For Ethereum (ETH), 2023 was a successful year with an increase of around 100 percent in the price curve. However, the second most important global cryptocurrency also had to face some tricky questions. Our Ethereum review and outlook.
The price performance of Ethereum (ETH) was a pleasing story for investors in the crypto year 2023: twelve months ago, the number two cryptocurrency was trading at around USD 1,200, and now, at the end of the year, Ethereum is trading at around USD 2,400. The roughly 100 percent annual increase for ETH shows that Ethereum is alive and kicking. Meanwhile, founder Vital Buterin is already looking to the future, as the success of Ethereum also brings new challenges.
The first major event for Ethereum in 2023 was the Shapella upgrade in April. This made it possible to withdraw Ethereum deposited for staking from the pools. Shapella had been delayed several times and analysts disagreed in advance as to whether the upgrade would have a significant impact on Ethereum’s price performance. After all, around 15 percent of all ETH was “parked” for staking in April and has now become freely available again. On the contrary: by the end of 2023, around 24% of all Ethereum had been registered in staking pools such as Lido and are currently earning investors a good 4% annual interest rate.
Ethereum founder Buterin reflects on decentralization
However, the popularity of Ethereum staking also has a downside. Founder Vitalik Buterin addressed this several times in 2023. Staking pools for Ethereum concentrate such large amounts of the total supply of all ETH that the situation could tend to undermine decentralization. Buterin suggests making smaller staking pools with special rights more attractive. This would allow Ethereum staking to be spread across more shoulders and thus underline the decentralization of the network.
As far as is known, however, this proposal will not yet play a role in the next major Ethereum upgrade, Dencun. Dencun is scheduled to be added to Ethereum in Q1 2024 and will focus on two other challenges in the ecosystem.
Ethereum expects technological progress in 2024
The Ethereum blockchain is still a bottleneck because it can only process around 12 transactions per second. For this reason, a number of so-called layer-2 solutions have been established, which first organize transactions on their own and then document them bundled in the Ethereum blockchain. The latest such layer-2 is Base from Coinbase. With the Dencum upgrade, Ethereum aims to integrate the connections to layer 2 solutions such as Arbitrum and Optimism more deeply, which should ultimately benefit users of DApps.
The issue of transaction fees remains important for Ethereum. On many days, these amount to 10 US dollars and more if you do not switch to a layer 2. With the Dencun upgrade and more capacity on Ethereum, transaction fees should also fall, which would certainly be welcome.
Decentralized finance and NFTs on Ethereum in 2023
Ethereum’s strong position in the world of cryptocurrencies is due in part to the fact that decentralized finance, NFTs and DApps have opened up a whole host of application areas for ETH. Here, Ethereum has underpinned its supremacy in 2023. DeFiLlama’s figures show that more than two thirds of the capital invested in DeFi is in the Ethereum ecosystem. In turn, ETH staking with Lido is the number one DeFi application on Ethereum.
The market for NFTs may be ridiculed by crypto-sceptics, but the buying and selling of digital art and collectibles is establishing itself. When the NFT markets picked up significantly at the end of 2023, this was largely due to the Ethereum ecosystem. In 2024, we will see how the still young Bitcoin NFTs, which have already caught up with Ethereum in terms of turnover on many trading days, perform.
Ongoing topic of Ethereum killer – is ETH threatened by competition from Solana and co.
In the crypto year 2023, Solana (SOL) was the big star in the top 20 altcoins, advancing to fifth place among the most capitalized cryptocurrencies with an annual gain of more than 900%. Solana is designed to be as multifunctional as Ethereum. The often-used nickname “Ethereum Killer” for Solana can be heard frequently again at the end of 2023. However, anyone who analyzes the situation on the basis of important key data will see that The lead that Ethereum has built up over almost a decade is huge.
However, the reverse is also true when people talk about “flipping” in connection with Ethereum. This refers to the forecast that Ethereum could one day replace Bitcoin (BTC) as the number one cryptocurrency in terms of market capitalization. Little has changed here in the crypto year 2023, with Bitcoin continuing to dominate the situation unchallenged with a good 50% of the capitalization of the overall crypto market and Ethereum remaining the eternal number two with just under 20%.
Conclusion: Ethereum’s further development supports optimism for 2024
With its mastermind Vitalik Buterin, Ethereum has a leading figure who does not shy away from unpopular topics. But Buterin always upholds the basic principles of cryptocurrencies such as decentralization and scalability, which benefits Ethereum and its ecosystem. The further development of the Ethereum colossus is not always as fast as some would like, but on the other hand ETH does not afford to stand still. Ethereum is well equipped for the crypto year 2024 and is therefore likely to feature in the portfolios of many investors who have also learned to appreciate ETH staking.