Ether (CRYPTO:ETH) has been in a bearish trend in 2022. Down 40% year to date, it has fallen much more than the average cryptocurrency. Historically, ETH has been one of the stronger performing cryptocurrencies out there. Since launching in 2016, it has mostly outperformed Bitcoin, resulting in the market cap spread between the two coins narrowing. This year, however, has been a marked departure from the long-term trend. Thanks to the waning of the NFT fad, a major incentive to buy Ether has been removed from the market. Now, ETH is left mostly to traders, and the demand for the token is much lower than it was late last year.
So, we are seeing a pronounced decline in demand for Ether. When a marketplace dries up, a token used exclusively in that marketplace will go down in value, and that’s exactly what happened with Ether and NFTs. But before you get too down on Ether, remember that there are reasons for optimism as well. Although 2022 was a swift kick in the pants to ETH in terms of adoption, it will be a great year in terms of technical upgrades. A sweeping set of blockchain improvements are coming this year, promising to make ETH faster than ever before. In this article I will explore the upgrades that are coming, and how fast Ether will become.
The 2022 Ethereum blockchain upgrades
In 2022, the Ethereum Foundation is rolling out a number of upgrades to the Ethereum blockchain. The changes will include:
- Support for up to 100,000 transactions per second (TPS)
- Increased security
- Improved data storage and transfer
- A merger of mainnet Ethereum with the Beacon Chain
Together, these upgrades will make Ethereum faster, more secure, and more environmentally friendly. They will also make Ether faster, since it works with the Ethereum blockchain. In the next section I’ll explore exactly how much faster Ether could get as a result of the upgrades its blockchain will be getting this year.
How does TPS translate to actual transaction speed?
As noted above, Ethereum’s 2022 upgrades will take it to 100,000 TPS, up from its current 15. That sounds like a big improvement. However, TPS is not exactly the same thing as real world transaction speed. In reality, a cryptocurrency’s speed depends on:
- Level of network activity
- The number of blocks mined daily
- Transaction confirmation time
The way all of these factors interact with each other can be complex. So much so that no direct relationship between TPS and transaction time exists. However, it can be said that if the blockchain supports more TPS, then the token will enjoy faster transactions, all other things being the same. So, ETH should get faster in the year ahead.
Will that be enough to get the token back to its all-time highs?
That remains to be seen. NFTs, which are declining in popularity, were a huge catalyst for ETH’s price gains last year. If they don’t become popular again then ETH’s price could stay depressed for a good while. On the other hand, the blockchain upgrades coming this year look genuinely promising. So, there is at least one good reason for optimism.
