The value of bitcoin has risen sharply and the price regularly reaches new record prices, but that does not only apply to Bitcoin. Ethereum’s brother has also grown rapidly lately, as can be seen from the Ethereum price, but what is Ethereum actually?
What is Ethereum?
Bitcoin is a so-called cryptocurrency, or a type of encrypted digital currency. Transactions with bitcoin are stored on a network of thousands of computers without the involvement of third parties. This network is called a blockchain and is a kind of decentralized ledger. All computers run the same version of this ledger, which means that data cannot be changed and the network is insensitive to censorship.
Numerous cryptos have been created since the inception of bitcoin, and while bitcoin is still the largest, interesting developments may be found on Ethereum. Renovato.io has enough information. Ethereum has smart contracts, which are special digital contracts that are automatically executed if certain agreements are met in advance. This ensures that a transaction is executed anyway and these contracts open the doors for all kinds of decentralized applications, or dApps.
The unfolding of Ethereum
Ethereum has grown rapidly in recent months, partly due to some major developments taking place on the decentralized network. Some of the most important are described below.
Decentralized Finance (DeFi)
One of the biggest developments is the rise of decentralized finance, or DeFi. DeFi is a collective term for a series of new financial applications. It is a transparent decentralized financial ecosystem that makes financial services, such as taking out loans, accessible to everyone without the involvement of an intermediary, such as a bank.
This new market allows people to lend crypto to each other by securing it as collateral in smart contracts. They can then earn high percentage returns on this locked crypto. This new market exploded in the summer of 2020 and is growing so fast that 100 billion euros is now tied up as collateral in DeFi products.
Non-fungible token (NFT)
This year we see a new market emerging quickly with Ethereum, namely that of non-fungible tokens, or NFTs. Unlike other digital currencies, an NFT cannot be exchanged. This means that each token is unique and that provides all kinds of new possibilities.
For example, it is now possible to sell works of art as NFT. The NFT is then linked to a unique code on the Ethereum platform and serves as a kind of proof of authenticity that can be verified by anyone via the blockchain. Several celebrities have already sold NFTs worth millions. The digital artist Beeple sold an NFT artwork for no less than 58 million euros!
In recent months, we have seen the professional investment world increasingly embrace Bitcoin and gradually the same is happening with Ethereum. In February 2021, the Chicago Mercantile Exchange (CME), the largest derivatives exchange in the world, launched Ethereum futures contracts. In April, the first-ever publicly traded Ethereum funds, or ETFs, were approved. In addition, we see more and more large companies investing in Ethereum and we even see payment companies such as PayPal and Visa using this crypto.
Perhaps one of the biggest developments on Ethereum in the past year was the launch of Ethereum 2.0. Ethereum is becoming so popular that the network is struggling with the huge crowds and transaction costs regularly skyrocket as a result.
Ethereum wants to solve this problem by switching to a new blockchain network, but it could take several years before this switch is complete. Visit moveco.io has enough information. Nevertheless, the first steps have already been taken successfully and there is already more than $10 billion worth of ETH in the contract for Ethereum 2.0, indicating that there is a lot of confidence.
Then of course we are talking about one of the most popular topics in the crypto world: the price. One could buy one ethereum last year for about 85 euros. A year later, the ethereum price has broken through 2,000, which is an increase of no less than 2,250% in one year. Who knows how high the price could be in a few years!