Bitcoin was the first widely adopted cryptocurrency, a type of digital asset built on blockchain technology and secured by cryptography. Those qualities underpin a brand new financial system, one in which electronic transactions can take place without the oversight of banks, card networks, or payment processors.
Bitcoin achieved a price of $1.00 in 2011, and has since soared over 5,380,000%. After that run, its market value sits at $1.0 trillion, meaning Bitcoin is still worth more than any altcoin. That being said, it lacks utility compared to some of the newer cryptocurrencies — specifically, those that support decentralized applications (dApps) and decentralized finance (DeFi) products.
Building on that idea, a recent report from Fidelity named Ethereum (CRYPTO:ETH) as the second-most-popular digital asset among institutional investors (behind Bitcoin). That quality, alongside Ethereum’s support for DeFi products, could make it a very rewarding long-term investment. Here’s what you should know.
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A programmable blockchain
Unlike Bitcoin, the Ethereum blockchain is programmable, meaning it’s possible to build self-executing computer programs (i.e. smart contracts) on the platform. In turn, that technology forms the basis of dApps and DeFi applications — products that, by definition, exist beyond the control of any single entity.
In the context of DeFi, that means you can borrow, lend, save, and earn interest on cryptocurrency without involving a bank. Fund manager Cathie Wood recently noted that DeFi is “collapsing the cost of the infrastructure for financial services.” That disruptive quality is a key part of the investment thesis here, and that thesis should get even more compelling as Ethereum — the most popular DeFi platform — becomes more scalable.
A more scalable solution
The Ethereum blockchain is currently being upgraded to Ethereum 2.0; and as part of that initiative, the network is changing from proof of work consensus to proof of stake (PoS), a mechanism that distributes mining power based on ownership. Making that move has two benefits: First, PoS is more eco-friendly than PoW, meaning its carbon footprint is far more sustainable. Second, PoS offers stronger support for shard chains, which will make the network even faster.
To make sense of that last point, let’s backtrack for a minute. Many blockchains have a serious scalability problem. For instance, Ethereum can process about 30 transactions per second (TPS) in its current form. That figure is sixfold greater than Bitcoin’s throughput, but it falls far short of the 1,700 TPS that Visa handles on a regular basis. As a result, increased traffic on the Ethereum network has already resulted in slower …….
Source: https://www.fool.com/investing/2021/11/30/missed-bitcoin-my-best-cryptocurrency-to-buy-now/