Ethereum (ETH)

Ether (ETH) is the cryptocurrency that powers the Ethereum blockchain. It is the second most valuable cryptocurrency behind Bitcoin. But what is Ethereum and why does it have such a huge fanbase?

The difference between Bitcoin and Ethereum is that the Ethereum blockchain is capable of smart contracts. Invented in 2013 by Vitalik Buterin, Ethereum was designed to be like Bitcoin but better.

Ethereum Tokens (ERC-20)

The open-source Ethereum blockchain allows anyone to build decentralized apps on it. This has led to thousands of projects being built on top of the Ethereum blockchain including the NFT marketplace Opensea, decentralized finance platform Compound, and the popular game Axie Infinity.

When a cryptocurrency does not have its own blockchain and is instead built on an existing blockchain, they are called tokens, not coins. There are thousands of tokens (called ERC-20 tokens) that operate on the Ethereum blockchain.

Some of the top tokens include:

• Chainlink (LINK)
• Uniswap (UNI)
• Aave (AAVE)
• Basic Attention Token (BAT)

Since its launch, many other blockchains with smart contract capabilities have popped up. However, since Ethereum was the first, it is by far the most used by developers. This is why the Ethereum network is so congested. When a new blockchain project or cryptocurrency is launched, 9/10 times it is built on the Ethereum blockchain and is an ERC-20 token.

Ethereum’s native cryptocurrency is Ether (ETH). This coin is currently the second most valuable cryptocurrency that exists.

Ethereum Needs Upgrading

The problem with Ethereum is that its network is severely congested. So many people use the network that it simply cannot process everything fast enough. This has led to an obscene increase in its network fees (gas). Moving ETH around the network can include fees that are as high as the value of the ETH itself.

Some people think blockchains like Cardano or Solana will be Ethereum killers because they are capable of faster and cheaper transactions. However, due to the number of developers whose projects are on Ethereum, it could take years before any of these other blockchains become as big as Ethereum.

Ethereum originally operated on a proof of work algorithm like bitcoin. Due to the congestion and high fees, Ethereum has had to upgrade because the current blockchain is not sustainable. Ethereum 2.0 is coming soon, which will move it to a proof of stake algorithm. It will also scale Ethereum so it is capable of many more transactions, and it will have vastly lower fees.

Currently, Ethereum can process 15 transactions per second, but Ethereum 2.0 will process tens of thousands of transactions per second. Ethereum 2.0 is vital for the long-term existence of Ethereum. If the team cannot fulfill the promise of a faster and cheaper Ethereum, then developers will move to another blockchain.

Can Ethereum Beat Bitcoin?

Many people believe that there will be a “flippening” where one day, ETH becomes the most valued cryptocurrency. While this is not out of the realm of possibility, this idea is assuming that bitcoin will stay at its current value. The reality is, bitcoin will probably also continue to rise in value, so Ethereum is unlikely to ever catch up. Plus, it remains to be seen how good Ethereum 2.0 will be.

Ethereum is huge. It was the first blockchain to exist that allowed decentralized apps and smart contracts. Had Ethereum never existed, the crypto market and DeFi space would unlikely be what it is today.

The reality is, however, there are newer blockchains that can do everything Ethereum can but more efficiently and cheaper. It means Ethereum has a lot of things it needs to fix if it is going to continue to be the second-most valuable crypto. Luckily, Ethereum has everybody rooting for it.