After hitting an all-time high of $4,878 in November 2021, Ethereum saw a collapse in value. In the aftermath, many commentators wondered whether Ethereum and other cryptocurrencies would disappear forever.
In this guide, we’ll break down everything you need to know about the Ethereum ecosystem in 2024 — and explore ETH’s long-term prospects!
What is Ethereum?
Ethereum is a decentralized, open-source blockchain.
Ethereum was the first blockchain that allowed developers to build decentralized applications using smart contracts—which enables DeFi protocols and NFTs!
Today, the Ethereum network is home to some of the biggest decentralized applications in the world. Applications like Uniswap — the world’s largest decentralized exchange — and Blur — one of the world’s largest NFT marketplaces — are built on Ethereum.
Ether (ETH) — Ethereum’s native cryptocurrency — is used to make transactions on the blockchain. Many investors hold ETH because they believe in the long-term potential of the Ethereum ecosystem.
Is cryptocurrency dead?
Despite market fluctuations, the cryptocurrency sector is far from dead.
While 2022 saw a collapse in cryptocurrency prices, the market saw a resurgence in 2023. Ethereum almost doubled in value — going from around $1,200 in the beginning of the year to around $2,300 at the end of the year.
In addition, the DeFi and NFT ecosystem continues to thrive. At the time of writing, it’s estimated that the DeFi ecosystem holds more than $60 billion in TVL (total value locked).
5 Key Metrics About Ethereum
Lets walk through 5 key metrics that show how Ethereum is performing in 2024.
- Market Capitalization: Ethereum remains the second-largest cryptocurrency by market cap, a testament to its relevance for users and investors.
- Active Developers: Ethereum boasts the largest community of active developers in the crypto space, reflecting its vibrant ecosystem.
- Decentralized Finance (DeFi): Ethereum is the leading platform for DeFi projects, holding the majority of the market share. It’s been estimated that Ethereum holds 58% of the liquidity of DeFi in its ecosystem.
- Network Upgrades: In recent years, Ethereum transitioned from Proof of Work to Proof of Stake — leading to a major increase in scalability.
- NFT Sales: Ethereum dominates the NFT market, hosting the majority of transactions and the most significant sales. It’s been estimated that Ethereum is responsible for more than 70% of the ecosystem’s trading volume.
The Current State of Ethereum
In September 2022, Ethereum switched its consensus mechanism from Proof of Work to Proof of Stake. This upgrade made the Ethereum network faster and more energy-efficient.
In 2024, Ethereum is expected to implement the ‘Dencun’ upgrade. This upgrade is anticipated to further enhance Ethereum's scalability and efficiency — reducing transaction costs for Layer 2 networks built on Ethereum.
In addition, some news outlets report that Ethereum ETFs will be officially approved by the SEC in May 2024. This will make it easier for investors to hold crypto-assets in their crypto IRAs.
Ethereum’s Advantages
Let’s walk through some of the advantages that Ethereum offers to users.
- Smart Contracts and dApps: Ethereum is the biggest smart contract blockchain — which means its the #1 choice for NFTs and DeFi protocols.
- Community and Developer Support: Ethereum has an active developer community. Thousands of developers contribute to improving the blockchain!
- Decentralization: Ethereum maintains a high degree of decentralization. This ensures that the blockchain is secure and owned by the community rather than an individual or an organization.
Ethereum’s Challenges
Let’s walk through some of the challenges that Ethereum may face going forward.
- Scalability: Currently, other smart contract blockchains offer higher transaction speeds than Ethereum.
- Competition: Emerging blockchains like Solana and Cardano also offer smart contracts, challenging Ethereum's dominance.
- Old blockchain: Because Ethereum is the oldest smart contract blockchain, many critics claim that its infrastructure is old and outdated.
Will ‘Ethereum killers’ beat Ethereum?
For years, many commentators have said that other blockchains — known as ‘Ethereum killers’ — would eventually overtake Ethereum by offering lower fees and faster transaction speeds.
However, Ethereum continues to be the #1 blockchain for smart contracts, even though cheaper and more scalable blockchains have been available for years.
It’s likely that Ethereum benefits from the first-mover advantage. In other words, because Ethereum was the first smart contract blockchain available, it was first to grow a large user base and developer community.
Some believe that Ethereum will co-exist with so-called ‘Ethereum killers’ in the years to come. For example, Chris Dixon, a general partner in the venture capitalist firm Andreessen Horowitz, has said that he believes in a multi-blockchain future where different smart contract blockchains serve different purposes. For example, there may be specialized blockchains designed for cryptocurrency games — which often require higher transaction speeds.
Has anyone ever hacked Ethereum?
The Ethereum network itself has never been hacked. Because of the way the blockchain’s consensus mechanism works, hacking the Ethereum network would require someone to own 50% or more of the supply of the cryptocurrency.
However, applications built on Ethereum have been compromised. In 2016, The DAO — a decentralized venture firm built on Ethereum — was hacked for $60 million. Ethereum’s user base then voted for a hard fork that rolled back the history of the blockchain before the hack.
The DAO incident helps to highlight the resilience of the Ethereum network. Even in a case where the future of the blockchain was threatened, the Ethereum community was able to come together and find a solution.
Is Ethereum better than Bitcoin?
It’s important to remember that Ethereum and Bitcoin were designed for different purposes. Which cryptocurrency is a better investment may vary depending on your risk profile and investment goals.
Bitcoin: Store of value: Bitcoin is primarily a store of value. Bitcoin was not built for smart contracts and does not have a well-developed NFT and DeFi ecosystem. However, Bitcoin is considered a hedge against fiat currency inflation.
Ethereum: A bet on the ecosystem: Meanwhile, Ethereum’s value comes from the value of the ecosystem. As the DeFi and NFT ecosystem grows, it’s likely to assume that demand for ETH will grow.
The choice between Ethereum and Bitcoin depends on the investor's goals: store of value versus utility and innovation.
Is Ethereum still a good investment?
While the collapse of exchanges like FTX and Voyager led to a crypto market crash, it’s important to remember that the fundamental promise of cryptocurrencies has not changed.
It’s likely that if the market for decentralized applications built on Ethereum smart contracts continues to grow, the value of ETH will rise.
While it’s difficult to tell whether Ethereum will continue to be successful in a decade, the blockchain has survived multiple crashes in the crypto market. Today, Ethereum hosts thousands of applications — such as DeFi protocols, NFTs, cryptocurrency games, and even Decentralized Autonomous Organizations (DAOs).
Will Ethereum recover in 2024?
It’s difficult to make a price prediction for any cryptocurrency. However, Ethereum’s strong user base and developer community, continued upgrades, and central role in the DeFi and NFT spaces are all positive signs for investors.
In conclusion
While Ethereum faces challenges and competition, the blockchain is thriving. Its active developer community and central role in the crypto ecosystem help make the network resilient. As the crypto market evolves, Ethereum is likely to remain at the forefront — helping to push forward the possibilities of decentralized technology.
