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There are numerous compelling reasons why Ethereum’s Ether is currently the number 2 digital coin in the market and why people are buying it. If you’re still relatively new to the world of cryptocurrencies. Then you’ve probably heard about Bitcoin, and now you’ve had your eye on the top coins in the market. If you also know about Ether, then you’ve probably seen its performance in the market.
While Bitcoin is great as a store of value, it doesn’t have that much support on smart contracts. Similar to how Ethereum does, and Ether is not globally known as a plain digital coin. It’s also a global computer to run DApps or decentralised applications. Ethereum is closely, or almost equally, capable as Bitcoin of being a store of value. As the two digital assets have competing for the number 1 spot as the largest digital currency by market capitalisation. But the question remains – is Ethereum still a good investment in 2021?
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Bitcoin Versus Ethereum
Ethereum and Bitcoin have utterly different use cases as Bitcoin acts as a store of value. While Ethereum enables the users to utilise the features through smart contracts with the assets virtual machine and solidity programming language. Moreover, the platform comes Solidity, which it’s own programming language that allows programmers to write codes dubbed as smart contracts. The smart contracts created can automate thousands of financial transactions while becoming the building blocks of NFTs or non-fungible tokens.
However, while basic smart contracts are technically possible using Bitcoin’s blockchain. The custom programming language and massive developer team make it clear that Ethereum is the winner for the long term. As far as which of the two is better than the other in regards to investing. It is still quite impossible to say.
Because at the end of the day, the decision to which digital coin you’re going to choose solely depends on your educated decision. So, best thing to do is to obtain all the necessary knowledge before taking part in the crypto investment world. That is full of risks and disappointments if you’re not fully prepared.
Ethereum’s Advantages
Similar to other digital currencies, Ethereum is also a speculative investment. There’s a possibility that you might end up losing some. Or sometimes all, of your investment if the asset goes down in value. Moreover, the overwhelming performance of Ether has gained the attention of numerous investors that are institutional or traditional alike.
Ethereum has a lot of advantages, one of which is its volatility as smarter investors came to realise the cycle patterns of its market value and are now able to capitalise on the market bubbles to have substantial gains. Another advantage is its lower inflation risk because, unlike real-world currencies that are regulated by the governments. Ethereum has a plan with its transparent inflation that is less likely to be susceptible to changes.
Furthermore, Ethereum’s support of decentralised finance is what also makes it attractive as NFTs and numerous other software are becoming more mainstream. With that in mind, it brings unpredictable changes in its market value. That educated investors can create opportunities for substantial gains.
The Disadvantages of Ethereum
Knowing all the advantages Ethereum has against its competitors. And it’s essential to be aware of the concerns surrounding the asset and cryptocurrencies in general. One of the risks involved is the high volatility. That’s why you would have to keep a close eye on the market to avoid a painful loss if you’re planning on investing for the short term.
The other disadvantage is the competition, there are already roughly around 11,000 digital currencies in the market. A lot of them also have smart contracts that can give Ethereum a run for its money. Thus the possibility of the market value plummeting to ridiculous numbers.
Conclusion
The future of Ethereum looks significantly bright. Especially that the developers are expected to move from proof-of-work to a proof-of-stake network by the end of 2022. With that in mind, it could significantly reduce its energy consumption by as much as 99% compared to its current levels.
Furthermore, future protocol upgrades may allow users to stake their tokens into a pool for commission. If they don’t have enough ETH to go around with, and with that in mind, Ethereum is the top cryptocurrency to invest in.