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Could Ethereum Make You a Fortune in 2022?

By Adria Cimino – Jan 11, 2022 at 1:00AM

Key Points

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There's one major catalyst right around the corner.

Ethereum (ETH -2.59%) climbed more than 400% last year. The world's second biggest cryptocurrency impressed users and investors with its real-world utility -- and promise of more to come. Ethereum is a leader in decentralized applications (dApp) and in the non-fungible token (NFT) marketplace.

But Ethereum's performance may be far from over. That's because there's a huge catalyst right around the corner. So, could Ethereum make you a fortune in 2022? Let's take a closer look.

An investor smiles while working on a laptop in an office.

Image source: Getty Images.

Following Bitcoin

First, a bit of background on Ethereum. This blockchain network launched in 2015 along with its native cryptocurrency, Ether. It's had its ups and downs when it comes to price -- often following in the footsteps of bigger rival, Bitcoin. And as Bitcoin climbed to $60,000 last year, Ethereum reached new highs too.

Ethereum Price Chart

Ethereum Price data by YCharts

But Ethereum isn't just a Bitcoin follower. There are solid reasons behind its success. The network has become a significant player in the world of dApps and NFTs. First, let's consider dApps. More than 2,900 dApps are built on Ethereum, according to the State of the dApps website. Ethereum dApps range from finance to gaming to technology. For instance, you can lend and borrow assets or buy insurance. Or you can play games that involve trading land in virtual worlds.

As for NFTs, Ethereum is the all-time biggest blockchain by sales volume, according to CryptoSlam. On Ethereum, you can scoop up popular NFTs from collections like CryptoPunks or Bored Ape Yacht Club.

All of this sounds great. But Ethereum has faced one big problem. And that's transaction speed. The network relies on a proof-of-work validation process. That involved time-consuming, energy-using computations to validate transactions. As a result, Ethereum processes about 30 transactions per second. Now, though, Ethereum is in the process of transitioning to a proof-of-stake validation method. This speeds things up by eliminating those complex computations. Instead, validation power goes to those with the biggest holdings.

Launching proof of stake

Ethereum expects to fully launch proof of stake in the first or second quarter of this year. And the blockchain will introduce shard chains next year. This divides up the database into new chains in a horizontal manner. Splitting the workload across chains reduces network congestion.

All of this means Ethereum may eventually process about 100,000 transactions per second. That's huge progress.

Now, let's come back to our question: Could Ethereum make you a fortune this year? Of course, it's impossible to predict whether a cryptocurrency will rise or fall. The industry is risky -- so never invest more than you can afford to lose.

That said, if all goes well with Ethereum's upgrade, it's possible this cryptocurrency will post significant gains. Here's why: Ethereum already is a step ahead of rivals in the areas of dApps and NFTs. Now, the upgrade is set to eliminate Ethereum's main flaw. Moving forward, Ethereum will be well positioned to maintain its leadership -- and that should attract more and more investors and users. And all of this means Ethereum may make a fortune for investors in 2022 and beyond.

Adria Cimino owns Ethereum. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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