Ethereum (ETH -0.60%) is at a major turning point right now. The world's second-biggest cryptocurrency already is a leader in decentralized applications (dApps) and non-fungible tokens (NFTs). But it could attract even more users -- and investors -- down the road. That's because the blockchain is undergoing a major upgrade.
One key part of the upgrade is called "the merge." And it's set to happen soon. Does this mean now is the time to buy more Ethereum?
An important upgrade
Let's talk about where Ethereum stands today -- and why the upgrade is important. Ethereum is a major cryptocurrency player. More than 2,900 dApps run on the network, according to State of the dApps. And Ethereum is the biggest blockchain by NFT sales volume, CryptoSlam data show.
That's great. But Ethereum still has struggled with a few major problems: high energy consumption and transactions prices, and slow transaction speed. The upgrade aims to tackle each of these problems. Today, we're heading for a move that will reduce energy consumption by more than 99%.
Ethereum this week launched the Bellatrix hard fork. This gets the blockchain ready for the merge. That will happen on or around Sept. 15. The merge shifts the manner of validating transactions on the blockchain to proof of stake from proof of work.
Proof of stake gives validation power to those with the biggest stake in Ethereum. It eliminates the complex computational work needed to validate through proof of work. And therefore, it cuts energy consumption.
The merge may offer transaction speed a bit of a boost. But the real improvements in speed and cost will come with the introduction of sharding. That's set for next year. Sharding involves splitting up a database horizontally to spread out the workload.
A future winner?
If all goes smoothly with the merge, and later with the addition of sharding, Ethereum could gain even more ground in the world of cryptocurrency. It already has established itself as a platform developers can rely on. And it's proved that it has what it takes to reshape the world of finance -- and other industries. If it can solve its biggest problems, it could become a clear winner in the near future and over time.
But, it's important to remember these upgrades are very complex. And that means a glitch could arise at any moment. Any such setback could have an immediate impact on Ethereum's price. Thousands of cryptocurrencies are competing for the chance to lead in this growing industry. If Ethereum shows signs of weakness, investors could turn to younger up-and-coming players.
Considering all of these points, is now the time to buy more Ethereum? This depends on your comfort with risk. If you're a cautious investor, you might want to wait until the merge -- or the entire upgrade -- is complete. If all goes well, you may want to consider adding to your position.
If you're an investor who is comfortable with risk, you may choose to buy more Ethereum right now. The crypto player has dropped more than 55% so far this year. But it has started to rebound from lows. If you look at all Ethereum has accomplished and the blockchain's future potential, today's price represents an opportunity.