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Ethereum (ETH -0.19%) has had a big year. The world’s second-biggest cryptocurrency successfully completed a complex upgrade — one that’s launching it on the path to become a stronger player than ever.
“The Merge” changed Ethereum’s way of validating transactions on the network and made it more energy efficient. Still, Ethereum has tumbled in value since the start of the year and is heading for a 65% loss..
But Ethereum’s upgrades aren’t over. And the next ones could eliminate the crypto’s biggest problems. That’s exactly why this crypto leader is my top cryptocurrency to buy before 2023.
First, a little bit about what’s been accomplished so far. Ethereum is a blockchain, and Ether is its native token. That means Ethereum can run decentralized applications (dApps) and offer non-fungible tokens (NFTs) on its blockchain — and Ethereum can also be used as a payment method.
There are many investors in Ethereum. And now, thanks to the switch to proof of stake to validate transactions from proof of work, you also can stake your holdings for passive income.
Ethereum is a top player in dApps and NFTs. Almost 3,000 dApps run on the blockchain. It’s also the biggest by sales volume in the world of NFTs, according to CryptoSlam. This is key because these are areas with huge potential for development.
For instance, dApps that allow people to loan and borrow money or get insured can change the way business is done a few years from now. These dApps remove intermediaries, and therefore cut costs and streamline operations.
This is great. But why rush to buy Ethereum before 2023? Because something big is set to happen then. Ethereum will introduce an upgrade that will eliminate its big problems of slow speed and high transaction fees.
Next year, Ethereum plans on launching sharding, which splits up the database horizontally. As a result, operations are quicker — and cheaper.
Sharding will work along with Ethereum’s layer-2 rollups. Rollups literally “roll up” many transactions into one on layer 1 to cut costs for everyone involved. Transactions then take place outside of layer 1. When sharding comes along, the entire network will help handle these operations.
If all goes smoothly, sharding could be a major step forward for Ethereum. The blockchain usually processes between 12 and 20 transactions per second, according to Blockchair. Sharding could bring Ethereum up to as many as 100,000 transactions per second.
Ethereum already is a leader. And these improvements could attract even more users and investors to the blockchain. That’s why it’s a good idea to invest in Ethereum now — before these changes lift the value of this dynamic crypto player.
But should everyone run out and buy Ethereum right now? Of course not. It’s important to consider your comfort with risk.
Cryptocurrency — even bigger established players like Ethereum or Bitcoin — remain a risky investment because the industry is new. And we don’t know exactly what it will look like several years from now. If you’re a cautious investor, you might want to favor assets that offer more visibility and safety — such as dividend stocks, for example.
If you don’t mind some risk, though, Ethereum is one of the most established players among the thousands of cryptocurrencies out there. The recent upgrade and the one that’s coming are preparing it well for the future. So if you want to bet on the future of crypto, Ethereum is a great player to stock up on before the end of the year.
Adria Cimino has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
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