Is it a Good Time to Buy ETH and Other Alt Coins?
Due to the Federal Reserve’s strong financial position in 2022, the value of the most speculative assets, like cryptocurrencies, has gone down. This has caused investors to rethink how much risk they are willing to take. The market decline has also had an impact on Ethereum (ETH 1.14%), the second-largest cryptocurrency by market capitalization. A widely traded cryptocurrency is already down 64% year to date (as of the writing of this article), but a recent occurrence may pique investor interest again. Do you feel that now is a good time to buy Ethereum on OANDA, considering that the merger looks to have gone off without a hitch? Let’s take a closer look at this.
Changes to the mechanism for obtaining consensus
Proof-of-work techniques were Ethereum’s sole means of validating transactions until a few weeks ago when it switched to a new consensus algorithm. To gain the privilege of confirming new transactions on the blockchain, those who call themselves miners must spend a substantial amount of electricity to run the equipment they employ to solve tough mathematical puzzles. This is done to allow miners to compete for the right to earn bitcoin. Proof of Work is the fundamental mechanism that powers Bitcoin, the world’s most valuable cryptocurrency.
Because it is not especially scalable and consumes a substantial amount of power, the Proof-of-Work protocol has been viewed with mistrust. Bitcoin consumes the same amount of power as a small to large country. Furthermore, it is only capable of processing three transactions per second simultaneously (TPS).
In response to these perceived limits, Ethereum’s founders switched the network to a proof-of-stake (PoS) consensus procedure. The Proof of Stake (PoS) consensus process allows token holders to “lock up” or “stake” their ether tokens. This increases the legitimacy of new transactions and boosts the network’s security. The fact that the move to proof-of-stake took seven years and was avidly anticipated for that amount of time demonstrates how tough and inventive the process was.
The official Ethereum website boasts that its energy consumption has been reduced by 99.95 percent, a figure that is sure to excite environmentally-conscious cryptocurrency enthusiasts as well as government officials. Furthermore, switching to PoS paves the way for sharding, a network update that would split and spread network load between side blockchains and is set to be introduced on Ethereum’s network in 2023. Sharding will divide and share the network burden among multiple blockchains. A new version will be released very soon. Adding extra lanes to a highway might be viewed as an analogy for this circumstance. This suggests an increase in throughput of up to 100,000 TPS is possible.
On the other hand, one may now argue that Proof-of-Stake adds to the further centralization of Ethereum’s network. This is owing to the fact that, at the moment, only two organizations are expected to possess 43% of all staked Ethereum. These companies are the cryptocurrency exchange Coinbase and the Ethereum-specific decentralized staking system Lido DAO. It is conceivable that this may cause difficulties in the future, undermining the benefits of blockchain technology’s decentralized nature. This could change the way transactions are allowed and the way the network is kept up.
However, as a result of Ethereum’s shift to PoS, the cryptocurrency’s scalability has risen. If decentralized applications such as DeFi protocols and non-fungible currencies continue to gain popularity, the technology may see much wider usage.
Investors should carefully analyze all of the options available to them.
Ethereum is the most enticing option for investors among the many different cryptocurrency networks that are now accessible since it is the only cryptocurrency network that supports smart contracts. This is because the ecosystem that surrounds Ethereum developers is in terrific health. According to a poll conducted by Electric Finance, a venture capital firm, Ethereum was the digital currency with the most developers working on it at the start of the year. With the announcement that sharding will be live in 2023, it is not difficult to see even more individuals digging deeply into the process of establishing Ethereum’s scalability. The outlook for the future is hopeful and optimistic.
Cardano and Solana are two additional major cryptocurrencies that have been deployed successfully in a point-of-sale context. Because each of them offers a distinct set of advantages, potential investors may be interested in any of them. Cardano’s development methodology is well-known for being comprehensive, deliberate, and research-based. This is one of the reasons for its popularity. Also, Solana’s possible theoretical capacity of 50,000 TPS could cause a stir in the payments industry.
As a result, investors may diversify their holdings among a number of different cryptocurrencies, each with its own set of unique qualities and purposes, or they can put all of their eggs in the Ethereum basket. Both of these outcomes create the potential for profit for investors. Analysts believe The Merge has the potential to act as a long-term catalyst, resulting in an increase in the price of Ethereum. However, it is too early to tell how the merger will unfold.
Ethereum’s value has dropped by about 25 percent in the last two weeks. As a consequence of the recent price decline, prospective purchasers who have been sitting on the sidelines may now opt to enter the market and obtain some of this top cryptocurrency.