Cryptocurrencies and the broader blockchain economy have had a stellar year in 2021, with Bitcoin and other major cryptocurrencies hitting all-time highs in both April and November, although with some dips in between. With the new year approaching, the question on every investor’s mind is which specific blockchain investments they should be made to get ready for 2022.
Ethereum is the second-largest cryptocurrency, and it has had an amazing 2021 as well, even better than Bitcoin in terms of percent gain. It sits at about a tenth the value of Bitcoin, and many analysts out there believe that the prices are going to level out at some point, implying that there are still massive gains to be had from investing in Ethereum.
It’s an incredibly well-established cryptocurrency that differentiates itself from Bitcoin by implementing smart contracts into the blockchain, the decentralized financial contracts that underlie innovative new blockchain applications like NFTs. The goal of Ethereum has been different from Bitcoin’s from the start, seeking to provide a more versatile platform rather than being a substitute for fiat currencies.
The reason that right now is the time to get into Ethereum is the upcoming release of Ethereum 2.0. This massive update will completely change the way that the blockchain operates, aiming to solve many of the prominent issues with the Ethereum blockchain, including exorbitant gas fees on most transactions.
Ethereum 2.0 has had a long development and has already launched the earliest phases of the overall plan. The second phase of the transition is expected to come in the first half of 2022. The largest change is a transition from traditional proof-of-work blockchain technology to proof-of-stake.
Proof-of-work is the computationally arduous method through which cryptocurrencies are mined, and the blockchain is propagated. However, this takes a lot of power and is the primary issue behind recent environmental concerns around Bitcoin and other cryptocurrencies. Proof-of-stake instead involves individuals staking holdings of a cryptocurrency and acting as a validator. It ties validation to holding the cryptocurrency itself rather than completing energy-intensive calculations.
This transition will set Ethereum 2.0 up as the environmentally conscious alternative to Bitcoin, assuaging many market fears around crypto in general. The new system will also solve the scalability issues that have plagued Ethereum for years. The new blockchain will provide much, much higher transaction speeds. Another phase of implementation will see shard chains added, which incorporates parallel blockchains to increase the number of transactions even further.
Given its past performance, there has never been a time when Ethereum wasn’t a good investment. Ethereum 2.0 is likely to be the biggest hit of 2022 when it comes to crypto and blockchain technology and could see Bitcoin facing real competition for the first time ever.
Decentralized Finance Platforms
DeFi has grown a lot in 2021, and everything points to that outlook continuing into 2022. These projects aim to deliver truly decentralized experiences, erasing the last vestiges of conventional finance systems that larger cryptocurrencies like Bitcoin and Ethereum carry with them.
DeFi platforms are incorporating a variety of smart contract applications for essentially any financial need. They can be used for trading, borrowing, lending, saving, and more, all without a central authority. These platforms have their own tokens for use on their platforms, which could increase in value over the course of 2022.
Chainlink (LINK) is one example of an exciting DeFi platform to watch in 2022. It’s a decentralized oracle service that’s meant to serve as a real bridge between smart contracts and real-world data. One expected development we could see in 2022 is the release of the Cross-Chain Interoperability Protocol that will allow for transactions and services across different blockchains.
Another DeFi mover to watch is Aave (AAVE), a decentralized borrowing and lending platform. The decentralized lending process brings together the two parties and facilitates transactions through smart contracts. It also features one of the most robust staking systems of any DeFi platform out there today.
Choosing Your Blockchain Investments for 2022
There certainly seems to be plenty of potential across many different elements of blockchain technology for 2022. However, it’s important to remember that this is a notoriously volatile space for investing. There are some massive gains to be made over the next 12 months, but there’s always the risk of massive losses as well. So make sure to do proper research and avoid get-rich-quick schemes like Bitcoin Prime which was recently exposed on a cryptocurrency investigation website named ScamCryptoRobots.com. If you are not sure just ask a friend or relative, that is always helpful.