In this article, I will let you know Is an Ethereum a Good Investment? Ethereum is the best long-term Crypto Investment of all time. I’ll first be going over Ethereum’s roadmap divided into two parts and then I’ll go over why all of this is important along with some rough price calculations and a few quick things. First up let’s dive into the crucial phases of the Ethereum roadmap. As a quick background vitalik buterin founded Ethereum after writing his white paper in 2014 at the age of 19. And he is possibly the most influential figure in the history of crypto back this past January. Vitalik posted his diagram of Ethereum’s road map.
He broke down the process into five main phases the merge, the surge, the verge, the purge, and the splurge all five phases are actually happening at the same time. As denoted by the green parts of the rectangles of these phases the merge and the surge are the most important ones that are at the core of what Ethereum developers envision when they think of Ethereum becoming the true dominant layer one. Let’s now go into each of these phases.
Is an Ethereum a Good Investment?
The Merge
The merge is Ethereum’s upgrade to its consensus mechanism from proof of work to proof of stake. Switching to proof of stake will bring two key benefits with the first being the elimination of mining which will drop energy usage by over 99 making Ethereum much more environmentally friendly and scalable. The second proof of stake reduces a majority of the costs and barriers to being an anode and validating the Ethereum network and this will help to keep the ecosystem decentralized and secure in the long term.
There’s actually a lot happening with the merge and if you want to learn more about it. It’s going to happen in the next three to six months and I think it’s going to be a huge catalyst for Ethereum’s price in the short term. So I do recommend checking that out and learning more if you’re interested.
The Surge
The next phase is the surge and this upgrade is focused on scaling Ethereum’s processing power through layer 2 roll-ups and sharding the simple explanation of this is that right. Now Ethereum is capable of executing about 45 transactions per second but after the search, Ethereum could reach over 100,000 transactions per second through the combination of sharding. And layer 2s which will allow Ethereum to handle over a billion users now to dive into the weeds a little more talk about how to layer twos and sharding actually work together zk roll-ups are currently the top scaling solution for Ethereum. That vitalik has been endorsed since mid-2020.
And the average speed for those is around 1,000 to 4,000 transactions per second though. They’re expected to improve even more over time. zk roll-ups allow users to conduct hundreds of thousands of transactions of the Ethereum chain. And then roll them up together hence the name roll up and submit them as one transaction onto Ethereum this should greatly help reduce Ethereum network congestion and gas fees.
Specifically, Ethereum will have 64separate chains that will run parallel to one another and you can think of this as 64 separate Ethereum ones working at the same time but all under one blockchain platform eventually all transactions are expected to occur on layer two and not on Ethereum. It itself and a ton of decentralized applications are already now on layer two with the total value locked on layer two’s around 6.3 billion dollars.
Compared to just 100 million dollars a year ago. if only the merge and the surge were to happen and none of the other phases metallic states that this would still be enough to make Ethereum last for generations and that’s why these two phases are the most crucial for Ethereum’s roadmap now before moving on to the next phases of Ethereum’s roadmap.
The Verge
The next phase is the verge which will make it even easier to run a node on Ethereum. So that it’s able to scale without sacrificing decentralization and vitalik says you’ll eventually be able to run anode on a phone to do this Ethereum will introduce stateless clients and use vertical trees instead of merkle patricia trees to lessen the computational and storage burden. when I listened to vitalik explaining what this phase is all about in his interview all of the user operations that get included in a block.
But instead of having the transaction overhead per user operation. You just have it once per block right and then you have a separate mempool for user operations miners can listen to that mempool you could and uh um actors like that participate in flash bots could listen to that man pool and so like but anyway do check out this end game interview. if you want to dig deeper into this topic and phase.
The Purge
The next phase is the purge and as the name implies. This is Ethereum’s move to get rid of its technical debt and eliminate the dead weight of history on Ethereum right now. If you want to validate a block on Ethereum you have to download the entire history of the chain and so imagine downloading tens to hundreds offer a bytes on your computer that would honestly suck.
After the purge Ethereum won’t store all the data on the chain. But can still make the data accessible if needed more specifically clients on Ethereum will need to delete data. That is over one year old and by reducing the amount of excess data Ethereum will be able to run more smoothly and reduce hardware requirements for validators.
The Splurge
Finally, the last stage is the splurge and in this phase, all the remaining important upgrades that don’t fit nicely into one category are in this part of the road map. There is a lot going on but vitalik pointed out too specifically the first was account abstraction which will make multi-sig and social recovery smart wallets easy to use through erc-4337.
The second was zk snark everything which means using zero-knowledge proofs for everything which makes it extremely easy for anyone to run a node. Since the amount of data they’ll need to verify will be a lot smaller now. i know a lot of this was a lot to take in but the essential point is that all of these upgrades will help improve Ethereum’s ability to process transactions.
While also ensuring that the blockchain remains decentralized through low validator requirements in this recent interview metallic says that Ethereum’s roadmap is about fifty percent completed and will be about sixty percent completed after the merge and then over eighty percent completed with the surge. All right now that you know the road map let’s go into why all of this is important and let me give you some rough price calculations. i think Ethereum is one of the best investments you can make in just pretty much any asset class in the entire world and I know that sounds like a pretty painfully obvious statement.
If you’re in crypto or if people have told you to buy Ethereum or maybe even bitcoin. But I think right now in the crypto space it’s still super early and it’s kind of like investing in internet stocks in the 1990s. you don’t know which one is going to be your next amazon and which one’s gonna be pets.com if you haven’t heard of pets.com. it’s because it was a huge flop and it just doesn’t exist anymore even looking back at 2017.
There are so many names that are no longer relevant in the crypto space including things like bitcoin Cashlitecoin, iota, and dash with the successful completion of the Ethereum roadmap. I think Ethereum will be one of those assets that you don’t have to worry about too much after you’ve invested in it and I think there’s a ton of value in that because you know a lot of investing.
you don’t always have the time to research every single project and you may not be able to get crazy returns. if you don’t invest in some other kind of platforms but at least I think Ethereum should be a core part of everyone’s portfolio. Because of the upcoming changes that are going to be made and because it’s going to really solidify itself as the dominant layer 1 solution to crystallize.
What I’m trying to say with numbers right now the crypto market is at about 2 trillion and there’s a lot of thought that institutional investors will in the next three to five years or so allocate one to five percent of their portfolios into crypto to add one data point gold man Sachs recently came out with survey results that state that institutional crypto exposure is expected to increase from 40 to 51 in 2022.
And 60 of investors expect to increase their exposure this year so taking 2.5 as the base case scenario i think we can get there in about three years from now and that leads to a roughly 5.5 trillion dollar total crypto market cap. If we then look at Ethereum’s dominance over the past few years. it ranges from as low as seven percent to as high as 31 percent and is currently at around 18 using these figures. we can multiply the 5.5 trillion dollar crypto market cap to Ethereum’s dominance to the conservative case of seven percent base case of 18 and the optimistic case of 30 to get to Ethereum’s implied market caps for each of these scenarios.
If we then divide by Ethereum supply we get prices of about thirty-two hundred dollars in the conservative case eight thousand two hundred dollars in the base case and thirteen thousand seven hundred dollars in the optimistic case. This results in a negative seven-point six percent return in the conservative case. but if you believe Ethereum will only have a seven percent market share then you probably shouldn’t invest in Ethereum at all in the base case scenario. you have a 138 return and in the optimistic case a 296 return and with the info, I have today.
I personally would be pretty surprised if Ethereum does not fall in between this range in the next three years or so barring any black swan events or development issues now, of course, these are pretty rough calculations and they don’t take into account the assumption that Ethereum supply could become deflationary.
And it also doesn’t really take into consideration the fact that the total crypto market cap could go even more than 5.5 trillion. If institutional investors are pouring in even more than 2.5 to something like 5 then Ethereum’s price could get even to 20 thousand or higher in the next really will take a lot of more fundamental developments with Ethereum and the successful completion of its roadmap.
And so I really just wanted to explain you know what’s been happening with Ethereum over the next three to five years and or what’s going to happen and why it’s so important to keep track of all the developments that are happening. And if everything is successful I think there’s a lot of reason to be really bullish on Ethereum.
