I first bought a few Ether, the tokens that help power the Ethereum (ETH 0.79%) network, back in 2017 when cryptocurrencies were still a fairly new concept to most retail investors. I naturally sold off a little bit early not really seeing the big picture but ended up holding a little more than one Ethereum long-term, and boy do I wish I had bought more. Now seeing the potential of cryptocurrencies in general, I plan to keep holding Ethereum with the belief that this is one cryptocurrency that can go a lot higher. Here's why.
Real-world utility
If Bitcoin (BTC 1.59%) is the proof of concept for blockchain and cryptocurrencies then you could say that Ethereum is the proof of concept for programmable blockchain where applications can be built on the network. These applications include smart contracts, which are automated contracts that cannot be changed after they have gone into effect. One use case of smart contracts on Ethereum is non-fungible tokens (NFTs), which enable items like artwork and sports trading cards to be tokenized and secured by blockchain in the sense that there can't be a duplicate of that specific copy.
While I'm not sure how I feel about NFTs, and the price of them seems quite inflated, I could also see a world where they continue to grow in popularity and become more mainstream. After all, an NFT can be boiled down to a digitized piece of artwork or a picture or video capturing a moment in time, among other digital files. Is that so different from art or collectibles now? Their value comes primarily from what people are willing to pay to own them, whether as part of a collection or as something to decorate our homes with. But with the world getting more digitized every day, who's to say future generations won't want to have these same collectibles to show all of their online and virtual friends, colleagues, and contacts.
Even if NFTs don't take off, smart contracts have many other potential use cases including but not limited to carrying out landlord and tenant contracts, automating insurance claims, quickening the mortgage process, and removing barriers in investing.
Image source: Getty Images.
Ethereum 2.0
The other thing I am really excited about in regard to Ethereum's long-term success is the massive set of upgrades for the network that developers have now been working on for years.
Ethereum 2.0 plans to make the network "more scalable, more secure, and more sustainable," according to Ethereum.org. The system will be more scalable in that it will be able to process more transactions per second. Currently, Ethereum can only process 15 to 45 transactions per second. Once the upgrade is complete, the network may be able to process up to 100,000 transactions per second.
The other big upgrade will be the transition away from the energy-intensive, proof-of-work concept that currently uses massive amounts of computer power to mine new tokens that power and validate the ledger. Ethereum 2.0 will see the network adopt a new proof-of-stake concept. In proof of stake, current owners of Ethereum stake tokens they own and then become the participants on the network who agree on transactions made on the ledger and create new blocks. Not only will staking make the network more sustainable, but it also improves security because it will make it easier for more Ether owners to become validators on the network, and the more validators there are, the more decentralized the network is, making it less likely to succumb to an attack.
Holding long
Although I've made some solid profits from my Ether tokens, I still think there is a long way to go due to the real-world utility of Ethereum, as well as how Ethereum 2.0 positions the network for the long haul. While we are seeing how Ethereum can be used in the real world with the rollout and popularity of NFTs, there are still so many other ways smart contracts can impact many other industries and make our lives more efficient, which is why I plan to hold Ethereum right now.
