Ether has long been the second biggest cryptocurrency behind bitcoin, but its platform has ambitions that go way beyond a currency.
On Monday (10 May), Ethereum hit $4,200 in value – its highest point to date.
Ethereum, or Ether, surged in value over the weekend while people were paying attention to Elon Musk’s Saturday Night Live appearance and what that might mean for Dogecoin – not a lot in the end. But the real crypto story was happening elsewhere.
Ether is the native cryptocurrency of the Ethereum blockchain network that was built by co-founders including Vitalik Buterin, a celebrity now in the crypto space.
It has regularly played second fiddle to bitcoin in terms of value, market cap and mainstream awareness, but Ethereum has always had its ardent supporters – mostly because its use cases go far beyond that of other cryptocurrencies.
Where Ethereum differs from bitcoin is that it is a platform that apps can be built on. These apps are powered by what are called smart contracts.
For example, a payment from one person to another could be withheld until certain technical conditions have been met. These conditions are written into lines of code in the smart contract.
The most prominent use case of Ethereum lately has been the boom in non-fungible tokens, or NFTs. These are typically built on the Ethereum blockchain and verified through smart contracts, which allows for the exchange of the NFT file for the funds owed.
The last time Ethereum went through a buzz like this was in 2017 and 2018 during the much-hyped initial coin offering craze, when many new cryptocurrency tokens were launched via the Ethereum network.
Since then, the market has matured somewhat and focused on other use cases.
Perhaps a bigger, more long-term impact of Ethereum is in the DeFi space. DeFi (decentralised finance) is a phrase used to describe a slew of new financial services products being built on blockchains like Ethereum that don’t rely on a single entity for control. This could be decentralised exchanges, lending or stablecoins.
It has caught the eye of the financial services sector as a way to improve various processes.
ConsenSys, a software development studio that builds products and services on Ethereum, recently raised its first major round of external capital from Mastercard, JPMorgan and UBS.
But Ethereum has been beset by its own challenges as well. While the network promises a decentralised internet, it has struggled with scaling issues to meet the massive demands on transactions.
There is also the question of security. DeFi services hold a great deal promise but still require user buy-in and confidence to really take off on any mass scale, and that won’t happen if people don’t feel their finances are secure when using a blockchain network like Ethereum.
A recent report from Federal Reserve Bank of St Louis said that if users can feel a greater sense of security and trust in DeFi it “may lead to a paradigm shift in the financial industry and potentially contribute toward a more robust, open and transparent financial infrastructure”.
For now, the Ether cryptocurrency is having its moment. It will inevitably dip and rise again but its trend is generally upward and, given the stock that financial services firms and other large investors have put in it, you could expect it to have more staying power than Dogecoin.