After Bitcoin, Ethereum is the only digital coin that has shown tremendous potential in the crypto world. It is not just a cryptocurrency but a global system responsible for running decentralised applications (dApps). Ether (ETH) is the cryptocurrency that controls the Ethereum network, and it’s the necessary sort of payment to run your application or handle the transactions on the highly-demanded Ethereum blockchain.
Indeed, Bitcoin is excellent as a store of value, but it doesn’t uphold smart contracts as Ethereum does. At the same time, ETH has the potential to be used as a store of value.Perhaps, people are still inclined toward bitcoin due to its hard-caped supply. However, the supply of both Bitcoin and Ether is expanding, but Bitcoin will only be limited to 21 million. With Ethereum 2.0 and EIP-1559, Ether might become deflationary, and supply will also diminish with time.
Without a doubt, ETH has been competing with Bitcoin in the cryptocurrency market capitalization since its inception in 2015, and it came close to surpassing Bitcoin in February 2018.ETH is reaching its all-time high rapidly and gives more chances to grow even in the future. Some experts state that Ethereum will overtake Bitcoin. Well, let’s find out in detail about the potential of Ethereum.
What is Ethereum (ETH)?
Ethereum is a blockchain and a decentralised open-source technology platform that aids in the development of decentralised applications. The platform’s native digital currency, ETH (Ethereum), is used to pay for transaction fees and computational services on the Ethereum blockchain.
Ethereum, like Bitcoin, is built on blockchain technology. Furthermore, Ethereum has gained an advantage by allowing people to create applications using its blockchain system, which also includes smart contract elements. Smart contracts are contracts that self-execute on the blockchain. These contracts are used to confirm a buyer and seller’s transaction without the use of a third party or mediator.
Since its inception, Ether has demonstrated significant real-world application potential as the Ethereum blockchain. It is the most widely used platform for developing smart contracts. As a result, highlighting the value of a network is not a platform to build, but rather a global financial and monetary utility.
Currently, anyone wishing to deploy smart contracts must pay the associated costs in ETH. Aside from that, new applications for ETH based on the Ethereum blockchain are emerging. Decentralized finance (DeFi), web 3.0, non-fungible tokens (NFTs), advertising, gaming, ID, and supply management are examples of these.
All of these Ethereum-utilized cases increase the currency’s impact. As a result, the DeFi system enables investors to borrow and exchange crypto assets via a decentralised blockchain network. It is even carried out without the involvement of banks or government officials. Furthermore, another potential application for ETH is in NFTs, with the approximately US $10 billion NFT market propelling Ethereum to the forefront of the fastest-growing system. Since many businesses have begun to accept ETH as payment for goods and services, Ethereum is establishing itself as a payment method.
Advantages & Disadvantages of Ethereum
To accurately judge Ethereum as a worthwhile investment further, it is essential to know its positives and negatives. A wise crypto trader always determines both sides of an asset before investing in it. Therefore, below are the advantages and disadvantages of Ethereum.
The staggering response of Ethereum has drawn in potential investors and institutional financial traders alike. Ethereum gives you several benefits over other cryptos:
Indeed, volatility is considered a negative, yet smart crypto investors have acknowledged market cycle designs and can benefit from capitalising on the extensive profits caused by market bubbles.
Ethereum is undoubtedly one of the most liquid investment assets because of the global foundation of trading services and online businesses that empower users to trade ETH for cash or various assets, including gold, with inconceivably low expenses.
On the contrary, the high liquidity of bitcoin enables it to become an outstanding investment option, especially for short-term profit seekers. Yet, due to the high demand, digital assets may also be a long-term investment source because of their high market interest.
3. Lower inflation chances
In contrast to the world’s traditional currencies, which governments control, Ethereum is a decentralised system and has a straightforward inflation plan that is less intrusive. The infinite blockchain network is a less compelling reason to worry about the deflation of Ethereum and other cryptos.
4. Decentralized system
Ethereum and DeFi are generally new. Therefore, NFTs and numerous other new applications are becoming more commonplace consistently. This newness attracts unusual price swings and instability.Consequently, it also creates opportunities for enormous profits.
Ethereum might influence the future of digital assets related to trade and worldwide computing, but it is equally important to learn about the risks associated with cryptocurrency investment.
If you are familiar with the crypto market, you might have remembered the price of Bitcoin on December 17, 2017, and it was $20,000. However, after a few weeks, the same value fell to around $7,051. Even though Bitcoin is doing great in the market now, it is essential to watch out for the market closely to avoid huge losses.
2. High Transaction Charges
Indeed, high transaction fees are Ethereum’s most significant disadvantage, preventing the ETH network from becoming mainstream. The Ethereum blockchain can cost thousands of dollars, preventing small retail investors from using and evaluating it. Whereas the alternative smart contract blockchain is very minimalistic, Ethereum’s blockchain has the most applications and use cases.
3. New guideline
The government will most likely not allow cryptocurrencies to remain unregulated for an extended period of time. As a result, the new rules and regulations may obstruct plans of action and result in crashes that are completely beyond anyone’s control.
4. Online Threats
Since the beginning of cryptocurrencies, there have been many hacks and compromises of cryptos globally. Hacks are a danger that numerous cryptocurrency investors face because most crypto exchange services are available on mobile or web browsers for trading cryptos. Most users keep their digital assets in exchange wallets, making the crypto vulnerable to online hackers and malware. Sometimes even the user’s private keys get compromised, compromising their assets. Cryptocurrency hung on most trades isn’t protected by the FDIC.
There are many rising smart contract services that give strict competition to Ethereum networks, specifically Binance Smart Chain, Cardano, and Polkadot. However, these cryptocurrencies offer preferable versatility over ETH. However, they still don’t have decentralisation and the powerful DeFi system that Ethereum has in its organization.
6. Proof of Work Consensus
Proof of work is also employed by bitcoin, however this is even more of a con for Ethereum. Bitcoin transactions are usually done with the intention of transferring the cryptocurrency, while Ethereum’s network is used for several purposes. The proof of work system is, however, quite expensive and slower than the proof of stake system. Many ETH rivals are currently using proof of stake.
Investing in Ethereum vs Bitcoin
To carefully examine Ethereum as a potential crypto to invest in, comparing it with Bitcoin, its biggest competitor, would indicate whether to invest in ETH or not. Bitcoin and Ethereum have unique use cases. Bitcoin is more of a store-value crypto, similar to gold. Whereas ether stores value too, the Ethereum Virtual Machine empowers many of the latest applications like DeFi, NFTs, and the metaverse.
As previously stated, the Ethereum network allows developers to create programmes known as “smart contracts.” Smart contracts are the structure squares of non-fungible tokens that can automate many financial assets (NFTs). These smart contracts are useful for a variety of applications, including decentralised exchanges (DEXs) and automated market makers (AMMs).
Perhaps completely simple smart contracts are also conceivable on Bitcoin’s blockchain. ETH, on the other hand, is a long-term settlement layer thanks to its custom programming language and large developer team. The blockchain of Bitcoin is more of a decentralised ledger for handling transactions. Ethereum also functions as a ledger with full computer attack, allowing it to do much more than just handle transactions.
As far as deciding between the best of these two prominent crypto names, It’s difficult to say without a doubt. Almost certainly, both Bitcoin and Ethereum will go long-term and exist together in the future. However, to claim Ethereum as the best investment, it would be vital to determine the factor that influences the ETH price.
Factors Influences Ethereum’s Price
The smart contracts on the blockchain helped Ethereum acquire its reputation in the market. The blockchain has fundamentally coded rules that execute financial transaction exchanges with algorithms. Presently, new Ethereum substitutes with comparative capacities are entering the market and changing the ETH demand in both ideal and negative ways. However, below are some factors that could influence Ethereum’s cost.
1. High Traffic and Utilization
Smart contracts have proved helpful for creators and artists to mint and sell digital artwork, also known as non-fungible tokens (NFTs). Besides, it is considered both good and bad for Ethereum, as the blockchain’s hype prompted a “bottleneck” on the blockchain. Consider the shopping centre parking lot on Black Friday—just digitally.
Presently, with so many users, it is pretty expensive to transact on Ethereum. Ethereum developers have come up with new system upgrades to tackle this, yet it’s required a couple of years to implement them.
Meanwhile, various news organisations have created add-on solutions (“Layer 2s”) that work on the current Ethereum blockchain.
However, now a completely new blockchain system, Layer1s, has also been delivered as the name of the most considerable Ethereum alternative, which eventually pushes traffic away from the Ethereum blockchain. For financial backers, more individuals utilising the Ethereum network implies more help to support the overall value of Ethereum. But, the competitors’ pulling users away could decrease Ethereum’s value in the long term.
2. First Mover Advantage
Even with the new rivals, crypto experts often predict that Ethereum’s “first-mover advantage” helped it stay ahead of new competitors, even though more recent and fast advancements have been made. In any case, communities hold a position on any cryptocurrency value because of community buy-in. Therefore, the responsibility of users is a higher priority than being first. Fortunately, Ethereum has both.
Similar to the Ethereum blockchain’s functions, Solana and Cardano’s blockchains have comparable features and local cryptocurrencies. Specialists are still in favour of Ethereum due to its potential growth and demand.
3. Competition from ‘Ethereum-Killers’
In any case, if the terms “cryptocurrency” and “NFT” become more common in the coming years, the deployment of “Web3” will make a run for ETH. Web3 was created as an open-source adaptation of the web-based blockchain system to improve transaction transparency and efficiency.
The Ethereum network and other similar blockchain systems, including Solana, Cardano, and Tezos, are continuously innovating the system with the aim of achieving the future vision of Web3. Investors associate these updates with game-changing events such as the introduction of the dot com when Google, Facebook, and Apple first went public.
Therefore, with Web3, continued support, and strong demand for Ethereum and its blockchain network system, Ethereum is likely to have a bright future. No doubt, more competitors will develop more innovative systems, but Ethereum will stand up.
Is Ethereum a Good Investment for the Future?
Experts believe that Ethereum is in its beginning phase and that the potential adoption by users and development is promising. Ethereum’s continuous development has carved a new passage for a different arrangement of functionalities. It will impact, in a good way, the blockchain’s potential and the ETH price. The innovative tech on which Ethereum runs is an ideal investment for the time being.
Despite the fact that the new surge in Ethereum’s acceptance raises its price and social hype. It drew the attention of financial investors, which is another important driver of cryptocurrency permeability and demand.
Ethereum is the most well-known blockchain system, which has been investigated and incorporated into various organisations’ current operations.
From their speculation, early adopters have already seen a positive impact from this innovation. At the same time, no one can guarantee that it will go smoothly. According to crypto investors, Ethereum demand will increase over time due to factors such as “the popularity of being the most reliable blockchain network, the scaling abilities, and the power to handle transactions quickly and at a lower cost.”
Despite Ethereum’s competition and various variables contributing to its ongoing volatility, there is a general consensus that the original smart contract blockchain will survive this period of testing.
Indeed, Ethereum covers more than 90% of the NFT market. It will play a crucial role in Ethereum’s long-term growth. There is a valid reason to anticipate rapid price growth based on the current situation that Ethereum is in.Profoundly, many aspects lead the crypto community to believe that Ethereum has the adaptability to flip other blockchain systems and tends to be a good investment.