The Ethereum merger marks a turning point for the crypto industry. The shift from proof-of-work to proof-of-stake is not only a big step towards sustainability. Of Tim Faltis*
The aggregation also shows that the cryptos are starting to do so in two large blocks to split up. For investors, this means additional facts for an investment decision – and opportunities for diversification.
The change of the Ethereum network to the side of the proof-of-stake representatives creates a balance between the energy-hungry crypto projects like Bitcoin and the payment systems like now Ether & Co. The industry is branching out, which is always a sign of maturity when it comes to asset classes is. For investors, this means that topics such as sustainability can now be included much better in investment decisions, including for crypto.
Own blocks, however, cannot be formed only based on the energy need and thus the question of the crypto’s validation system. Also about them The function that the projects in the cryptoverse fulfill is an investment function. Blockchains like Bitcoin thus concentrate on expanding their function as a store of value, as an actual parallel currency.
On the other hand, there are more and more projects being founded to be able to implement digital business models. The Ethereum network, for example, will not only be less energy-demanding with the switch to the new system. At the same time, changes were introduced that are significant for a higher performance of blockchain worries.
More transactions per second with lower transaction costs is the extended goal of the Ethereum community. This also leads to a new way of thinking when it comes to investment decisions. Anyone who buys ether from now on is no longer dependent only on the price development of the second largest cryptocurrency in the world. Rather, the investor bets also on the success of a crypto infrastructurewhich enables many new business models.
This change in strategy was well received by the markets. Ether has been growing over the past few months significantly better developed than Bitcoin. A lot of substance is created by the already huge network of developers on the Ethereum blockchain, which is now likely to continue to grow. On the one hand, there is potential for returns, as the demand for ether may tend to increase. On the other hand, such a broad application also protects against heavy price losses.
Overall, this should match the now Ethereum-led block of sustainability-focused proof-of-stake projects a lot of tailwind give. The entire crypto asset class is becoming increasingly important to many institutional investors. The switch now ensures that a potential obstacle, such as excessive energy consumption during validation, is eliminated. For many institutional investors, this could be the final push that allows them to invest in cryptos. Especially since the market is already much more mature and therefore become more investable is. Luxembourg securitizations in particular have proven to be ideal for representing this asset class via custodial securities.
And what performance concerns: Even with conventional systems, it is clear that a focus on sustainability can have positive effects on performance. This can now continue in the cryptoverse.
*) Tim Faltis is on the board FAIR ALPHA
About FAIR ALPHA
Through its subsidiaries, Fair Alpha offers financial market solutions to (semi-) institutional investors and asset managers. Investment ideas and trading strategies are converted into investable and safe custody securities. In addition, innovative approaches are pursued that focus on the creation and issuance of digital assets (tokens) stored in specific wallets. With the help of tailor-made issuance vehicles, structures are created where issuer risk can be excluded. Fair Alpha takes over the entire value-creating process from product setup to administration and ongoing life cycle management. More at www.fair-alpha.org
Already our brand new Crypto Annual Edition 2022 (Volume 1, release date Aug 2022) seen?
Our newest Bond Guide Annual Edition ‘Green and sustainable finance 2022’ came out in April and can do just like ours BondGuide reference book ‘Bonds 2021’ conveniently downloaded, saved and browsed or forwarded as a free e-magazine!
Please use Twitter for questions and opinions – for the benefit of the entire community. Follow all discussions and news more timely Twitter @bondguide !