Ethereum (ETH -2.71%) has had an incredible year, with its price soaring by more than 415% over the past 12 months. Despite all this growth, 2022 could be even more promising for the cryptocurrency. Ethereum is currently transitioning into its upgrade, Ethereum 2.0, which will make it faster, less expensive to use, and far more environmentally friendly.
If you've been on the fence about investing in Ethereum, now could be the right time to buy. But does it have the potential to make you a millionaire?
Where is Ethereum headed in 2022?
While 2021 was a good year for Ethereum, 2022 could be even better. With Ethereum 2.0, the network will move from a proof of work (PoW) protocol to a proof of stake (PoS) protocol, which could give it a leg up over the competition.
Under a PoW protocol, miners verify transactions using powerful computers that solve challenging calculations. Not only is this process energy-intensive, but it's also incredibly slow. Currently, Ethereum can process around 14 transactions per second, and Bitcoin (which also uses a PoW protocol) can handle just seven transactions per second.
Once Ethereum moves to a PoS system, it can potentially process up to 100,000 transactions per second, according to co-founder Vitalik Buterin. This will give Ethereum a significant advantage over Bitcoin, as well as help it keep up with newer cryptocurrencies such as Cardano that already use a PoS protocol.
In addition, this upgrade will make it easier for Ethereum's decentralized applications (dApps) to scale. The Ethereum blockchain is home to projects ranging from decentralized finance to non-fungible token (NFT) marketplaces and more, but its sluggish transaction times are holding it back. Once it completes its upgrade, however, it will be able to handle more users and grow even faster.
Could Ethereum make you a millionaire?
Ethereum has had an incredible year, but the best may be yet to come. However, it's important to be cautious when investing in any cryptocurrency.
Crypto, in general, is still highly speculative. Although Ethereum is one of the strongest players in the crypto market, nobody knows for certain whether it will succeed over the long run. Despite its many advantages, Ethereum could struggle if cryptocurrency and decentralized applications don't become widely accepted.
It's also likely that Ethereum will experience more volatility throughout 2022, especially as it continues rolling out its upgrade. If you choose to invest, be prepared for a rollercoaster of ups and downs.
Finally, don't go into this investment expecting to get rich overnight. The best investments are slow-but-steady performers that experience long-term growth. Even if 2022 is a good year for Ethereum, expect to hold your investment for at least another several years or even decades to maximize your earnings.
Ethereum may be a strong cryptocurrency, but there are no guarantees that it will succeed. However, if you have a high tolerance for risk and are willing to hold your investment for years despite short-term volatility, you could potentially make a lot of money over time.