Ethereum Takes Bitcoin’s Proof-of-Concept to the Next Level

Editor’s Note: This article has been updated to reflect the fact that on the date of publication, Matt McCall held a position in Bitcoin.

All eyes are on cryptocurrencies and for a darn good reason. Last year, I made a friendly wager with my InvestorPlace colleague Louis Navellier, which we called the “Race to 40K.” I bet him that Bitcoin would reach that lofty threshold before the Dow Jones did. A quick look at the charts reveals that I was right on the money. But astute investors should really take a look at Ethereum.

A stack of ether or ethereum coins on a gold background.

Source: Shutterstock

Don’t misread this — I didn’t give Louis a hard time. In my opinion, whether you invested in Bitcoin or in powerful, relevant stocks, we’re all winning. A few weeks ago, I more than doubled down on my bullishness in BTC, stating that it’s well within the realm of possibility that it could hit $100,000 sometime this year. Thus, if you missed the boat, you’ve still got time yet.

But if you’re as optimistic about cryptocurrencies as I am, I recommend that you also consider Ethereum. Just recently, ETH broke above the $1,400 level, hitting $1,439 and by doing so, it secured a fresh all-time high. Currently, Ethereum tokens are entering a corrective phase as some weakness has come into the digital markets.

Still, this is nothing to worry about. As I’ve stated repeatedly, it’s the long-term picture that investors should focus on.

Earlier this month, I stated that big-time investors are recognizing the power and potential of cryptocurrencies. Even NFL player Russell Okung “is now receiving a portion of his salary — $13 million a year — in bitcoin.” There is a great awakening that’s about to blow the roof off this paradigm-shattering investment class.

In addition, I have discussed at length the unprecedented wealth transfer that will occur from baby boomers to millennials. And where will that money go? To the one asset class that is truly in the hands of the young: virtual currencies.

Ethereum Is the True Hidden Gem

Granted, the present enthusiasm is centered on Bitcoin. But as great as it is, in the intermediate term, we’re talking about a 2x or 3x opportunity. Ethereum, though, could swing much, much higher.

First off, the numbers don’t lie. On a year-to-date basis, Bitcoin is up 16.5%; whereas, Ethereum has gained over 72%. The difference in scale is phenomenal and it’s well justified.

This leads to my second point regarding the mission purpose behind each token’s underlying blockchain architecture. Bitcoin was really the proof of concept that a payment system and digital economy can operate decoupled from the staid, resistant global financial hierarchy. However, as the first-to-market enterprise, it has structural and administrative issues that stymie its technology’s true potential.

Enter the Ethereum blockchain. Taking a promising concept, the Ethereum architecture improves upon the speed, scale and convenience of the original Bitcoin blockchain. Not only that, the ETH platform is much more flexible, facilitating multiple innovations such as smart contracts.

Essentially, smart contracts remove the need for a trusted human intermediary to monitor, arbitrate and close deals. By replacing the intermediary with a digital intelligence, the arbitration process is immutable: computers are only influenced by protocols (facts), not pressure, bribes or other forms of manipulation. By decentralizing the trust element in digital transactions, other forms of innovations — such as decentralized finance (i.e., removing brokers from the stock market equation) — are now possible.

If that wasn’t enough to get excited about ETH, we now have Ethereum 2.0. This new protocol introduces multiple new improvements to the Ethereum blockchain, with two pivotal ones being:

  • Proof-of-stake, a consensus mechanism that greatly mitigates the traditional energy-intensive mining process called proof-of-work by forcing users to stake their ETH holdings if they wish to participate in network validations, and
  • Shard chains, a process where transactions are verified and validated in parallel sequences rather than one by one, thereby reducing network congestion.

While the details of these changes for Ethereum sound incredibly granular, they provide the enhanced modularity and accessibility necessary to take blockchain-based innovations — and not just cryptocurrency speculation — to the next level.

Can’t Go Wrong with Either ETH or BTC

Again, you shouldn’t misread what I’m telling you. This isn’t about pitting one crypto against another. Both Bitcoin and Ethereum have tremendous upside potential and serve the broader narrative in different ways. The former has established credibility and acts as a digital safe haven, while the latter pushes the boundaries of blockchain technology.

Frankly, you can’t go wrong with either. The only mistake would be to not get involved at all.

On the date of publication, Matthew McCall held a position in ETH and BTC. On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article held a long position in ETH and BTC.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.

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