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Last year was a turning point for the entire crypto industry. One thing that stood out was the growth of Defi, a decentralized financial system that is primarily based on the Ethereum blockchain. Ethereum not only made Defi possible but NFTs that went viral and primarily live on the Ethereum blockchain. Ethereum is powering just about every innovative and disruptive application that is changing the world. Many of these applications are already changing the world by inventing new ways to transfer property, funds, debt, and equity in a safe and secure way. When you look at the numbers, Ethereum had an epic 2021, with the price of ETH rising 400% and the total transaction volume for the year reaching $5 trillion. This is some serious volume. The general consensus is that Ethereum will outperform Bitcoin and we may even see a flippening. Will Ethereum’s market cap surpasses Bitcoin’s in 2022? Will 2022 be the year the Ethereum force awakens?

The future of Ethereum wasn’t always as bright. A few years back bitcoin clones like Bitcoin Cash and Dogecoin made Ethereum look like just another coin in a massive soup of cryptocurrencies.

Earlier today, Ethereum’s price and market cap were at about $3,200 and $380 million. While Ethereum had a strong year, 2022 could be even brighter.

One of the reasons is the ETH 2.0 upgrade.

The Ethereum upgrade is expected in mid-2022 and will convert the network from proof-of-work to proof-of-stake. It will ultimately alleviate the problems around speed, costs, and scalability, making it as fast as many centralized payment processors such as VISA and Mastercard.

Proof-of-stake opens up staking which should appeal to institutional investors familiar with revenue-generating assets. If institutional investors like Microstrategy start buying up ETH then it’s going to increase demand significantly and make Ethereum a household name.

Currently, layer 2 solutions play a vital role in addressing issues relating to Ethereum’s network performance. Layer 2 blockchains are those compatible with Ethereum and provide an array of scaling solutions. The primary technologies of layer 2 blockchains are currently rollups and sidechains.

Rollups handle the computational load on their blockchain then post a batch of ledger updates to the Ethereum mainnet. This means those transactions could theoretically inherit the full security and decentralization of the base layer in the future. Sidechains do not update mainnet balances and use their own consensus mechanisms. This tradeoff is made for applications where scalability is more important than security. Polygon is the most widely used sidechain today. By the end of 2022, Ethereum will primarily be a blockchain that is used by other layer-2 networks to interact with each other.

The upgrade is important but there are a few more reasons for Ethereum to smile. While every ecosystem needs at least one killer app to drive its adoption, Ethereum has dominated multiple categories: ICOs (2017), DeFi, DAOs, and NFTs.

Without a doubt, DeFi is one of the most exciting areas in finance today, with offerings ranging from asset management, yield farming or borrowing and lending, decentralized exchanges, derivatives, and stablecoins. In 2021, the market exploded from $22 billion at the start of the year to over $250 billion locked across DeFi protocols, according to data from DeFi Llama. The market has several competitors, but Ethereum’s has the lion’s share of total value locked in DeFi, around 70%, and the upcoming ETH 2.0 upgrade, should keep it in the driver’s seat.

NFTs became extremely popular in 2021 with the total sales volume surging past $41 billion. Ethereum is the de facto medium for buying and selling NFTs, as most NFT projects are built on the Ethereum blockchain. Research has shown that Ethereum leads the NFT market, generating more than 97% of the sales. In the first few days of 2022, Ethereum NFT trading volume on OpenSea is already soaring. This coming year NFTs will gain even more traction and you can expect your grandmother to start asking you about NFTs. We will see the market explode with new use cases beyond art, collectibles, and gaming and Ethereum will be smack in the middle of it all.

If you take a look at CoinMarketCap, you’ll see that the DAOs have a market cap of $29.5 billion. According to analytics tool DeepDAO, there are over 188 DAOs with a total of $10.1 billion in assets under management. While DAOs surged last year, the legal framework around them is mostly unclear. You can think of DAOs as internet communities with a “shared” bank account and governance token that community members hold and use to vote about where to invest the money in the account. In 2022, we will see them springing up like mushrooms in all kinds of web3 projects and communities around the world as they become more mature and mainstream.

The journey has barely started, but Ethereum has already hit escape velocity. While Ethereum has the first-mover advantage, competitors are hot on its heels, so if the upgrade comes too late it could miss the boat. For now, there is a lot of optimism surrounding ETH 2.0 and as interest and adoption of NFTs and DeFi continues to grow and Web3 is fully realized, Ethereum could moon if it executes flawlessly.

Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG.

Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet. Create your wallet in less than a minute, without seed phrases, private keys, passwords or documents. Keep your bitcoin and digital assets always secure and recoverable: https://kryptonio.com

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.