Ethereum: All You Need To Know To Decide If This Crypto Is Worth the Investment

]

BackyardProduction / iStock.com

Cryptocurrencies have skyrocketed in popularity recently and this trend shows no signs of slowing. Given all the talk around these digital assets, you might be wondering whether now is the time to invest. But before pulling the trigger, it’s always a good idea to have an understanding of the underlying asset. Cryptocurrency is no exception and it is quite different than investing in stocks or bonds.

Show Support: It’s Not Too Late To Nominate Your Favorite Small Business To Be Featured on GOBankingRates — Extended to June 5

Therefore, we will cover a popular blockchain technology called Ethereum (ETH). Like many blockchains, Ethereum has a native coin called ether. Let’s take a closer look at what Ethereum is and whether you should consider investing.

Read: Dogecoin: Is It a Worthwhile Investment?

What Is Ethereum?

Ethereum is an open-source, decentralized blockchain technology. Ethereum’s native coin is called ether. This coin is one of the largest cryptocurrencies by market capitalization, second only to Bitcoin (BTC). Although ether has a smaller market cap than Bitcoin, Ethereum is the most widely-used blockchain.

See: What Is Chainlink and Why Is It Important in the World of Cryptocurrency?

One thing that is important to understand about Ethereum is that it is not the same as Bitcoin. Whereas Bitcoin’s purpose is primarily to be a digital currency, Ethereum is much broader. In fact, Ethereum is an open-source operating system and computing platform. It also supports distributed applications (dApps) and smart contracts.

Another key aspect of Ethereum is that it enables decentralized finance, which is an important part of how the system works. Because the system is inherently decentralized, there is not a single entity controlling it or the value of ether.

More: How the IRS Taxes Cryptocurrency – and the Loophole That Can Lower Your Tax Bill

What Is Ethereum Worth?

Like many cryptocurrencies, the price of ether has fluctuated greatly since it launched in 2015. Back then, its price was around $1 and stayed there for several months. The price reached $1,358 in January 2018, its highest price ever at the time. The price began to fall, as did the price of many cryptocurrencies; ether bottomed out at $83 in December 2018.

Story continues

The price has ebbed and flowed since then but has risen overall. At the beginning of April 2020, the price was around $140; and as of May 18, it is at around $3,349, according to Coindesk. That’s a pretty hefty increase in just over a year.

Read: Breaking Down the Basics of Cryptocurrency

Should You Invest In Ethereum?

If you decide to invest in ether (and therefore, in Ethereum), you should first ask yourself why you are investing. Although the price of the coin has risen substantially over the past year, it can be extremely volatile. Thus, if you buy ether simply hoping the price will rise, you may end up frustrated.

On the other hand, the Etherum blockchain can be used for many different applications, said Tally Greenberg, head of business development at Allnodes. “Ether is the cryptocurrency required for any transaction made on Ethereum, a blockchain network of applications. A blockchain, on the other hand, is a technology with limitless potential. It doesn’t rest on Ethereum alone and can be used to make a difference in our future with or without cryptocurrencies.”

See: 10 Best Cryptocurrencies To Invest in for 2021

Sam Bretzmann, the owner of Blocklink, agrees with this sentiment. “The difference here is that instead of investing in individual projects which may or may not make it, you can invest in the infrastructure. You can think about it like this, go back to 1999, and instead of having to try and pick which up and coming businesses will survive, you get to just pick ‘the internet’ and invest in that.”

This article is part of GOBankingRates’ ‘Economy Explained’ series to help readers navigate the complexities of our financial system.

Will Ethereum Kill Bitcoin?

]

A common critique of Bitcoin (CRYPTO:BTC) is that it is outdated technology in the fast-moving world of cryptocurrency and it will eventually be replaced by something better. There are different versions of this theory, with some saying another decentralized cryptocurrency will overtake bitcoin as the best crypto money and others saying bitcoin will eventually be made obsolete by central bank digital currencies (CBDCs).

Let’s focus on the former theory. The Ethereum (CRYPTO:ETH) network’s underlying ETH cryptocurrency has the most support. During the initial coin offering (ICO) bubble of 2017, various crypto market commentators claimed that ETH overtaking BTC as the largest and most popular cryptocurrency is inevitable. Although this didn’t happen back then, the idea of a “flippening” taking place has gained traction once again, as the BTC-denominated price of ETH has nearly tripled so far this year.

The argument for ETH over BTC

The main argument for Ethereum over Bitcoin is that the latter of the two cryptocurrency networks is limited by a lack of technical functionality in the form of smart contracts. Smart contracts enable advanced crypto use cases such as non-fungible tokens (NFTs) and decentralized finance (DeFi). Mark Cuban has pointed to these sorts of use cases as his reasoning for preferring ETH over BTC.

DeFi in particular has been the main source of attention for Ethereum over the past year or so, as various apps have enabled new ways of doing traditional financial activities like issuing assets, trading, borrowing, lending, and more. The argument is that ETH will overtake BTC as the most widely used cryptocurrency due to these additional applications.

The argument for BTC over ETH

A key argument against the idea that DeFi and other types of decentralized applications is that much of the activity on Ethereum today is likely unsustainable. Many of the Ethereum use cases that are popular today, such as stablecoins and the trading of those stablecoins against ETH, involve the reintroduction of third-party risk, which puts into question whether it makes sense to build these applications on a decentralized blockchain.

Bitcoin itself also has various solutions for implementing many of the use cases that have gained popularity on Ethereum. Sovryn is a relatively new DeFi application built on Bitcoin that combines many of Ethereum’s touted use cases into a single interface. It has long been argued that Bitcoin can adopt any new tech that is developed by its competitors, and Sovryn is an illustration of that point happening right in front of our eyes.

If Bitcoin is able to adopt the features of its competitors, then the real competition between cryptocurrencies has more to do with their monetary properties than anything else. And in that department, bitcoin is still by far the most liquid, stable form of crypto money with the most credible, unwavering monetary policy.

The Top 10 Things You Need to Know About Ethereum

]

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Ethereum (CCC:ETH-USD) is the world’s second largest cryptocurrency behind Bitcoin (CCC:BTC-USD). In this article, I’ll discuss the top 10 things you should know about Ethereum today. This list is, of course, subjective, but I hope you find it to be informative.

Source: shutterstock

What Are Ethereum and ETH?

First of all, you can explore Ethereum as a project by visiting its website. There, you can learn how to use Ethereum, what the developers are up to at this time and community news.

According to the website:

“Ethereum is a technology that’s home to digital money, global payments, and applications. The community has built a booming digital economy, bold new ways for creators to earn online, and so much more. It’s open to everyone, wherever you are in the world – all you need is the internet.”

Ethereum is currently the most used blockchain in the world.

ETH is Ethereum’s cryptocurrency with a market capitalization of about $310 billion and a market price of about $2,677 as of midday June 4, 2021.

What is the main difference Between Ethereum and Bitcoin?

The distinction between Ethereum and Bitcoin is that Bitcoin is considered to be a digital currency, while Ethereum is a ledger technology, used by developers and businesses to create new applications and programs via smart contracts. Smart contracts are collections of code that are used to carry out a set of instructions and run on blockchain technology.

Ethereum is highly programmable, much faster and more powerful than Bitcoin and it focuses on Decentralized Finance. Furthermore, ETH acts as a platform for numerous other cryptocurrencies.

Both Bitcoin and Ethereum are based on blockchain technology.

Can Ethereum Overtake Bitcoin?

This not easy to answer. It has to do with the supply, demand and mostly utility. According to Todd Morley, the co-founder and former executive of Guggenheim Partners, “Ethereum has ‘much higher utility’ than bitcoin—and is ‘where the action is.'”

“Ethereum, to me, has a much higher utility [than bitcoin] through smart contracts,” Morley told Bloomberg TV, warning that companies that don’t have a digital strategy risk “something” suddenly showing up “and your walkman looks like an abacus.”

Rather than just speculating on the price of cryptocurrencies, it is their utility and applications that will be the main catalyst for their future. It remains to be seen whether Ethereum will dominate Bitcoin, but it seems to have the potential.

Does ETH Have a Limited Supply?

In contrast to Bitcoin, which has a limited supply, ETH does not have a limited supply. It is therefore not supposed to have any deflationary effect. As of today, ETH has a circulating supply of 116,138,166.69 ETH. A big change has happened in late 2020 called Ethereum 2.0. The aim was to change the “proof of work” protocol to the “proof of stake” protocol.

A self-explanatory definition of these different protocols is given by an article on CNBC, which was published in December 2020.

“Like Bitcoin, Ethereum’s blockchain currently operates on a “proof of work” model. So-called “miners” with purpose-built computers compete to solve complex mathematical puzzles to validate transactions. Whoever wins that race is then awarded in bitcoin.

On Tuesday, the Ethereum blockchain is set to begin a transition to a “proof of stake” model. Instead of miners, the network will rely on “stakers” who already hold some ether to process new transactions.”

This change makes transactions much faster. But there is a main disadvantage according to Ethereum itself. “Proof-of-stake is still in its infancy, and less battle-tested, compared to proof-of-work.”

What Are the Price Predictions for ETH?

There are too many, from $5,000 to $20,000 or even more. A word of advice: don’t spend too much time or brainpower on these forecasts.

They are just opinions without any real validity behind them.

Do not assume that large hedge funds or institutional investors can predict the future price of Ethereum with accuracy. It is just a “clever” way to influence market sentiment once they have already built positions in ETH and hope to push the price higher. Nobody has a crystal ball to predict the future performance of ETH, not even on Wall Street.

So Is Ethereum a Good Investment?

The answer is twofold.

First, most central banks have warned against investing in cryptocurrencies, as they believe that cryptocurrencies are highly speculative currencies with no intrinsic value. They are for definitely too risky for some investors and traders.

Ethereum is a very volatile and investment, so be sure you’re comfortable with its risk before you decide to buy. If you think that Ethereum is the future of blockchain technology, and you have a well-diversified portfolio, consider whether your investment philosophy accepts risk. Only invest money you can afford to lose.

Is ETH a Mature Cryptocurrency to Invest in?

Back in 2020, ETH was priced at a range of $100-$700. In early 2018 it reached $1200, but a large crash occurred and ETH dipped to almost $100. With a price near $2700 today it has increased a lot, but it has fallen from highs near $4,000.

The crypto market is far from reaching “maturity” and stability. Expect both rallies and crashes.

Who Accepts Ether as a Means of Payment?

Many merchants are willing to accept payments in Ether in 2021, according to cryptonews.com.

Some of them include Digitec Galaxus (the largest Swiss online retailer), CryptoPet (pet supplies retailer), PizzaForCoins (service dedicated to buying pizza with cryptocurrency), and Snel.com (VPS hosting service). What is very important though is that Ethereum gains traction internationally, and there is a list of over 500 international companies who are members of the Enterprise Ethereum Alliance.

These companies support the Ethereum ecosystem, though not all of them accept Ethereum at this time.

What are the key uses of Ethereum?

Gemini cryptocurrency exchange has published an analytical article about the key uses of Ethereum today.

The main takeaway is this:

“Ethereum has expanded on Bitcoin’s decentralized digital currency by building a global network that undergirds an interconnected marketplace of decentralized applications (dApps) — from decentralized autonomous organizations (DAOs) to Initial Coin Offerings (ICOs), stablecoins, decentralized finance (DeFi), and non-fungible tokens (NFTs). Ethereum’s use cases are vast and expanding fast, offering blockchain projects enhanced efficiency, security, and decentralized equity to industries across the globe.”

What Are the Main Pros and Cons of Ethereum?

According to TopCoins.com the main advantages of Ethereum are:

“Reliability

Ethereum 2.0 upgrade

follow us