3 reasons why Ethereum can recover

History, market cap and community

Let us start with the most mundane, but at the same time fundamental point: the mix of history, market cap and community.

Ethereum is a blockchain with many years on its back now. The longevity stands out even more when we consider that many of the competitors were born quite some time later and did not experience the truly pioneering periods of our industry.

Having established itself as the benchmark for smart contracts (after all, that is where they were born), Ethereum firmly holds the second position by absolute market cap, behind only its excellence bitcoin. Indeed, many DeFi platforms must be on this network in some way, because that is where the liquidity is concentrated.

Moreover, the project has a huge user base, absolutely not comparable to that of many rivals.

This combination of factors puts Ethereum and the ETH coin in an advantageous position that is not easy to scratch. Of course, the past is the past and one cannot live on one’s laurels: one can always fall from Olympus and find oneself on Earth. However, the Foundation, which leads the development of the network, seems to be starting to move with more determination to get out of the complicated period, driven by a demanding community that wants great results again.

In this sense, the key figure is still him: Vitalik Buterin.

Vitalik Buterin

The founder is still very central to the project and exerts enormous influence on the direction to be taken and strategic choices. For example, he was the one who pointed the way to layer 2s, which, were it not for the undesirable effect of fragmentation, make it vibrant, scalable and inexpensive to operate in the ecosystem.

Vitalik made it clear that things have to change in Ethereum and get off on the right foot. First, he stated that a return to solutions other than Layer 2 would be wrong and would take the whole project several steps backward. In a nutshell, he swept away some of the voices pushing for a change in this direction.

At the same time, he was very clear about the problem given by fragmentation and urged developers to work together to reduce this effect. Today, with many L2s active and several under development, Ethereum seems a bit like a universe with many distant galaxies, connected by expensive and complex methods. The direction indicated is for more integration in order to bring these systems closer together. Layer 1 is doing its own and the schedule of updates is interesting, we will talk about that shortly; however, it is also up to the L2s to find the right balance, but we already have positive examples in this regard.

Foundation side, the community is dissatisfied with the higher ups and is asking for change. Vitalik is intent on listening to supporters and donating fresh forces to the entity that controls the development of the project, especially in leadership positions, to pick up where we left off.

If in the future we want to see this behemoth on everyone’s lips again, it has to come through Vitalik Buterin. This he knows well and, fortunately, he remains at center stage.

Pectra and futures updates

The Pectra hard fork is getting closer. Starting this month, testnets will in fact begin integrating it, a common practice for updates. From what we know, around February 24 Holesky will open the dances ; Sepolia will join instead in early March. If all goes well we could put April in our sights as early as April as the mainnet landing date (speculation, depends on testing and other factors).

Regardless of dates, Pectra brings some very interesting and much-needed updates to improve Layer 1 performance, but not only that.

The update is definitely meaty and includes two different upgrades:

• Prague, for the execution layer
• Electra, for the consensus layer

Going deeper, Pectra introduces several key interventions, the ultimate goal of which is to improve various parameters such as scalability, user experience and cost reduction. Among these are three particularly interesting updates:

• Verkle Tree. This is a new data structure apt to make its processing more efficient through data compaction, scalability and efficient verification;
• Blob space. Through this upgrade it will improve data storage, which will also have an effect on transaction fees;
• PeerDAS technology. This technology is designed to improve Layer 2 scalability by limiting the big problem of data availability. Not surprisingly, the acronym DAS stands for Data Availability Sampling. For the more technical-minded, here is an interesting insight on Medium.

Pectra will then introduce other important changes, such as raising the maximum limit for ETH staking from 32 to 2,048. This should lead to more full-bodied nodes and a reduction in the number of validators, which will benefit the staking process and operations in general.

This hard fork is not an end point, but rather one of many stages in a long journey that began years ago. As long as there is news and a willingness to improve and file down problems, we can look forward to the future with confidence. So let us keep an eye on Pectra and trust that we will soon see the expected improvements.

Bonus: skimming of layer 2?

Here we come to another possible positive point for Ethereum, which is the skimming of layer 2s.

The current landscape is very competitive and there are dozens of projects. Some of these stand out from the others in terms of originality, development, liquidity and other factors. Conversely, some are instead a collection of projects similar to others, struggling realities, and so on.

Over time, a natural and deep selection will be inevitable. The users (and thus the liquidity) will make choices and elect L2s of excellence for their needs. This phenomenon already exists, but as the numbers increase (more users, more competitors, more ideas…) we can imagine that it will become more and more prevalent.

As in any market, at some point some will win, some will survive, some will fail. Such selection will certainly have downsides, but it will also help reduce excessive fragmentation.

In addition, the winning projects will almost certainly go in the direction of simplification that is being clamored for, for the benefit of the end user. Making operation and exchange simple is a big plus point, which does not drive away liquidity but attracts it strongly.

Where can I buy Ethereum?

ETH is available on so many of the platforms out there, both CEX and DEX.

Exchanges are the best choice for those not already operating in the crypto world, or for anyone who wants to deposit fiat currency (euros, dollars…) in simplicity and without spending a fortune in fees.

Among the best platforms in this family we mention Binance, Coinbase, Bybit, Bitget and Crypto.com. By clicking on the links just provided you will access our tutorials and find referral links to sign up and benefit from the bonuses reserved for our readers and readers.

Outside the centralized world, there is still plenty of choice. We can buy ETH directly on the layer 1 blockchain; however, to save money in gas fees, we recommend taking advantage of the many layer 2s such as Optimism and Arbitrum, leaning on major DeFi platforms such as Uniswap (which has now launched its Unichain).