Ethereum became famous as an asset when it proved itself as one of the best investment opportunities the world has ever seen. In 2015, Ethereum conducted one of the first big ICOs. The founders described a new decentralized application platform in a whitepaper and offered early investors to buy Ethereum tokens for around 35-40 cents. Those tokens soared to become worth hundreds of dollars today and deliver investors returns of well over 100,000%.
But, what about those of us that missed out on this early breakthrough? Ethereum is unlikely to see another rise of the same proportions again any time soon. Instead, Ethereum is taking on a new role in the cryptocurrency market. As the second biggest cryptocurrency by market cap, it offers investors a much safer bet than ICOs. Here are some reasons you might want to consider Ethereum as a more stable investment in your portfolio.
1. Ethereum is an established network
Stability has been hard to come by in crypto. The industry is still young, and the amount of money involved is still relatively small. Only a couple of dozen cryptocurrencies have a market cap measured in billions. The value of most crypto tokens can be easily and heavily influenced by something as simple as a news headline.
Ethereum is on a different scale to most cryptocurrencies. The daily trading volume of Ethereum is measured in billions. Along with Bitcoin, it is one of the heavyweights of the cryptocurrency industry.
As blockchain projects are always network products, this head start is extremely important. It’s a well-known and well-studied pattern that established networks are very hard to overtake. This is called the network effect. Once large numbers of people are using one network or platform to do something moving all of them over to a new one is difficult and usually isn’t worth the cost. This is why companies like Facebook, Amazon and Google are so dominant in their industries.
It will be very difficult for another decentralized smart contract platform to overtake Ethereum. It already has the reputation, developers, resources, users, and applications ready to go.
2. Most ICOs are run on Ethereum
Fundraising through ICOs are the most important application for decentralized smart contracts we’ve found so far. Billions have been raised in the last couple of years. ICOs now raise more capital than IPOs. The good news for Ethereum is that most of this fundraising has been done using Ethereum as the ICO platform. Businesses and investors know the ERC token standards well and feel comfortable using them. New innovations are happening all the time.
ICOs are important for Ethereum as they create a real use case for Ether tokens. Investors need to buy Ether tokens to participate in most ICOs. This keeps the demand and trading volume for Ether tokens high, which helps to stabilize the price of Ether.
3. Ethereum apps need Ether to run
Another avenue generating demand for Ether tokens is the fact that DApps need Ether to run on the blockchain. Every transaction and line of code executed in each smart contract on the Ethereum blockchain needs to be paid for in Ether to the Ethereum miners. As the Ethereum network grows, this demand from those hosting applications on Ethereum will continue to increase. This will, in turn, help to keep the price of Ethereum high.
4. Enterprises are loving Ethereum
Enterprises like Accenture, BP, Credit Suisse and JP Morgan Chase are collaborating in the Enterprise Ethereum Alliance to come together and develop standards and specifications to help advance the global adoption of Ethereum technology. The organization even states that they think Ethereum is one of the most promising ideas to bring large-scale adoption of decentralized technologies to the corporate world.
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Widespread enterprise adoption is key to Ethereum becoming a global decentralized platform. Huge enterprises are already confidently stating that they are well on board with the idea and want to contribute to its development.
5. Scalability will happen
One of the big claims of Ethereum skeptics is that the network can’t scale. They claim that Ethereum can only do a few transactions per second, which won’t be enough when more DApps are built and the adoption of Ethereum continues to grow.
There are good reasons for this argument. Ethereum has become congested multiple times over the last few years when popular apps are released or there is a surge in interest in cryptocurrencies. The same thing has happened with Bitcoin.
The issue with this argument is that the same has been said every year about many internet companies and platforms. In the 1990s, people were saying the internet couldn’t scale for email. Later they said it couldn’t scale for email attachments. Later they said it couldn’t scale for video. Of course, the internet managed, one way or another, to scale to all of those things.
The Ethereum network has billions of dollars of vested interest in it. Thousands of people and companies around the world have invested in Ethereum, and they certainly won’t just let it fail. There are some great scaling solutions on the way, so it’s just a matter of time before Ethereum steps things up to the next level. When it does, even more people will want to build DApps, more people will say it can’t scale to that new level, and we’ll have this discussion all over again.
6. The future is crypto
The fear, uncertainty and misunderstanding of cryptocurrencies are slowly wearing off. In their place, we are getting knowledge, ideas, excitement and worldwide interest in blockchain technology and how it might revolutionize the way our economies work.
Ethereum will likely be one of the projects leading crypto technologies in this new wave of innovation. Ethereum is decentralized and allows anyone around the world to develop and run applications on its platform. It can provide the raw infrastructure for these applications well into the future.