New Upgrades to Ethereum’s Scalability and Efficiency Will Benefit Decentralized Apps

Bets on Ethereum could yield big rewards, but they’re also risky investments. As the world’s second-biggest blockchain experiences major transformation on its core layer, investors putting money on this digital currency must accept uncertainty and change as part of its business plan.

After an eventful year in crypto – deposits have been lost at untrustworthy deposit-taking ventures; a crypto hedge fund collapsed; stablecoins proved volatile – any good news would be a welcome relief – however the forthcoming upgrades to Ethereum’s scalability and efficiency don’t necessarily indicate increased prices for its cryptocurrency itself.

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Instead, the improvements should open up new business opportunities for businesses who utilize the platform to develop and host decentralized applications (dapps). As a result, users of these dapps as well as those holding coins for them will enjoy cost savings that benefit both parties involved.

Scalability features introduced in Ethereum will allow it to process more transactions, potentially leading to lower transaction fees for users. At the same time, more tokens being staked on the network will lead to increased staking rewards that in turn drive up prices of those holding coins.

Of particular concern to Ethereum has been its high energy costs. Ethereum’s proof-of-work consensus algorithm requires significant amounts of electricity; mining consumes more electricity than El Salvador and other countries combined! This has raised environmental concerns, leading the cryptocurrency to move to proof-of-stake model which requires less power usage.

With its high fees and slow speed, Ethereum 1.0 blockchain is expensive to use. While this can benefit its price – as dapps need to pay to execute their smart contracts – high fees mean more tokens may be needed; on the downside it might make competing utility protocols such as Cardano, Polkadot or Tron more likely to attract users.

These lower costs should have no detrimental effect on existing Dapps built on Ethereum blockchain and it should not be hard for other Layer 1 chains to re-create the functionality offered by Ethereum by taking advantage of scaling improvements. Furthermore, successful dapps typically boast advantages that none of their competitors can match such as having an extensive ecosystem of developers and user base.

These new improvements may not significantly damage existing alt Layer 1 blockchains either; as their dapps can move to Ethereum 1.0 merge chains easily. But once these dapps move over, their growth may decline as user bases and communities adjust to competing with more competition while Ethereum itself improves. They must learn to navigate these changes on their own terms before new dapps can demonstrate they can compete with its robust community and strong development ecosystem; only then will users stay loyal to their platform.