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Founded over five years ago, the Ethereum platform and its native ether (ETH) have existed mostly in the shadow of bitcoin in the public eye. However, Ethereum has been gathering momentum particularly in the past few months. In July this year, it was reported that the use of the Ethereum network has surpassed that of bitcoin.
In the last few weeks, Ethereum has been the subject of much interest, particularly in the context of the DeFi boom. Ethereum and ETH are well worth watching closely – and here’s why.
1. Going through a period of increased volatility
Ether has been more volatile than bitcoin in recent weeks. Volatility metrics put the rates at 29 percent in the last week of August, which constitutes a six-month high. Most recently, in the space of just ten days between August 27 and September 6, the price of ETH increased by 30 percent to reach the highest price since Q4 of 2018 ($485) only to drop again by 33 percent.
This volatility – unusual at this rate even for crypto currencies – is attributed to the increase in DeFi use and interest. Traders and crypto asset holders will want to keep an even closer watch on ETH prices these days.
2. The DeFi market boom
DeFi (decentralized finance) has seen huge growth over the past few months, as dapps facilitating lending, borrowing and smart contracts are suddenly becoming more numerous and popular. The total value locked in DeFi reached an all-time high on September 2 at over $9.5 billion, which signifies an almost 800 percent increase over the past three months.
The vast majority of DeFi dapps are on the Ethereum network – of the 247 dapps currently available, 201 are on Ethereum (with another 24 on bitcoin and 22 on EOS).
3. The Ethereum 2.0 update
At the beginning of August this year, the long-awaited Ethereum 2.0 update – known as Serenity – was launched. It brought significant enhancements to the platform, including a major improvement in efficiency through sharding. The increase in Ethereum’s processing capabilities means that the network is able to handle many more transactions – facilitating the rise in DeFi usage.
4. Serenity ensures that Ethereum will continue growing
Towards the end of 2019, Ethereum’s previous version was running into major efficiency issues, as well as increasing ether prices. The Serenity update resolved these issues, providing opportunities for growth for the platform. Ethereum is going through a period of explosive growth – as evidenced by the rise in the total value of DeFi.
5. Ethereum’s functionality keeps expanding
Innovations in how Ethereum’s capabilities can be applied to various aspects of not only asset management but also daily life, are frequent, as new functionalities are being added. For instance, the already highly useful – and popular – use of smart contracts has recently been augmented by dapps such as Chainlink, which facilitates communication between blockchain-based protocols and off-chain sources of information.
This suggests that we’ll keep seeing expansion in the number and variety of practical applications offered by Ethereum-based dapps, ensuring further growth of the platform and value of the ETH crypto currency. Plus, it’s worth following Ethereum-related news to keep up with blockchain innovation and spot opportunities for new kinds of business ventures.
6. Ethereum is the platform of choice for stablecoins
Ethereum’s flexible digital contract functionality lends itself extremely well to the issuance of stablecoins – cryptos pegged to a fiat currency in order to minimize the volatility factor. The two stablecoins with the highest significance are Tether and USDC – both based on Ethereum and both through a period of extensive (and relatively consistent) growth over the past year, with assets increasing from $1 million to over $7 million over 12 months.
7. Compound and other decentralized money markets
One of the biggest players in the DeFi market is Compound – a money market protocol that lets users earn interest or borrow assets against crypto-asset collateral. Compound is based on Ethereum, and it too is seeing explosive growth. In the several months of being live, it has collected approximately $700 million in assets – and in June, it played a major role in the boom of DeFi through encouraging liquidity mining. Altogether, Ethereum decentralized money market platforms – with Maker and Synthetics being the other top platforms alongside Compound – control over $2 billion.
8. The number of Ether whales is increasing
“Ether whales” are users holding between 1,000 and 10,000 ETC – currently equating to around $350,000 to $3 million. At the end of August, two unknown ether whales separately moved 189,735 ETH worth about $80.88 million at the time, drawing significant public interest to ETH and its native Ethereum. On September 7, meanwhile, another unknown whale transferred $76 million worth of ETH.
Even more interesting is the fact that at the beginning of September, when the ETH price dropped by about 30 percent, a massive 68 new whales joined the game.
9. Offers several ways of making a profit
From Ethereum mining to faucets and staking, there is no shortage of ways to make ETH with enough processing power or risk tolerance. Ethereum-based DeFi dapps provide further incentives for new users to ease themselves into the world of crypto, such as liquidity mining and the ability to borrow fiat against crypto collateral.
10. Here to stay
Ethereum is no passing fad – the constantly expanding platform and technology behind it will only keep growing as time goes on. As a fully decentralized system with no pivotal point, it’s virtually impossible for Ethereum to go offline. The potential offered by Ethereum-based apps means that ETH is here to stay, too – the platform’s native currency is necessary for the completion of contracts and deployment of dapps. Although bitcoin is still generally trending higher than Ethereum, the two platforms (and their cryptos) serve different purposes – so there is no risk of BTC overtaking ETH completely.