You may have seen Bitcoin in the news more often recently . The value of bitcoin has risen sharply and the price regularly reaches new record prices, but that does not only apply to Bitcoin. Brother Ethereum has also grown rapidly in recent times, as shown by the Ethereum exchange rate , but what is Ethereum actually?
What is Ethereum?
Bitcoin is a so-called cryptocurrency , or a kind of encrypted digital currency. Transactions with bitcoin are stored on a network of thousands of computers that do not involve third parties. This network is called a blockchain and is a kind of decentralized ledger. All computers run the same version of this ledger, so data cannot be changed and the network is insensitive to censorship.
Since the inception of bitcoin, countless crypto has been brought to life, and while bitcoin is still the largest, the interesting developments may be found on Ethereum. Ethereum has smart contracts , which are special digital contracts that are automatically executed if predetermined agreements are met. 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 thanks to a number of 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.
With this new market, people can lend crypto to each other by securing them as collateral in smart contracts. They can then earn high returns on this secured 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 emerging quickly a new market with Ethereum, 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 opens up all kinds of new possibilities.
For example, one can now sell artworks 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. Multiple 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 that is also happening with Ethereum. In February 2021, the Chicago Mercantile Exchange (CME), the largest derivatives exchange in the world, launched futures contracts for Ethereum. In April, the very first 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 to cope with the enormous crowds and as a result transaction costs regularly skyrocket.
Ethereum wants to solve this problem by switching to a new blockchain network, but it may take several years before this switch is fully completed. Still, the first steps have already been taken successfully and there is already more than $ 10 billion in 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. Last year, one could still buy one ethereum for about 85 euros. A year later, the ethereum price has broken by 2,000, an increase of no less than 2,250% in one year. Who knows how high the price could be in a few years’ time!