Cryptocurrencies as a whole have been in an extreme bull market since late 2020 and the market cap leaders, in particular, Ethereum (ETH) have been seeing steady value inclines. We have seen this before in the ETH market when there was a bubble back in 2017 that eventually burst. Investors are suggesting that this time may be different though and we may continue to see steady inclines into late 2021.

More Room for Valuation Increases

As it currently stands ETH is only about one-fifth the size of BTC in terms of total market capitalization. As we know from history the largest companies in the world at some point eventually start competing with each other for size and scale and one often overtakes another and grows larger. There is no reason why the cryptocurrency market should be any different from the stock market in the future so there is potential for ETH to not only catch up with BTC in terms of market capitalization. Being one fifth the size just makes it more attractive as catching up with BTC not only means a more attractive coin but also significantly more gains percentage-wise over just investing in BTC. 

There is a problem with predicting big gains for ETH though, namely that it is a very risky asset as opposed to investing in something like Gold. For example, the price of ETH will rise exponentially when times are good but it will drop in a similar fashion when times are bad. This means in economic conditions that support a strong bull run in the crypto market you can expect to make an outstanding return but in recessions, you can expect to lose not only your shirt but also your underwear. 

Superior Technology

Ethereum has some strong technological advantages over Bitcoin and some of the other coins out there and available on the marketplace. The first main advantage of ETH is that it acts more like a legal contract than a coin, which makes it very different. So in all reality, it is more like Apple Pay or another digital wallet alternative than a $1 bill or even a bank check. 

A good example of this is in payment protection. A buyer may hold ETH in an escrow account while they await the delivery of goods or services, where the ETH will automatically be transferred upon delivery of the goods or services. BTC offers no such functionality and is simply a coin transfer system.

Another big technological advantage is there is a theoretically unlimited supply of ETH whereas BTC has a maximum supply limit of twenty-one million coins. What this means in terms of the flow of coins is eventually the economic principle of the circular flow of income at some point in the future could dry up for BTC whereas there can be a continuous quantitative easing style supply of coins for ETH that can speed up the circular flow of income model in an ETH based decentralized economy. 

Perhaps one of the most important benefits of ETH over BTC is when we talk about the issue of speed of transfer. BTC can take about 15 minutes to transfer between wallets which make retail shopping with BTC very problematic. ETH on the other hand only takes approximately 15 seconds to be transferred between stakeholders in the blockchain technology. For this reason, ETH is a much safer bet if we are truly considering cryptocurrencies being used in everyday life.

Ethereum 2.0

ETH 2.0 was released in October 2020 which saw a huge influx of new users to the technology. ETH 2.0 is a staged process that will take a significant amount of time but as time goes on we will see a significant upgrade in the ETH technology and features.

ETH 2.0 is totally different from ETH 1.0. ETH 2.0 is fast, more scalable and energy-efficient than ETH 1.0. ETH 2.0 will run on Proof-of-Stake (PoS) algorithm, have a sharding chain and new virtual machine eWASM. The ETH 2.0 is the biggest update for Ethereum and will be rolled out in phases.

Ethereum 2.0 Roadmap

There are three major phases that the developers are working on. Just to get all the phases towards Ethereum 2.0 launch straight:

1. Frontier (the initial stage of the Ethereum 1.0 network)
2. Homestead (the stage that we saw in 2018)
3. Metropolis. This stage consists of two substages Byzantium and Constantinople hard forks. We are currently at this stage.
4. Serenity (Ethereum 2.0) This stage also consists of three sub-phases:

• (i) Phase 0. Serenity introduces Ethereum Beacon Chain which will help the network to migrate from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
• (ii) Phase 1. Ethereum Sharding to achieve unbelievable scalability.
• (iii) Phase 2. eWasm (Ethereum Flavored WebAssembly) integration. eWASM will enable faster code execution and have to bring significant improvements to a development environment. 

The result of all these new features and use cases will be an even greater influx in the number of companies supporting ETH. Already there are tech giants such as Paypal supporting ETH contracts which is a big plus. In saying that more strategic partnerships will mean more of a valuation increase as usability and adoption increase.

ETH is definitely the cryptocurrency to watch in 2021 as it is continuously evolving and on top of its evolution and is genuinely superior to the older but more established BTC. However, BTC isn’t going anywhere any time soon and will likely remain the dominant cryptocurrency in the foreseeable future. But as sentiment in the cryptocurrencies matures over the next several years and more people get to understand how blockchain technology actually works, there will likely be significant upside potential for ETH in the future.