3 reasons Ethereum could overtake Bitcoin in 2022

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Cryptocurrency has had all year, with many cryptocurrencies experiencing explosive growth. Bitcoin (BTC -0.54%) remains the most popular, with a market cap of almost $ 900 billion.

However, Ethereum (ETH -0.34%) is steadily gaining ground and catching up with its biggest competitor. As the second most popular cryptocurrency, Ethereum currently has a market cap of just over $ 450 billion. Its price has also increased by around 466% so far this year, while Bitcoin is up by around 70%.

While Ethereum has had a solid year, 2022 could be even more promising. And there are several reasons why it could be on track to overtake Bitcoin next year.

Image source: Getty Images.

1. It will be more energy efficient

One of the biggest hurdles Bitcoin faces today is its impact on the environment. Bitcoin uses a Proof of Work (PoW) mining protocol, which involves powerful computers solving complex puzzles to verify transactions. This process requires an incredible amount of energy, and many regulators and critics are concerned about Bitcoin’s long-term environmental impact.

Although Ethereum also uses a PoW protocol at the moment, it is currently in the process of moving to a Proof of Stake (PoS) model. Point of sale systems are much more environmentally friendly. They don’t require as much energy, as they involve users stake a portion of their crypto holdings to validate transactions.

Ethereum’s update, Ethereum 2.0, is expected to be completed next year. Once it fully switches to a PoS model, it will use around 99.95% less power, which could give it a serious edge over Bitcoin.

2. It will be faster

Another benefit of updating Ethereum 2.0 is that it will result in significantly faster transaction times.

Bitcoin is one of the slowest cryptocurrencies, processing around 7 transactions per second. (For reference, Visa is capable of processing around 24,000 transactions per second.) Ethereum is also slow at the moment, processing between 15 and 45 transactions per second.

However, once Ethereum rolls out its update next year, that number will increase. One of Ethereum’s founders, Vitalik Buterin, claimed that after the Ethereum 2.0 transition, the network could potentially handle up to 100,000 transactions per second. These faster transaction times can help Ethereum scale and give it a better chance of being widely adopted.

3. Its dApps give it more space to develop

The Ethereum blockchain not only houses its native token, Ether (which can be used as a means of payment), but it also hosts various decentralized applications (dApps).

Some of the more popular dApp projects include decentralized finance (DeFi) and a non-fungible token market (NFT). Because it is an open source network, developers can also create new projects on the blockchain.

This creates virtually unlimited potential for Ethereum. All of these dApps require the use of Ether, so if any one of them becomes widely adopted, Ethereum will benefit, even if Ether itself does not become a common currency form.

No one knows for sure what the future holds for Bitcoin, Ethereum, or cryptocurrency in general. While Ethereum may not be the right investment for everyone, it does have a few important advantages over Bitcoin that could make it a wise choice in 2022.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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