Why Ethereum will beat Bitcoin in 2022

[ad_1]

In the cryptocurrency world, Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) dominate all others. The two digital tokens are now worth over $ 1.3 trillion in market value, or roughly half of the total value of all cryptocurrencies in the world.

As the original cryptocurrency, Bitcoin has the advantage of being the first to arrive and is the largest crypto token in the world with a market capitalization of around $ 900 billion, which is twice that of Ethereum. However, you might be surprised to learn that Ethereum crushed Bitcoin in 2021.

Image source: Getty Images.

As you can see from the graph below, the price of Ethereum has risen by over 400% while Bitcoin has risen by around 70%.

Bitcoin price data by YCharts

There are a number of reasons Ethereum dominated Bitcoin in 2021, including the emergence of non-fungible tokens (NFTs), and these trends don’t look set to accelerate until 2022. Keep reading to see three reasons Ethereum will surpass Bitcoin again in 2022.

1. Ethereum has greater utility

Bitcoin’s initial promise was a digital currency that would not be controlled by a central government or other institution. While Bitcoin has been widely adopted as an investment, its progression as an alternative currency has been slower. Today, around 15,000 businesses around the world accept Bitcoin. It may sound like a lot, but it only represents about 1 in 10,000 businesses among the hundreds of millions of businesses around the world.

Ethereum is not as widely accepted by real-world businesses as Bitcoin, but it is the leader in the space where cryptocurrencies are gaining ground – in the metaverse, with NFTs, and with other applications in the world. real world.

In fact, Ethereum has become NFT’s de facto way of buying and selling because its blockchain enables smart contracts, unlike Bitcoin. Ethereum was designed to support smart contracts, which automatically execute transactions without the help of a middleman. This has applications beyond simple non-fungible tokens, including in real estate transactions, for concert tickets and other such purchases for which the item in question must be authenticated.

As Ethereum shows, the future of cryptocurrency is not about moving the dollar, but meeting needs that fiat money cannot meet on its own.

2. Ethereum attracts more developers

In the tech world, developer interest is often a leading indicator of where technology is going. The technology or platform with the most developers tends to win in the long run, as attracting developers leads to a virtuous cycle of attracting more, which leads to more improvements for that platform. It’s a massive network effect that builds a wide economic divide.

In crypto, Ethereum is the leader when it comes to developers working on its platform. According to a report by venture capital firm Electric Capital, Ethereum had an average of nearly 2,300 developers in the third quarter of 2020, while Bitcoin had less than 400. The report also found that more than 300 new developers join Ethereum each. month.

With a significantly larger developer base, Ethereum will be much more agile and better able to adapt to new use cases than Bitcoin. Its developers are currently working on upgrading Eth2, which will make Ethereum more durable, secure and scalable, supporting thousands of transactions per second. While Bitcoin has a similar project in the Lightning Network, Ethereum’s lead in developers will make it faster and more likely to be successful in upgrading and advancing its architecture.

3. The future of crypto is heading towards Ethereum

Throughout 2021, momentum developed for NFTs, Decentralized Autonomous Organizations (DAO), Decentralized Finance (DeFi) and the Metaverse. These cryptocurrency apps all favor Ethereum over Bitcoin, and they are also expected to gain momentum in 2022.

One virtual world, Decentraland, has seen its user base grow tenfold in recent months, reaching 300,000 monthly active users. Many of the crypto tokens used in the most popular virtual world, such as MANA from Decentraland and SAND from Sandbox, are built on the Ethereum blockchain, showing how Ethereum has already established itself as a fundamental platform in the metaverse. This is essential for the next iteration of the blockchain.

By comparison, Bitcoin seems frozen in a particular time and place. It has benefited tremendously from the edge, name recognition, and tracking of its first mover, but according to Bitcoin bulls, the best argument for its value seems to be that it is a form of “gold. digital “since its offer is artificially capped. . This argument seems specious, given that Bitcoin, like most cryptos, has been very volatile and tends to move in the same direction as the stock market, making it a poor hedge on risky assets, the destination of the market. ‘gold. Ethereum, on the other hand, is much more flexible and adaptable to the direction of the crypto universe.

2021 has shown that cryptocurrencies have applications far beyond Bitcoin, and this trend will continue into 2022. As interest and adoption in areas like NFT, DeFi, and the metaverse continue to grow, Ethereum will benefit as well, making it a good bet that it will still outperform Bitcoin 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! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

[ad_2]