It’s 2021 and if you are used to the general loop of life’s events and happenings, then you have possibly heard of Bitcoin. Others perhaps, have heard of Ethereum or cryptocurrencies. Nevertheless, there is some new age financial jargon being commonly discussed amongst the financial worlds. Regardless of particular understandings, cryptocurrency networking on blockchains is a hot trend. If you are unfamiliar with the ways of investing beyond bitcoin, but interested in realizing what the big fad is, then I recommend reading the succeeding material on Ethereum: the blockchain that pushed cryptocurrency into new depths.
Ethereum is an open source blockchain network using smart contracts that allow separate, independent entities to create and mint their own tokens that are used for exchange in the Ethereum ecosystem. These specific smart contracts are regarded as ERC-20 or, less frequently, ERC-721. The independent entities have freedom to trade for Ether; or, swap for other ERC-20 tokens that are on the Ethereum blockchain. This unique innovation greatly changed the ways cryptocurrencies could be constructed beyond the more commonly storage of value of Bitcoin. However, from a fundamental perspective, Ethereum’s value is not entirely dependent on storage of value as much as volume of adoption, usage, and liquidity in the network. Here are a few noteworthy functional variances between Bitcoin and Ethereum:
- Bitcoin is a store of value (viewed as digital gold); whereas, Ethereum is a blockchain platform allowing public and private entities ability to create smart contracts and generate a network of cryptocurrencies.
- Bitcoin has a hard cap supply of 21 million coins; Ethereum has an unlimited supply and can mint in a deflationary system at given periods.
- Ethereum creates block times at speeds nearly 100 times faster than Bitcoin.
- Bitcoin success depends on mass adoption for storage and payment; Ethereum success reliant on liquidity and volume of its ecosystem of ERC-20/ERC-721 tokens.
- Ethereum uses native Ether token to process token hash transactions (txn Hash) via gas; Bitcoin uses leftover balance in transactions (UTXOs) which are similar to lose change from a cash register to process its token hash transactions.
Co-founded by Vitalik Buterin (proposed ideas for Ethereum in 2013), Gavin Wood (computer programmer from Microsoft who wrote Ethereum’s programming code, Solidity, and Ethereum’s runtime system)[resigned in 2016], Joseph Lubin (entrepreneur) , Charles Hoskinson (mathematician) [resigned in 2014], and four others. On 30 July, 2015, Ethereum successfully launched its genesis block.
In order for the Ethereum network to function properly, all transactions that occur on the network require a gas fee of Ether. This “gas fee” is a calculated price estimation for the cost of Ether required to communicate within the network and perform transactions. In other words, to use the Ethereum blockchain effectively, the native token, Ether, is required. Ethereum’s value is dependent upon its ability to produce and sustain high volumes of transactions per block. The more users that the network provides service to, the longer Ethereum will remain a portion of the market. Currently, Ethereum is the second largest market cap price by volume in cryptocurrency.
Since the genesis date of Ethereum, many new updates and additions have been produced which has permitted even further depths of opportunities for cryptocurrencies. For example, 2020 saw an explosion of activity in the DeFi space– resulting in huge sums of new users and money to the everyday crypto trading space. Many tokens were easily swappable with the use of decentralized exchanges (DEXs) such as: Uniswap, Balancer, Sushiswap, and 1inch. Some of Ethereum’s dApps and DEXs offer exceptionally high yielding returns (Yield Farming/Liquidity Pooling) which began creating instances for investors to multiply their investments greatly in long or short periods of time.
Subsequently, as the increase in users came into the crypto space by means of Ethereum dApps and DEXs, so too did the demand for its use; thus, ensuring a sweeping price increase in late 2020 and early 2021. Taking consideration to the chart above, the radical spike in 2018 was caused by new explorations of the market and technology. Numerous ideals failed, and/or lead to fraud as a result of the boundless new areas of digital smart contract finances. Accordingly, several resolutions were proposed to the Ethereum network and the market bounced back strappingly. Since the hard crash, several new and striving entities have replaced the collapsed.
NOTE: At the time of writing, Bitcoin price and volume is also at all time high levels.
As of today, the biggest hinderance with the Ethereum chain is in fact that it has too much volume. The fees for gas of late have looked posh and this is a result of Ethereum’s technology not being able to efficiently scale all its transactions. This is a notorious subject in the blockchain space, and many platforms are working to implement a solution— including the much awaited Eth2.0. There is little contradiction that Ethereum has forged a crypto space. Still, just as Bitcoin reached its pinnacle for tech, so too has ETH. If a solution is executed that works in Ethereum’s favor, then I believe it will retain a large majority of its ecosystem. However, I do have confidence in the separate blockchains that are beginning their voyages of exploration in housing their own ecosystems. This expansion of technology will bring new discoveries of challenges, obstacles, solutions, and countless innovative concepts.
At the moment, there are copious sums of investments, support, and implementations taking place for cryptocurrency and blockchains which indicate reasons to continue optimistic viewpoints. Ethereum has pioneered a market place that today is bigger than it was when it started. However, there is now competition in a market because of the origin of Ethereum’s ambitions to push Bitcoin further; to push blockchains further.
When it comes to Ethereum from the viewpoint as a financial asset, it is highly dependent of the individual and the strategies and successes of Ethereum’s network advancements. From a technological perspective, Ethereum needs to further develop its foundation and performance to maintain a feasible ecosystem. If this problem isn’t answered, then it leaves a market wide open for countless new blockchain platforms to pioneer. Regardless of the outcome of Ethereum evolving into a more sufficient ecosystem; it has credibly initiated an entire ecosystem of cryptocurrency and blockchains.
As of late, there have been few signs of the cryptocurrency market liquidating. Furthermore, there are frequent and regular market signs of buying pressure and selling releases which is creating a collectively larger market of blockchain liquidity; Ethereum has greatly appreciated in value during this “bull market” cycle. Notwithstanding the uncertainty and doubt of cryptocurrency sceptics, when it comes to making any investment financially, it is best to take risks from a reasonable viewpoint.
In conclusion, Ethereum has existed next to Bitcoin longer than most other blockchains. It had a vision, and executed its plan. As it grew, Ethereum endured problems and supplemented solutions. ETH has been a critical reason the cryptocurrency space is as large and successful as it is today. The success of Ethereum as a blockchain network is as likely as the success of others: How effectively, safely, securely, and efficiently can the network process effective block transactions? If Ethereum can continue to answer these questions, then it will likely continue as a reputable and reliable digital currency.
