Ethereum (ETH): prospects in 2025
Ethereum 2.0 and PoS: technological improvements
Ethereum's (ETH) transition to Proof-of-Stake (PoS), which began with the launch of the separate Beacon Chain blockchain network and culminated in The Merge in 2022, has already brought significant changes:
- Increased scalability: One of Ethereum's key problems was low network bandwidth, which resulted in high fees. Layer 2 solutions such as Arbitrum, Optimism, and zk-Rollups, combined with the introduction of sharding (planned for 2024-2025), can provide scalability of up to several thousand transactions per second.
- Reduced energy consumption: The transition from Proof-of-Work (PoW) to PoS has reduced the Ethereum network's energy consumption by 99.95%. This has made Ethereum more environmentally friendly, making it more attractive to institutional investors who pay attention to ESG (environmental, social, and governance) criteria.
- Protocol updates: Planned hard forks, such as Cancun and others, can improve user experience and optimize gas usage, making Ethereum more accessible to developers.
- Improved security: The PoS mechanism provides a higher network security level by involving validators with a vested interest in keeping the network up and running since their capital (ETH) is used as collateral.
- Financial sustainability: Implementing the EIP-1559 (Ethereum Improvement Proposal 1559) update and burning off a portion of commissions, the move to PoS has made Ethereum a deflationary asset in the long run. The shrinking overall supply of ETH strengthens its appeal to investors.
The Ethereum network is expected to finally stabilize in its new format in 2025, providing better performance and energy efficiency.
Increased use of smart contracts and DeFi
Ethereum remains a leader in decentralized applications (dApps) and decentralized finance (DeFi). As of the end of 2024, more than 70% of all decentralized applications operate on the Ethereum platform. The Total Value Locked (TVL) in Ethereum's DeFi protocols has exceeded $80 billion, representing about 60% of the entire DeFi market. This dominance is attributed to its rich developer ecosystem, reliability, and support for multiple token standards, including ERC-20, ERC-721, and ERC-1155. The DeFi and dApps segments are expected to further expand in 2025.
DeFi applications such as Uniswap, Aave, and MakerDAO continue to attract capital and users. Uniswap, one of the largest decentralized exchanges, processes billions of dollars worth of transactions daily, offering users instant exchanges without the need for middlemen. Aave provides decentralized lending services, managing over $15 billion in assets, making it one of the most trusted DeFi platforms. MakerDAO, the creator of the DAI stablecoin, maintains its ecosystem's stability through smart collateralization and governance. These projects demonstrate how Ethereum is a foundation for building innovative financial solutions that can compete with traditional banking systems. These projects could increase in popularity as Ethereum's infrastructure evolves and the user interface improves.
Despite market volatility, NFTs continue to evolve, becoming an essential part of the digital economy. The Ethereum platform plays a central role in the NFT ecosystem thanks to the ERC-721 standard, which enables the creation of unique tokens representing digital assets. As of 2024, over 80% of all NFTs are issued on Ethereum, including well-known collections such as Bored Ape Yacht Club and CryptoPunks. The monthly trading volume of NFTs on Ethereum reaches billions of dollars, demonstrating the high interest from users and investors. The ERC-721 standard has provided the basis for creating new applications such as games, art, and virtual worlds, making Ethereum a leader in this segment.
Banks and large corporations increasingly seek Ethereum to create tokenized assets and platforms. Ethereum-based blockchain technology allows financial institutions to issue digital versions of traditional assets such as bonds, stocks, or stablecoins. For example, JP Morgan has already implemented Onyx, which runs on Ethereum, to process tokenized asset transactions. In addition, companies such as Visa have started using Ethereum to support cryptocurrency payments, including the integration of the USDC stablecoin. This trend is also supported by the growing use of tokenization to simplify and accelerate transactions in real estate, art, and other physical assets. This strengthens Ethereum's position as a universal tool for financial transactions and interactions between the traditional economy and the world of cryptocurrencies.
Institutional investments
Attracting institutional investors remains one of the key factors contributing to Ethereum's growth. In 2025, we may see an intensification of this trend.
In July 2024, the first spot Ethereum-ETFs approved by the Securities and Exchange Commission (SEC) were launched in the United States. Such products provide institutional and retail investors a convenient and regulated way to invest in Ethereum. Some of the most prominent spot Ethereum-ETF providers include BlackRock, Fidelity, and Invesco. The launch of ETFs has significantly increased Ethereum's liquidity and strengthened its position as an investment asset. In the first days after the launch, the volume of investments in these funds exceeded $100 million, emphasizing the high interest from institutional investors.
Despite increased regulation in several countries, Ethereum remains a relatively safe asset for major players due to its decentralization, transparency, and widespread acceptance. Ethereum's decentralized structure reduces the likelihood of centralized control or interference from government agencies. For example, validators are distributed globally, making the network resistant to localized bans. The transparency of the network, based on a public blockchain, allows regulators and users to track transactions, increasing trust in the platform. These qualities have made Ethereum a popular choice among large institutional investors and companies seeking to minimize regulatory risk while maintaining access to innovative technology.
The growing interest from corporations demonstrates the importance of Ethereum as a technology platform for solving complex financial problems. Companies like Microsoft use Ethereum to build decentralized applications and manage data in cloud systems. IBM is actively exploring incorporating Ethereum into its Hyperledger ecosystem, improving enterprise blockchain interoperability. Ernst & Young has developed Ethereum-based solutions for asset tokenization and transaction accounting. These projects validate Ethereum's versatility by combining traditional finance, data management, and innovative blockchain technologies, making the platform an integral part of the corporate world.
Comparison with Bitcoin: opportunity to overtake by capitalization
Bitcoin (BTC) is traditionally considered digital gold, while Ethereum is positioned as a platform for building applications. Nevertheless, by 2025, Ethereum has a chance to overtake Bitcoin in terms of market capitalization. Let's take a look at the main arguments in favor of this:
- Wide range of uses: Unlike Bitcoin, which is mainly used as a savings vehicle, Ethereum has multiple use cases, including DeFi, NFT, asset tokenization, and enterprise solutions.
- Ethereum's economic model: After the implementation of EIP-1559 and the transition to PoS, ETH inflation has significantly decreased, and the burning of some commissions makes the token deflationary. This sets the stage for a steady increase in its value.
- Ecosystem development: Ethereum has the most active developer ecosystem, which ensures continuous innovation and a growing user base. According to the Electric Capital Developer Report, in 2024, the Ethereum ecosystem will have more than 5,000 active developers each month — more than any other blockchain network. In addition, more than 3,000 decentralized applications (dApps) are being developed on the Ethereum platform, covering areas such as finance, art, gaming, and data management.
- Growth dynamics: Historically, Ethereum has shown a higher growth rate than Bitcoin. From 2016 to 2024, the value of Ethereum increased by more than 32,000%, while bitcoin's growth over the same period was about 6,000%. In addition, the daily number of transactions on the Ethereum network exceeded 1.2 million in 2024, more than double that of Bitcoin. With plans for further scaling and infrastructure improvements, Ethereum's growth rate could remain high, especially with growing enterprise demand and adopting new technologies.
Conclusion
Ethereum is well-positioned to consolidate as the leading platform for smart contracts and decentralized applications in 2025. While overtaking Bitcoin in terms of capitalization remains debatable, fundamentals speak in favor of Ethereum's continued growth. Investors and developers should keep a close eye on the development of this ecosystem, which continues to change the face of the financial and digital world.