By Olga Kupchevskaya, Vice President of Research and Development for MEW (MyEtherWallet)
Ethereum, the cryptocurrency that once played second-fiddle to Bitcoin, has enjoyed its busiest and most successful year to date. Chalk it up to major new updates, booming use cases like DAOs, and the consciousness-raising power of NFTs. Still, there's plenty of room left for Ethereum to grow in 2022, especially as Web 3.0 begins to fire up. Here are just a few of the most exciting moments for Ethereum this year:
London's calling… and it's burning up ETH
The London Fork, one of a series of radical changes to the network’s protocol (which inverts the validity of blocks and transactions) catapulted Ethereum into a new era. When it was activated in August, it initiated five key changes to the blockchain that proved to be catalysts for Ethereum's continued growth throughout the latter half of 2021.
The most critical change was in how transaction fees are calculated. With the rapidly increasing popularity of the blockchain, the London fork helped standardize transaction-to-transaction “gas” fees (the payments users make to process transactions on the blockchain). Instead of holding a blind auction for every block to determine the gas price, Ethereum's protocol now uses algorithms to decide the transaction fee based upon overall demand on the network.
This upgrade also set the groundwork for Ethereum to switch to a Proof-of-Stake (POS) system rather than its original Proof-of-Work (POW) model. What that means, essentially, is that users are required to leverage their existing ether to verify and mine incoming transactions, thus dramatically reducing energy consumption. This change has had rippling effects throughout the crypto industry, particularly as we seek more environmentally friendly alternatives to Proof-of-Work.
NFTs are everywhere
Right out of the gate this year, we saw Beeple become the world's richest digital artist, selling his NFT for $69 million, followed by a surge of interest in original NFT projects (like CryptoPunks) and new collections, like Bored Ape Yacht Club, being used as avatars by celebrities online. NFTs and their communities have upended valuation methods and collecting norms. Why? Because the best NFT projects have been built on top of the Ethereum blockchain.
Presently, someone can gift an NFT representation of an Ethereum block to someone else, or they can purchase an NFT that will allow them access to exclusive events. NFTs are promoting the benefits of Ethereum into Discord communities and across our own dinner tables.
Next year, NFTs will continue to evolve rapidly, becoming more complex (intelligent NFTs, anyone?) and expanding even more into various entertainment channels and the metaverse.
DAOs are rapidly gaining traction
In my opinion, DAOs, or “decentralized autonomous organizations,” were the most significant contribution to the entire Ethereum ecosystem in 2021. As rules-based entities without a central authority, they have the potential to completely alter how companies can be launched, managed, and funded. DAOs are a real glimpse into this new Web 3.0 landscape.
Although they have their own flaws, as in the case of the ill-conceived ConstitutionDAO, these decentralized entities will only get better with time. As regulations occur, I believe that we will continue seeing DAOs propagate. Indeed, their non-traditional structure makes them an appealing model for many companies like Shapeshift, allowing them to run without the traditional business entity.
The next step for DAOs is education. We have to empower users to want to learn more about DAOs and for projects to consider the benefits of this model.
Looking to 2022
After everything else that happened this year, Ethereum’s record-breaking all-time highs were the cherry on top. And the price is almost certain to keep rising in 2022, as the innovative qualities of the entire Ethereum ecosystem continue to drive attention and success to this blockchain.
In 2022, I'm looking forward to seeing how the Ethereum ecosystem evolves, watching NFTs offer companies opportunities on secondary market royalties and tangible goods being minted to the blockchain. These will be innovations that introduce a whole new layer of crypto adoption to audiences because now it’ll impact their day-to-day lives in even more ways.
This community is what originally got me excited and interested in Ethereum when I first started working at MEW. All these years later, it's still so exciting to see what’s next, with Ethereum 2.0 implementing Proof-of-stake consensus, Layer-2 solutions and more mainstream use cases being right around the corner. The most innovative people are building the future of the web right here on Ethereum.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.