Ethereum is the second blockchain by capitalization, but the first by the degree of use of smart contracts. Automatic algorithms have made this network really popular, but the slow proof-of-work protocol has led to transaction delays and a significant increase in fees. Today we will describe the main trends in the development of the network and give a forecast of Ethereum for 2022.
Scope of application
Smart contracts have found their application:
In the sector of decentralized finance (DeFi), allowing to automate the processes of exchange and borrowing of cryptocurrencies between users;
In the gaming industry, where the processes of buying and selling game paraphernalia are simplified;
In contemporary art, helping to endow art objects with copyrights.
Most of the projects for monetization issue their own tokens, but the basic blockchain is mainly ethereum.
In the DeFi sector, ethereum dominates the rest of the blockchains with $157 billion of blocked funds or 66% of the total market volume. The gap is even stronger in the NFT market, where the altcoin share exceeds 90%. The dominance of Ethereum makes it possible to make favorable forecasts taking into account the overall growth of the market, but competition gradually reduces its market share.
The Ethereum Problem
Ethereum is the preferred base blockchain for any project due to its high decentralization. However, the popularity of the network, coupled with low bandwidth, led to a significant increase in commission. Sometimes you need to pay over $ 50 for a transaction, which is prohibitively expensive compared to competitors. For example, in Solana, the commission is less than a cent.
The solution to the problem is the transition to the proof–of-stake protocol and the subsequent scaling of the network. Now the date of the move is the second quarter of 2022, but there is a risk that it will be postponed again. The forecast of the Ethereum exchange rate is largely related to the timely implementation of the roadmap, otherwise, competing blockchains will again eat up part of its market share.
The markets associated with the use of smart contracts will continue to grow strongly in 2022. Over the past year, the DeFi sectors have grown by an order of magnitude (from $22 billion to $240 billion) and NFT (from $250 million to $2.1 billion). This year, the metaverse market is expected to boom, which could grow from $600 million to $5 billion. Despite the high congestion of the network, the demand for Ethereum will continue to grow, but much depends on the speed of the transition to PoS.
The basic scenario of the exchange rate forecast assumes that the move to the new protocol will be postponed again. In this case, by the end of the year, Ethereum will rise in price to $ 7,000. If Vitalik Buterin manages to successfully merge the two branches, the cryptocurrency will come close to the $10,000 mark.