Ethereum (ETH): what it is, what its worth and should you be investing?
Ethereum was launched in 2015 based on Blockchain technology. It is an open-source, decentralized software platform that uses its own cryptocurrency, Ether. Ethereum utilizes Blockchain technology to store computing codes. These codes enable developers to build tamper-proof Smart Contracts and Distributed Applications. These contracts and applications run on this platform without the interference or control of any third party. Ethereum technology is home to many applications, global payments and digital money. This application of Ethereum allows users to make agreements and transactions directly to buy, sell and trade goods or services without involving a third party. For example, users bypass banks to transfer money or skip lawyers to make sales contracts. Ethereum works through a network of computers that operate together as supercomputers. This network gathers and runs smart contracts; these are pre-programmed, self-executing applications independent of third party involvement, as Blockchain has inherent resistance against tampering. These smart applications conduct contract terms digitally. Once certain conditions are met, the buyer can then access the merchandise. Ethereum works just like the internet. The only difference is that all information, data and agreements are stored in Blockchain ledgers not in a centralized location. For example, data stored in Google cloud or Facebook server is an example of centralized storage which can easily be subjected to theft by cyber criminals.
WHAT IS ITS WORTH?
Ether is the second-largest cryptocurrency according to market capitalization after Bitcoin. It hit its all-time high trading price of $2,151.25 which is up over 180% from $738 at the beginning of the year. Ether was created as a complement to Bitcoin but is now working as a competitor against it. Recently the cryptocurrency market value soared above $2 trillion smashing all previous records. Bitcoin accounts for approximately 54% of the entire market capitalization of cryptocurrency. Hence, play a major role in uplifting the value. But recently Bitcoin’s rally had a setback. Ethereum along with BITTORRENT, XRP, TRON and STELLAR rallied above it and boosted the market capitalization value to new heights. One can safely assume 2021 to be in the altcoin season. Ethereum with these altcoins managed to achieve a double-digit percentage growth in early April, according to Messari’s data. Ethereum also played a vital role in achieving $4.5 billion worth of cryptocurrency inflow in the first quarter of the year. It accounted for approximately $765 million worth of investments. Ethereum should be given its due credit, for it was this buzz around it that helped increase the overall market capitalization of all cryptos. Its unique feature of enabling the creation of Smart Contracts and Applications without third party interference attracted many investors. To top it all Ethereum has recently secured its position in the top 10 list of financial service players globally with a market capitalization of $243.62 billion. This virtual coin stands ahead of China Construction Bank whose market capitalization is $210 billion, as per the date from CompaniesMarketCap. The biggest factor for ETH being able to attract attention is the growing NFT market, which is largely powered by Ethereum. NFT can store all forms of intellectual property and agreements which owes to their huge potential, says Vikram Rangala, CMO, ZebPay, to Financial Express Online.
SHOULD YOU INVEST IN ETHEREUM?
Well, keeping in view all the facts and figures it might not be a bad idea to do so. Ethereum is amongst the few cryptos that are recommended to invest in, in 2021. It is getting its due share of attention since many retail traders and institutions are now accumulating it. According to CoinShare ETH-related investment products attracted $4.2 billion inflows in this quarter. In addition to that, Ethereum’s digital investment products closed at $55.8 billion in crypto assets. Grayscale, being the largest institutional holder of cryptocurrency products has $43 billion worth of digital assets under management. Grayscale purchased more than 48,000 ETH in the first quarter of 2021. Of the many factors behind the Ethereum surge, decentralized finance (DeFi) won the race. DeFi is similar to the traditional financial system but doesn’t involve third party such as banks. This system works on the Ethereum platform. Customers can borrow, lend, trade and invest through Smart Contracts through Protocols like Compound, Aave and Yearn Finance. Approximately around $24 billion is locked into various DeFi projects right now. The major concerns regarding investment in ETH and Bitcoin are its supply crisis. A large number of ETH and Bitcoins are withdrawn from the exchanges. As for Bitcoin with a limited number to be mined, this might seem like a stunt to increase the demand and later the price. But with ETH the story may not be the same. With no cap on the number of ETH to be mined, the supply crisis is still a big issue. With approximately 18 million ETH (around 15% of the total supply) locked in various places, a diminished market supply is sure to follow. In addition to that, ETH whales are consuming the digital asset leading to diminished supply to various exchanges. According to the latest data published by crypto analytics firm, Santiment, Ethereum Whales own more than 68% of the total ETH supply.
The amount of attention Ethereum is getting and the quality of services it provides makes it a perfect competitor of Bitcoin. With an unlimited supply of coins to be mined as compared to Bitcoins, this virtual space should be on your list of things to invest in, in 2021.
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