5 Reasons Why Ethereum is Popular

There is no denying that there has been a considerable increase in cryptocurrency investment in recent years. It may have started with Bitcoin, but now investors are looking for alternative cryptocurrencies to invest in. Ehtereum is certainly one of the most popular.

Below, we will reveal everything you need to know about this cryptocurrency and the reasons why it has become so popular.

What is Ethereum?

There is only one place to begin, and that is by explaining what Ethereum is. Ethereum was created to improve on and augment Bitcoin, and a lot of people would agree that it has done so, offering extended capabilities when compared with Bitcoin.

Importantly, Ethereum was created so that smart contracts would feature prominently. For those who are unaware, smart contracts are self-executing, decentralized agreements that are coded into the blockchain itself.

This currency was first proposed in 2013 by Vitalik Buterin, and then it went live in 2015 in the beta version. In fact, almost $18 million in bitcoin was raised in 2014 for the purpose of developing Ethereum.

The blockchain for Ethereum is constructed with a Turing-complete scripting language, which is able to run smart contracts simultaneously across all nodes, achieving verifiable consensus without the need for a legal system, judge, court, or any other sort of trusted third-party.

As per the Ethereum website, this cryptocurrency can be used for trading, securing, decentralizing, or codifying pretty much anything.

The EVM – Ethereum Virtual Machine – has the capability to run smart contracts that can represent monetary agreements, including coupon-paying bonds, swaps, or options contracts.

You can also use it for executing wagers and bets, fulfilling employment contracts, maintaining a legitimate decentralized gambling facility, or to act as a trusted escrow when purchasing items that are high in value.

These are just a handful of examples when it comes to smart contracts and the possibility of them. This makes the potential with Ethereum very exciting!

Now that you know what Ethereum is, let’s take a look at five of the main reasons why it has become so popular:

Smart contract capability

There is only one place to begin when it comes to the benefits of Ethereum, and it is something that we have touched upon already; the smart contract capability of this cryptocurrency.

Ethereum was created as a platform for running programmatic smart contracts and applications using its own currency; Ether.

We have seen that use cases in the real world of this are emerging and sustaining value, as the Ethereum blockchain can execute smart contracts that will power DApps (decentralized applications), such as NFTs (non-fungible tokens) and DeFi (decentralized finance).

Let’s take a look at these in further detail…

DeFi

Firstly, we have DeFi, which is a very bullish catalyst for Ethereum. In fact, Ethereum is pretty much synonymous with Ethereum because it powers a lot of the cryptocurrencies within the decentralized finance market.

There are more than 200,000 ERC tokens that are hosted on Ethereum, a lot of which are part of the top 100 biggest cryptocurrencies.

DeFi gives users the ability to borrow, lend, and trade assets directly with one and other without banks needing to be involved. It also acts as a platform for unlocking value in a creative manner for products like insurance, loans, payments, and much more.

It is likely that we will see an increasing number of retail consumers turn to the DeFi space because of the draw of better interest rates and the ease of accessibility.

DApps

DApps are smart contracts that have been programmed for recurring and specific use. As of June 2021, there were more than 3,000 DApps deployed on Ethereum, and this number is growing all of the time.

This is a greater figure than the total number of DApps that are deplored on any other general-purpose blockchain platform across the globe combined.

According to DappRader, which is an industry tracker, in 2020, the top ten DApps were responsible for approximately 90 percent of the blockchain transaction volumes.

Disinflationary supply

Another reason why Ethereum has become so popular is because of the disinflationary supply it offers. Bitcoin is often recognized as an investment against inflation and a store of value because it has a finite supply of 21 million coins.

This is one area whereby Ethereum differs from Bitcoin. Ethereum provides an unlimited number of Ether, yet the amount released per year via the mining process is capped. This gets rid of the perceived scarcity that may factor into the higher valuation of bitcoin.

The supply of Ethereum increases in accordance with the disinflationary mechanism, which will continue to be amended as the network matures.

With the new model of Ethereum, there is a fundamental amendment in the creation of blocks. Rather than miners being rewarded for creating blocks, validators will earn a transaction fee for every smart contract and transaction they validate.

The greater amount of Ether being staked, the higher the value is going to be, as there will be fewer Ether in circulation.

Aside from this, proof of stake gets rid of the expenses that come with mining, like hardware and electricity costs, which means that fewer Ether will be sold by miners.

Scalability and speed

Aside from the points that we have mentioned so far, we also need to consider the scalability and speed of Ethereum. Ethereum differs from Bitcoin, as measured by two chief metrics.

Ethereum block times are around 10 to 15 seconds. With Bitcoin, this is much longer, coming in at around 10 minutes.

If that was not enough, it will take Bitcoin around 40 minutes for a transaction to be completed, whereas this is only going to take around five minutes with Ether.

The reason for this is because security is the chief concern with Bitcoin. The restricted commands and coding language make it more challenging to hack, but it does mean that much more time is needed to complete a transaction.

Speed is something you are guaranteed with Ethereum, and this is only going to get better and better as new upgrades come out.

A good example of this is the Beacon chain upgrade, which employs shard chains. This means that there are smaller node groups that process their own parts of transactions in parallel, without a consensus needing to be achieved across the full network.

Proof-of-stake model

The Proof-of-stake model is another reason why Ethereum has become so popular. Although it started off as a proof-of-work model, which is what Bitcoin uses, Ethereum is changing to a proof-of-stake model, and this is something that is gaining a lot of attention and is only boosting the interest in this cryptocurrency.

The reason why this is significant is that it will change the rewards system dramatically. The existing proof-of-work model does nothing in terms of encouraging collaboration, nor does it offer any consequences when there is malicious behavior.

On the other hand, with a proof-of-stake model, miners will be replaced with transaction validators. This means that there are not going to be any cryptographic challenges that need to be solved.

To be a validator, the person must own Ether, and they need to put their full stake of Ether on the line as a way of certifying the validity of the block. So, if malicious behavior is happening, the stake in question will be at risk.

Ethereum provides a new type of connectivity

Finally, we can view Ethereum as an infrastructure; one that has the ability to potentially revolutionize both technology and finance.

The entire financial system is arguably being recreated thanks to DeFi. Plus, we will most likely see that Ethereum-based applications will impact public services, governance, markets, and even the way in which identity is managed.

In the future, it is possible that we could use the Ethereum platform to change the way that a lot of other fields work too, including securities trading and mortgage transfers.

Furthermore, this is going to take place on a network that is able to reach anyone who can connect to a public network, no matter where in the world they are based.

While these fresh ideas come to fruition, the value of the network is being driven by the fact that Ethereum brings a new type of innovation and connectivity layer.

There is already an active user and developer community base on Ethereum. In fact, it is one of the most popular networks for digital currency across all metrics in terms of Github activity, which includes total stars, total project watchers, total contributors, and the number of commits.

All of this points to an Ethereum ecosystem that is diversifying and expanding. A growing network is the best story you can tell for a blockchain.

Final words on the popularity of Ethereum

So there you have it: an insight into Ethereum and why it is such a popular cryptocurrency. From smart contract capability to the speed and scalability of Ethereum, it is not hard to see why this is a cryptocurrency that is thriving at the moment.