After watching Shiba Inu soar more than 45,000,000% last year, you might want to get in on the action -- especially since the popular meme token has a couple of catalysts ahead: development of its metaverse and the launch of a scaling solution. But Shiba Inu's limited uses don't help it stand out among rivals. And that means there may be a better long-term option out there for you.
There's one that already has proven itself in the world of decentralized applications (dApps) and non-fungible tokens (NFTs), for example. It also just made a transformation that should make it an even stronger player. I'm talking about Ethereum (ETH -4.15%).
The switch to proof of stake
Ethereum completed "The Merge" on Sept. 15. This event was a switch to the proof-of-stake method of validating transactions from proof of work.
Proof of stake gives validation power to those who hold a big stake in the cryptocurrency. This method cut the blockchain's energy use by 99%. Proof of work uses enormous amounts of energy because it requires complex computations before a block of data can be validated.
The Merge also may have contributed to a decrease in the time it takes to create blocks of data -- and to increases in blocks created per day and transactions per day.
Ethereum Average Block Time data by YCharts.
This clearly makes Ethereum a more competitive platform. But there's more.
The Merge was actually part of a much broader general update. This update is meant to solve Ethereum's biggest problems: slow transaction speed and high transaction costs. The above chart shows Ethereum making progress on the former.
But the introduction of sharding -- which is set for next year -- should truly solve the speed and cost problems. Sharding splits up the database horizontally to relieve network congestion. As a result, transactions can move through more quickly. And that means they also cost less to complete.
It's also important to remember that Ethereum already is a major player in cryptocurrency. It's the world's second largest by market value. And Ethereum is the market leader in the hosting of dApps and sales of NFTs.
Growth in developers
Ethereum also dominates when it comes to developers using the platform, which is key because this results in actual use of the network. The number of monthly active developers on Ethereum climbed 42% from January 2021 through December 2021, according to an Electric Capital report. The research showed that 20% to 25% of developers regularly choose Ethereum when they decide to use a blockchain.
Now let's look at Ethereum's price. The cryptocurrency has dropped more than 60% this year, and since the merge, it's lost about 16%. So why isn't the merge and Ethereum's solid position in the crypto market lifting its value?
Many investors today are avoiding assets considered risky. That often happens during economic downturns. Investors prefer safer investments in this sort of environment. Cryptocurrencies are risky because the industry is rather new -- and we don't know what the landscape will look like a few years down the road.
Even if Ethereum's news is bright today, it may not soar immediately, and that's OK. As long-term investors, we're looking for performance over time. This leading cryptocurrency has all of the elements needed to win over the long term. Buying Ethereum now -- after its recent declines -- and holding on may be a great idea.
