereum Utility
The growth of Ethereum is its real-world utility, which is also what makes it so valuable. While it is impossible to predict how the market will behave, investing in utility-centric projects increases the chances of an investment doing well. So, how is Ethereum used?
Smart Contracts
Perhaps the most recognizable use of Ethereum is in the duration of smart contracts. Smart contracts are transactional protocols or programs that run when certain conditions are met. This allows them to automate the execution of different agreements, including cryptocurrency transfers and swaps on the Ethereum blockchain. Smart contracts also remove the need for an intermediary in cryptocurrency transfers, exchanges, and swaps.
Developers are also taking advantage of this feature to create decentralized apps (dApps) that run on the Ethereum network. With developers taking advantage of the benefits provided by the Ethereum network, the demand for its cryptocurrencies continues to increase.
Staking
Ethereum recently switched to a proof-of-stake mechanism from the proof-of-work one still in use by cryptocurrencies like Bitcoin. This new staking protocol rewards Ethereum owners for holding the cryptocurrency and ensuring the security of the whole network. These holders also validate transactions on the network, further enhancing its security.
Such staking rewards the project’s top supporters, encouraging others to hold the cryptocurrency. This increases its demand and, therefore, its price.
Non-fungible Tokens (NFTs)
Although many scammers took advantage of people not understanding what NFTs are to swindle them, NFTs remain a strong player in cryptocurrency and blockchain conversations. A larger portion of NFTs are built on the Ethereum network, which has increased the number of transactions on the blockchain.
With the utility of NFTs still being discovered, there is a lot of space for Ethereum to become a dominant force.
So, is Ethereum a good investment? Many signs point to it being one. However, all crypto investments come with some risks, and you should do your due diligence before investing.