Shark Tank star Kevin O’Leary appeared on CNBC on Sept. 13. The outspoken investor had a lot to say about Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and the regulatory changes needed to make cryptocurrencies a legitimate institutional asset class.
I don’t think he’s wrong. It’s possible that decentralized finance (DeFi) can coexist with regulatory oversight. However, the Securities and Exchange Commission (SEC) needs to move faster.
But what O’Leary said about Ethereum had me scratching my head a little. I mean, even I know that Ethereum needs to get faster at processing transactions, and I’m a relative dinosaur at 57.
“I find Ethereum — as a user, it’s too slow. And so there’s going to be other chains that are going to emerge,” O’Leary said while appearing on CNBC.
Of course — there’s Cardano (CCC:ADA-USD), Solana (CCC:SOL-USD) and Ripple (CCC:XRP-USD), and the list goes on.
Ethereum 2.0 is already underway, with one of the phases of the upgrade up and running. The moves are meant to fix all that ails the Ethereum network.
Ethereum 2.0 Will Boost the Value of Ether
I find it hard to believe that a man whose firm manages several ETFs, including the O’Shares Global Internet Giants ETF (BATS:OGIG), wouldn’t be familiar with the updates to Ethereum’s network. But I digress.
The fact is, the Ethereum network is making many changes to make it all that and a bag of chips. Most importantly, for those who care about the environment, it’s moving to a proof-of-stake (PoS) consensus mechanism for validating transactions. This is a big change from the proof-of-work (PoW) protocols used by Bitcoin and many other cryptos.
Decrypt contributors Rene Millman and Liam J. Kelly pointed out on Sep. 10 that the first phase of the upgrade, Beacon Chain, went live last December.
“The Beacon Chain introduces native staking to the Ethereum blockchain, a key feature of the network’s shift to a PoS consensus mechanism. As the name suggests, it is a separate blockchain from the Ethereum mainnet,” the authors reported.
The Rest of the Process Is Underway
By the end of June 2022, all the brainy people behind Ethereum will have figured out a way to merge the Beacon Chain with the mainnet.
By creating shard chains, it will spread the network’s workload from one single blockchain to 64 new chains. The resulting network should be able to handle considerably more processes as a result.
For those who live and breathe crypto, I must sound like I’m your kindergarten teacher all over again.
The third phase is expected sometime in the second half of 2022. Currently, the network processes about 30 transactions per second. As Decrypt points out, 2.0 will boost that to as much as 100,000 per second.
While there’s a lot more involved in fully implementing Ethereum 2.0, what’s important is that scalability should boost usage, and that would increase the demand for Ether itself.
“By the time ETH 2.0 and rollups work together there will be 100,000 transactions per second capacity. That’ll mean a completely seamless experience for the next billion people,” said Jamie Anson, founder of Nifty Orchard and organizer of Ethereum London.
No matter the reasoning behind O’Leary’s opinions, these updates are vital to Ethereum’s future success. Without them, it’s dead on arrival.
The Bottom Line on Ethereum
In my last commentary about Ethereum in early September, I struggled with the idea of being able to apply a specific intrinsic value to Ether.
While I continue to watch for and understand the utility present in all cryptocurrencies, I’m especially interested in ones like Ethereum that use smart contracts to bypass traditional toll booths in the financial services industry.
“At the end of the day, if Ethereum can make a meaningful contribution to the global financial system while also reducing its carbon footprint to the cloud-computing it uses for its servers, it’s a win for investors and a win for the world,” I wrote on Sept. 1.
If Ethereum 2.0 does what people think it will do, Kevin O’Leary’s view on Ether will change dramatically. I guarantee it.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
