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What awaits Ethereum in 2022?
Ethereum, the second-largest cryptocurrency after Bitcoin, has dominated the altcoin market since its inception. Right now, the long-awaited upgrade, Ethereum 2.0, is still in the works and important steps in that direction are expected in 2022. Read on and find out what else awaits Ethereum in 2022.
Ethereum, the altcoin giant and the second-largest cryptocurrency, is on its way to its long-awaited Ethereum 2.0 upgrade that will introduce a monumental change to its consensus algorithm. Ethereum 2.0 will probably not be the only highlight of Ethereum in 2022, as the blockchain hosts many DAOs, ERC20 tokens, DApps, NFTs, and Defi platforms; all these areas can bring us surprising news in the coming months.
The merger: a step towards Ethereum 2.0
What will probably be the highlight of the year for the entire crypto market is Ethereum’s plan to move forward with Ethereum 2.0. For many, with this upgrade, Ethereum could even have the potential to overtake Bitcoin in an event they have called ” The Flippening “.
At the heart of Ethereum 2.0 is the consensus algorithm change: Ethereum will move from Proof of Work to the more environmentally friendly Proof of Stake. In addition to a drastic reduction in environmental costs, this change will make the network faster and cheaper, since the update is expected to increase the TPS (transactions per second) of Ethereum considerably, from the current 30 to a possible 10,000 TPS. This improvement has the potential to resolve network congestion issues and possibly reduce Ethereum’s high transaction fees.
Although this update is definitely going to take some time, this year will see this altcoin giant take a step forward in its plan. This step is known as “ the merger ” – it is expected to happen in the first half of 2022 and, as the name suggests, it will “merge” the Ethereum mainnet with the Beacon Chain.
The Beacon Chain went live on December 1, 2020, and the merger represents the step that will finally allow Ethereum to switch to PoS, while also preparing it for staking and shard chains.
ERC20 tokens are on the rise
The Ethereum Request for Comments 20 Token Standard, ERC20 (The Ethereum Request for Comments 20), is a technical standard for smart contracts used to implement tokens on the Ethereum blockchain. Before ERC20, cryptocurrency exchanges had to build ad hoc bridges to allow cross-platform token trading.
The ERC20 standard is a set of 6 rules that smart contracts have to comply with if they want to work on the Ethereum blockchain, a system that promotes interoperability between smart contracts themselves.
If a smart contract complies with the 6 rules of ERC20, it will be able to launch its token on the blockchain and third parties and applications will be able to access all the related infrastructure and be able to execute transactions, connect wallets and access information. Respecting the ERC20 standard also means that the behavior of smart contracts will be predictable, and there will be no need for bridges between platforms.
There are currently 486,408 ERC20 tokens in circulation, and their popularity is growing.
Some ERC20 tokens include the StormGain Ecosystem Token (BEST), Tether (USDT), Shiba Inu (SHIB), and Chainlink (LINK) among many others.
If DApps and DeFi continue to accelerate the adoption of blockchain technology, the ERC20 tokens that power the smart contracts that underpin them will also be set to play a significant role. From 2022 onwards, we could see ERC20 tokens further broaden Ethereum’s use cases, especially on a day-to-day basis.
DAO and DeFi will be the protagonists
Two terms that we are likely to hear very often in 2022 are DAO and DeFi. DAO, short for Decentralized Autonomous Organization, refers to an Ethereum-based community, owned by its members, in which the leadership is decentralized and the rules are written in code. DAOs are powered by smart contracts, self-executing digital representations of classic contracts.
Once the DAO smart contract is up and running on the Ethereum blockchain, the only way to alter it will be to put any suggested changes to a vote. As there is no centralized authority in the DAOs, all decision-making power is in the hands of their members, whose votes will determine whether or not changes are made to the network.
DAOs have flourished on the Ethereum network and are today seen as an alternative not only to more traditional types of organizations but also to traditional business and working models – some believe that DAOs have the power to change business structures. as we know them.
Not only DAOs, but also many DApps (decentralized applications) are based on Ethereum, as the power of the internet is shifting to users. DApps are the result of the union of smart contracts, a cryptocurrency, a blockchain and an application. DApps have a great influence on DeFi developments: although it is only the beginning of decentralized applications: they are already revolutionizing the world of traditional finance by providing financial services through cryptocurrencies, from loans to executing transactions and obtaining of interests.
The possible use cases for DApps go beyond decentralized finance: any type of application that can be installed on your laptop or smartphone can be a DApp, including social networks, browsers, games, work platforms and more. much more.
DApps and DeFi have surged in popularity in the past year, and it would not be surprising to see Ethereum continue the upward trend in 2022.
Ethereum and NFTs on the rise
NFTs have been in the limelight throughout 2021 and this trend is not going to stop any time soon. Artists and celebrities continue to approach the NFT world: for example, Eminem recently bought a Bored Ape for 123.45 ETH; $462.00 at time of purchase. The Ethereum blockchain hosts many NFT markets, including OpenSea, the largest NFT market by trading volume, which started in 2022 with a whopping $300 million in funding.
As well as shaking up the landscape with their application in digital art, NFTs can be used to represent ownership of any digital asset and Ethereum is betting on them to further shape the future of decentralized finance; for example, with projects such as NFT-backed loans and fractional ownership, the latter currently in development.
The enthusiasm for NFTs is not going to wane in 2022, and we can see NFTs playing an active role in expanding the mainstream adoption of Ethereum in the coming months.
Ethereum will face strong competition
Although Ethereum is still considered the largest altcoin and is the most popular blockchain for smart contracts when it comes to DApps and DeFi, it is likely to face significant competition in 2022.
Blockchains such as Solana, Near Protocol, and Polkadot, to name just a few, are working to provide a secure, fast, and cheap alternative environment to Ethereum for developers to create and deploy smart contracts and DApps, and extend the applications of finance. decentralized.
Earlier this month, the Metaplex Foundation raised $46 million in a strategic funding round to expand the Solana NFT ecosystem, while the Hubble DeFi protocol raised $10 million and is preparing to launch on the network. Solana’s main
Near Protocol is also gaining traction in DeFi, launching an $800 million development fund in October 2021. Not long after, Polkadot started its parachain auctions and the first one was won by DeFi platform Acala.
With Ethereum 2.0 and the official switch to Proof of Stake consensus still in the making, these other blockchains may be real contenders as they are able to offer higher number of transactions per second and cheaper transaction fees than Ethereum.
Although Ethereum continues to retain the largest number of active developers, the blockchains that are imposing themselves in the space are establishing themselves as a valid alternative, and we could also see them vying for ETH dominance in 2022.