Is Ethereum a Millionaire-Maker?

Ether (CRYPTO: ETH), the native cryptocurrency of the Ethereum blockchain, turned its earliest investors into multimillionaires over the past decade. A $1,000 investment in Ether at its earliest recorded closing price of $2.77 per token in 2015 would be worth $1.22 million today.

With a market cap of $407 billion, Ether is now the second most valuable cryptocurrency after Bitcoin (CRYPTO: BTC). But could it turn a fresh $1,000 investment into $1,000,000 again?

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Why did Ether generate millionaire-making gains?

Ether was originally a proof-of-work (PoW) token that was actively mined, similar to Bitcoin. However, Ethereum's blockchain transitioned to the more energy-efficient proof-of-stake (PoS) mechanism in 2022.

As a PoS blockchain, Ether could no longer be mined with powerful computer chips. Instead, it could only be "staked", or locked up for interest-like rewards, which were paid out in its own tokens. It also gained support for smart contracts, which developers can use to create decentralized applications (dApps), non-fungible tokens (NFTs), and other cryptocurrency assets.

After that transition, known as "The Merge", Ether was primarily valued by the growth of its developer ecosystem instead of the scarcity of its tokens. Today, Ethereum hosts nearly 32,000 active developers, making it the world's largest blockchain-based development platform.

Ethereum's native Layer 1 (L1) blockchain doesn't process transactions as rapidly as newer PoS blockchains like Solana (CRYPTO: SOL) and Cardano (CRYPTO: ADA). However, its Layer 2 (L2) networks -- which are built on top of its L1 blockchain -- are helping it keep pace with those challengers by processing its bundled transactions at much higher speeds.

Last year, the Securities and Exchange Commission (SEC) approved the first spot price exchange-traded funds (ETFs) for Ether. Those approvals cemented its reputation as a "blue chip" cryptocurrency (like Bitcoin) and drew in more retail and institutional investors.

Ether's evolution from a niche token into the foundation of the world's largest ecosystem for decentralized apps drove it to churn out millionaire-making gains for its patient investors -- even as the broader crypto market was chilled by the two crypto winters of 2018-2019 and 2022-2023.

Could it generate more millionaire-making gains?

Over the next few years, the following three planned upgrades for Ethereum's L1 blockchain -- The Verge, The Purge, and The Splurge -- will boost its scalability, reduce its congestion and gas fees, and improve its overall efficiency. Those improvements should widen its moat against its PoS challengers and support the broader adoption of Ether in decentralized applications.

As that happens, Ether could be more widely adopted for mainstream payments. Like Bitcoin, it could also be adopted as a form of legal tender in countries plagued by inflation. That broader adoption would encourage more institutional investors to increase their exposure to Ether.

Another bottleneck is the lack of staking features in Ether's first spot price ETFs. Without those high yields, those ETFs became less appealing than Ether's staked tokens. The next generation of Ether ETFs -- starting with Blackrock's (NYSE: BK) recent submission for the market's first staked Ether ETF -- might break that bottleneck and draw in more investors.

Ether has already come a long way, but it could have even more upside potential. Standard Chartered expects those tailwinds to boost Ether's price from about $3,400 today to $7,500 by the end of this year. VanEck, which launched its own Ethereum ETF last year, expects its price to more than triple $11,800 by 2030. Ark Invest's Cathie Wood -- who is also fiercely bullish on Bitcoin -- claims Ether's price could surge nearly 4,800% to $166,000 by 2032.

But even if Ether hits Cathie Wood's sky-high price target, it would only turn a fresh $1,000 investment into about $48,800 over the next seven years. Therefore, investors shouldn't expect it to replicate its millionaire-making gains from the past decade. However, it could still generate incredible long-term gains as the nascent decentralized application market expands.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.