Ethereum, as the world's second-biggest cryptocurrency behind Bitcoin, already is a billion-dollar player. This cryptocurrency and blockchain is a market leader, attracting developers and users to its platform -- and investors to buy and stake coins.
But the past year hasn't been easy for cryptocurrency in general. The market's value tumbled last year. Amid economic woes, people turned away from cryptocurrency and favored the safest investments. This year, the crypto market has been on the rise -- but it's slipped from its 2023 peak reached in April. Could this hold back Ethereum? Or could this market leader become a trillion-dollar cryptocurrency by 2024? Let's find out.
Developers love Ethereum
If you ask developers which blockchain they're building on, many of them would say Ethereum. In fact, the blockchain has the most total developers of any other player, according to the latest Electric Capital developer report. And the number has increased 52% from two years ago to more than 5,800.
Winning over developers is key because they are the ones building content -- and that, in turn, adds to the use cases for a particular blockchain.
And that's part of why Ethereum also is a leader when it comes to hosting decentralized applications (dApps). This big player is No. 1 in the sales of non-fungible tokens, too, CryptoSlam data show.
Still, people have had one complaint about Ethereum since its early days. That's its slow transaction speed and the costs associated with this. But the good news is Ethereum is working on this problem, and thanks to a series of planned updates, the blockchain should become much faster and cheaper down the road.
Ethereum has already started that process. An update last year helped the blockchain reduce its energy consumption by 99%. That's as it switched to the proof-of-stake validation method from proof of work. While proof of work relies on intense computational power to validate blocks of data, proof of stake doesn't. Instead, it grants the right to validate to those holding a significant stake.
The role of rollups
Ethereum also is scaling up by using a layer 2 solution known as a rollup. Rollups involve handling transactions in batches and then sending output back to the mainnet. Already, rollups are as much as eight times cheaper than using the mainnet -- and in the future, fees could become at least 40 times cheaper.
The blockchain also is working on improving security and even "future proofing" the system. For example, eventually quantum computing may represent a risk for the cryptography used to secure Ethereum today. Even though the threat probably is far down the road, right now Ethereum is exploring two forms of quantum-safe cryptography.
All of this means the Ethereum of tomorrow is likely to be even better than the Ethereum of today. Now, let's consider whether that could push Ethereum from its $208 billion market value of today into trillion-dollar territory. If we use today's circulating supply of Ethereum -- about 120 million coins -- we can see that to reach a market value of $1 trillion, Ethereum would have to more than quadruple from today's price.
The economic backdrop
Against a strong economic backdrop, that could happen rather quickly. But I'm not convinced we're there yet. The Federal Reserve is modeling for a recession later this year. Even though it's expected to be mild, this still could weigh on demand for crypto. Ethereum has increased more than 40% this year. And it still may continue to climb -- but it may not do so at a pace that will catapult it to $1 trillion in value by next year.
That said, this isn't bad news. Ethereum's outlook remains bright. And planned upgrades should help the network excel over the long term. And that's great news for investors who buy this leading cryptocurrency now.
