Ethereum, the second most valuable cryptocurrency with a current market cap of $360 billion, has been on the radar of many investors. In the past five years, its native token has seen a staggering increase of 1,700%, turning a $1,000 investment into $18,000. While Ethereum has experienced a dip of 36%, it remains a popular choice for investors looking for potential returns in the volatile crypto market.
Here are three key things to know about Ethereum before investing:
1. Aiming to boost functionality
Ethereum’s key feature is its ability to support smart contracts, which are computer programs that automatically execute transactions once the parties involved have fulfilled their end of the agreement. This eliminates the need for human intervention and can potentially lower costs. This makes Ethereum more useful compared to Bitcoin, as it has a wide range of use cases such as gaming, finance, non-fungible tokens, and the metaverse.
2. A sustainable future
Previously, Ethereum operated on a proof-of-work consensus mechanism, which was energy-intensive and not environmentally sustainable. However, in September 2022, the network successfully transitioned to a proof-of-stake system, reducing energy usage by over 99%. This change also aims to make the network faster and cheaper, with plans for further upgrades in the pipeline.
3. Ongoing technical risk
Ethereum has a large team of developers constantly working to improve the network and bring about real-world utility. However, with constant updates and tweaks, there is always a risk of technical issues arising. As blockchain technology is still in its early stages, there is much to be learned, and any changes to the software can pose a risk.
In conclusion, understanding these key areas of Ethereum can help investors make informed decisions before investing in this top cryptocurrency. However, it’s important to note that Neil Patel and his clients have no position in Ethereum, and The Motley Fool has positions in and recommends Ethereum and Bitcoin. As with any investment, it’s important to do thorough research and have a proper risk management plan in place.
