It’s had a heck of a run, so far.
In fact, Ether’s spectacular rise has many investors and supporters believing that the cryptocurrency–as well as the infrastructure behind it–will be the key to creating a future financial system that can function without regulation form world governments and central banks.
With a market cap of more than $350 billion, Ether (ETH) is now the second-biggest cryptocurrency on the market today, just behind bitcoin. It might even be safe to say Ether has reached the mainstream.
For comparison, Bitcoin’s market cap currently stands at $1.1 trillion.
How is Ether Different Than Other Cryptos?
Ether holders believe it has some unique advantages compared to other cryptocurrencies that should make it very attractive to crypto investors, potentially even dethroning Bitcoin.
Ether was developed as a currency for transactions on Ethereum, the most actively used blockchain network in existence.
The platform was launched by a programmer Vitalik Buterin in 2014, who was 19 at the time. He is now worth north of billion dollars, thanks to the fact that Ether so far quadrupled in value in 2021.
The Ethereum network is a sort of platform which allows users to exchange tokens on the blockchain and enter into smart contracts. It was that development that allowed for the creation of NFTs (non-fungible tokens) and DeFi (decentralized finance).
NFTs are unique tokens whose ownership is recorded on the blockchain. They recently made headlines as many were sold as artworks and collectibles for millions of dollars. One piece, made by an artist known as Beeplem sold for $69 billion.
But outside their use as collectibles, NFTs have the potential to be used as virtually impossible-to-counterfeit versions of legal documents, property titles, etc.
Decentralized Finance: A Future Without the Fed
This is where DeFi comes in. DeFi is a system of blockchain applications that aim to replace traditional finance and financial instruments. For example, DeFi lending allows users to borrow a set amount of cryptocurrency, or to loan it and earn interest.
The prospect of a financial system without government, institutional or central bank control excites investors and libertarians alike. Imagine a decentralized financial system where the Fed can’t control interest rates and wreck the currency through inflation. That is what Ethereum promises.
Billionaire investor Mark Cuban is one of the most ardent DeFi supporters and is himself invested in it. He predicts that the industry will explode in the next 10 years.
Better than Bitcoin?
Many see Ether as unique among cryptocurrencies, due to the popularity of the Ethereum network. Ethereum is Ether’s unique advantage. However, Bitcoin could prove to be hard to dethrone.
For starters, bitcoin is effectively first to market and most investors still hold more Bitcoin. Cuban’s cryptocurrency holdings, for example, are comprised of 60% Bitcoin, 30% Ether, and 10% in other cryptocurrencies.
Due to its huge popularity and network effects, Bitcoin is treated more like a store of value–much like gold. Some, like Cuban, even say it could be a better alternative to gold, especially due to its built-in scarcity.
The New Wild West of FinTech
Critics warn that this entire crypto system is truly unregulated, which means that there’s no consumer protection. In other words, good luck getting your money back if you fall victim to a scam!
But that’s also what attracts many people to blockchain technology. It is a sort of a FinTech Wild West, where anything goes and anything is possible. It’s like cash on the internet which holds a lot of appeal, while simultaneously creating a lot of concern. Illegal transactions, for example, can be achieved through these crypto currencies.
In addition, the system is far from perfect. Specifically, Ethereum cannot really compete with traditional finance. The reason for this is the exorbitant transaction costs, which could range from $60 to $100 per transaction!
Bugs are also not unheard of. One user was reportedly charged a $2.6 million fee to send $130 in Ether.
Developers are promising they will resolve this issue with the rollout of “Ethereum 2.0“, a complete upgrade that would include a different system for processing transactions. But many will want to see it before they believe it.
Bottomline: there’s no question that the technology behind Ether holds promise. However, investors will likely want to make sure Ethereum can actually deliver on its promises.