Even after the major cryptocurrencies experienced an ominous collapse from their all-time highs in April, most are up by 200 percent to 300 percent or more from this point last year. Bitcoin is getting all the headlines, and there are legitimate concerns about its roller coaster nature.
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But what about Ethereum? Conceptualized in 2013, Ethereum is an open-source platform that helps to develop and implement new decentralized applications using the same core concepts such as blockchain.
The difference between Ethereum and Bitcoin has caught the attention of major market players like Goldman Sachs, which recently noted to its investors that Ethereum has a good chance of surpassing the $660 billion market capitalization of Bitcoin.
The Ethereum network shows more promise due to its real-world applications and ability to store value. Ethereum represents the future of programmable money and smart contracts in a way that legacy cryptocurrencies like Bitcoin cannot.
Ethereum simplifies worldwide payments
Because the Ethereum network supports the development of and allows for the creation of new applications on its infrastructure, it’s potentially a more valuable resource in the long term. Ether (ETH) is used to pay for those transactions, as was most recently seen with the booming popularity of NFTs this spring. The result is a much higher utilization rate for ether, with far more transactions than Bitcoin in the last 12 months.
Despite the recent dip in cryptocurrencies, ether rose nearly 1,000 percent over the last 12 months compared to the 300 percent increase for Bitcoin. Where a bitcoin is purely a token of value — a currency backed by the perceived value of those who hold it — Ethereum and the ETH blockchain fuel one another. Recent upgrades to the Ethereum network are helping it to scale much faster and reduce the cost of transactions on the network, further pushing the price of the tokens up.
Instead of having a central authority that oversees how the applications on the Ethereum network run and what transactions are processed, Ethereum-based apps are booming. The most common types of these apps are DeFi. These apps saw 2,000 percent growth in 2020, with more than $16 billion in crypto assets stored in its protocols through the end of the year.
The future of ETH
Ether started 2020 at $125.63 and grew by nearly 500 percent by the end of the year to $729.65. In 2021, it briefly reached $4,380 but has ranged between $1,700 and $2,500 since then, sometimes jumping or dropping by as much as $1,000 in a single week.
The big question is where ETH will end 2021. Many forecasts are relatively bullish, with an average targeted price between $3,500 and $4,500 by the end of the year and average long-term projections as high as $11,170 by 2025. However, there are some who see it growing even faster and more substantially in that time.
In a recent Forbes article, a panel of crypto experts including Sagi Bakshi and Lex Sokolin predict that ETH could rise as high as $19,842 by 2025 and that by the end of 2022 it could be the most widely transacted cryptocurrency due to its expanding utility in the marketplace.
These experts cite an array of upgrades being made to the network in 2021 that will reduce the currently high cost of transactions and drastically increase utility. One expert on the panel, Sarah Bergstrand, estimated ETH could reach $100,000 by 2025.
The biggest upgrade being eyed by investors is EIP-1559, which will overhaul the transaction fee system used by Ethereum. Instead of sending fees to miners who complete tasks on the network, users will send the fee to the network itself, which will destroy the fee, reducing overall supply and subsequently increasing the value of the currency.
The future of regulation in cryptocurrency
Ethereum represents a sustainable, function-oriented approach to cryptocurrency that will support the future of DeFi. But many people remain on the sidelines, waiting for government regulations to be implemented.
While long-time cryptocurrency investors bemoan the thought of regulation limiting the freedom currently available in the market, big investors and companies see the inevitable implementation of such regulations as a source of stability that could lead to mass adoption.
After a chaotic few months, the Biden administration is looking at how to address the markets. A congressional committee has been launched to review digital currencies, the FDIC has asked banks to provide documentation on how they are using digital assets, and Comptroller of the Currency Michael Hsu is reviewing all current and past guidance related to cryptocurrencies. The chairman of the U.S. Securities and Exchange Commission has gone as far as to warn bad actors that enforcement and regulation are coming.
As a whole, many see these changes as good. When the markets are regulated, they become safer for everyday users, and Ethereum, with the range of decentralized apps it supports and applications it enables, can become “normal.”
Ahmed Shabana is a venture capitalist, startup adviser, investor and entrepreneur. He serves as managing partner for Parkpine Capital, founder of Global Ventures Summit and creator of The Hungry Company.
Illustration: Li-Anne Dias
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