Cryptocurrency has had a rollercoaster of a year, experiencing record-breaking highs and devastating lows over the past 12 months.

Bitcoin (BTC -1.32%) is the most popular and the most well-known cryptocurrency, with a market cap of more than $1.1 trillion -- making up nearly half of the $2.6 trillion crypto market as a whole.

While Bitcoin has its fair share of advantages, there's another cryptocurrency that could potentially overtake it in the future: Ethereum (ETH 0.09%). Ethereum sits behind Bitcoin as the second most popular cryptocurrency, but there are several reasons why it could become surpass Bitcoin someday.

Bitcoin symbol made of numbers

Image source: Getty Images.

1. Ethereum will become faster and more environmentally friendly than Bitcoin

One of the biggest differences between Bitcoin and Ethereum is the mining process within the blockchain.

Bitcoin uses a proof of work (PoW) system, which involves high-powered computers solving complex puzzles to verify transactions. Because there is a limited supply of Bitcoin tokens, these puzzles will become increasingly difficult as more tokens are mined. The Bitcoin mining process already uses more energy than some countries, and it will require even more energy as time goes on.

Ethereum also uses a PoW system at the moment, but it's in the process of transitioning to a proof of stake (PoS) protocol. Under this system, validators must put a portion of their crypto holdings at stake to verify transactions. The more you stake, the more you can potentially earn in rewards.

Not only does a PoS system require significantly less energy (Ethereum is expected to use 99.95% less energy once it fully transitions to a PoS protocol), but it also results in faster transaction times. This means once Ethereum moves to a PoS system, it will be both faster and more sustainable than Bitcoin.

2. Ethereum has a wide variety of applications

While Bitcoin is used primarily as a form of payment, the Ethereum blockchain has a wide variety of uses that could potentially revolutionize multiple industries.

For example, Ethereum has the ability to host smart contracts, which allow two individuals to perform transactions without an intermediary such as a lawyer. Smart contracts also open up new opportunities in the areas of finance and technology, such as decentralized finance (DeFi), and non-fungible tokens (NFTs).

While Ethereum isn't the only network to host smart contracts, it is one of the largest and most popular for applications like DeFi and NFTs. Even if cryptocurrency doesn't eventually become widely adopted as a form of payment, Ethereum could still succeed if smart contracts or any of its other applications become mainstream.

3. The possibilities are endless with Ethereum

Ethereum is an open-source blockchain, meaning developers can build new applications on the network. These can be decentralized applications such as NFTs, or they could be new cryptocurrencies hosted on Ethereum's blockchain.

Because anyone can build a new application or cryptocurrency on the Ethereum network, its potential is only limited by developers' creativity. While nobody knows exactly how revolutionary Ethereum could be, some supporters believe that if today's internet is considered Web 2.0, Ethereum and all of its decentralized applications could be Web 3.0.

Bitcoin may be the most popular cryptocurrency right now, but Ethereum has plenty of advantages that could push it ahead of the competition. While there are never any guarantees when investing (especially when it comes to cryptocurrency), Ethererum could be a strong investment with plenty of long-term potential.