Last year was a great one for cryptocurrencies. The market surged to a value of more than $3 trillion for the first time ever. And the world's biggest cryptocurrency, Bitcoin, soared past $60,000.
But the element that most grabbed investors' attention was the story of Shiba Inu (SHIB 2.58%). This young cryptocurrency jumped an eye-popping 45,000,000%. And it reached the important milestone of more than 1 million holders.
Since hitting a high in October, Shiba Inu has given up some gains. And this has prompted some investors to wonder whether momentum is permanently slowing -- or if this is just a short pause in the action. So is it a good idea to invest in Shiba Inu this year? Let's find out.
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Built on Ethereum
Shiba Inu is a cryptocurrency built on the Ethereum blockchain. It's a currency -- but it isn't a blockchain network like Ethereum and other rivals. That's why its uses are limited to paying for goods or services at certain merchants, trading the token, or generating passive income through staking.
Shiba Inu has three tokens: one for trading, another for staking rewards, and a third for voting on proposals. The trading token -- Shib -- is the one we refer to when talking about Shiba Inu's market value.
Shiba Inu's biggest strength has been its loyal community -- the Shib Army. This community drove the enormous gain in 2021. Otherwise, Shiba Inu doesn't offer anything in particular that makes it stand out from the thousands of cryptocurrencies out there.
Still, one particular catalyst may be on the horizon. Shiba Inu is planning to launch a scaling solution called Shibarium -- and maybe as soon as this year. It's been referred to as a blockchain or a layer-2 system operating on top of Ethereum. Right now, Shiba Inu faces the high transaction fees and congestion that go along with running on Ethereum, but Shibarium will cut down on both.
NFTs and gaming
Shiba Inu is aiming to gain ground in the world of non-fungible tokens (NFTs) and gaming. Reducing transaction costs is essential for this sort of expansion. Therefore, the development of Shibarium is a big positive.
Let's get back to our question: Should you buy Shiba Inu this year? A potential launch of Shibarium may offer Shiba Inu a boost. And support from the Shib Army could result in gains here and there. But I'm still not convinced Shiba Inu could be a long-term winner in the cryptocurrency industry.
Details of Shibarium are scarce. But from what we do know, it doesn't change the problem I mentioned earlier: Shiba Inu doesn't stand out from rivals. Many already have built powerful blockchains hosting a variety of decentralized applications (dApps) that may change the way business is done.
It's unclear whether Shiba Inu, through Shibarium, eventually will offer features that others don't. And I don't like investing without some level of visibility. As a result, in 2022, I would favor blockchain players with strengths in dApps over an ultra-risky cryptocurrency like Shiba Inu.
