The Top 10 Reasons to Buy Ethereum: A Comprehensive Exploration - WalletInvestor Magazin - Investing news (2024)

May 10, 2023

Ethereum, the decentralized, open-source blockchain with smart contract functionality, has been making waves in the world of cryptocurrency since its inception in 2015.

Rising from a concept to a fully-functional platform, Ethereum’s native currency, Ether (ETH), is now the third-largest digital currency by market capitalization, only outshone by the pioneering Bitcoin and Tether.

The question on many minds, however, is why should one buy Ethereum?

This article aims to explore the top ten reasons that make Ethereum a lucrative addition to your investment portfolio.

Smart Contract Functionality

The first and most foundational aspect that sets Ethereum apart is its smart contract functionality. Smart contracts are self-executing contracts with the terms of the agreement directly written into code lines. They eliminate the need for intermediaries, making transactions faster, cheaper, and more secure.

Ethereum’s platform was designed specifically to facilitate these smart contracts, making it a pioneering force in this area. For instance, Decentralized Finance (DeFi) applications, a sector that now locks over $100 billion in value, primarily operate on Ethereum’s smart contract technology.

Ethereum 2.0: A Promising Upgrade

Ethereum 2.0 or Eth2, is the much-anticipated upgrade to the Ethereum network. This upgrade aims to improve the scalability, security, and sustainability of the network, addressing many concerns that have been raised about Ethereum’s viability in the long term.

The transition to Ethereum 2.0 involves a shift from proof of work (PoW) to proof of stake (PoS) consensus mechanism, a move that could drastically reduce energy consumption and allow the network to process transactions more quickly.

A Thriving DeFi Ecosystem

Ethereum’s smart contract capabilities have made it the go-to platform for DeFi applications. DeFi represents a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments.

Instead, it utilizes smart contracts on blockchains, predominantly Ethereum. As of 2023, the DeFi space is worth over $100 billion, with the majority of DeFi projects being built on the Ethereum platform. Popular DeFi projects such as Uniswap, Compound, and Aave are all part of Ethereum’s thriving DeFi ecosystem.

Non-Fungible Tokens (NFTs)

Ethereum’s flexible and robust smart contract layer has also given birth to a booming market for Non-Fungible Tokens (NFTs). NFTs, unique digital assets that represent ownership of a particular item or piece of content, are predominantly built on the Ethereum blockchain.

The popularity of NFTs exploded in 2021 and continues to grow, with notable sales such as Beeple’s digital artwork “Everydays: The First 5000 Days” selling for an astronomical $69 million at Christie’s auction house.

Decentralized Applications (dApps)

Ethereum’s platform is designed to facilitate the creation and operation of decentralized applications (dApps). Unlike traditional apps, dApps run on a peer-to-peer network rather than from a single source.

As of 2023, Ethereum hosts a vast majority of dApps ranging from games to decentralized exchanges. Ethereum’s dominance in this sphere demonstrates its practical value and widespread adoption.

Strong Developer Community

Ethereum boasts a robust and ever-growing developer community, which continually works on improving the platform and creating innovative solutions for its users. This strong support network guarantees the platform’s sustainability and adaptability to emerging needs and challenges, thereby promising steady growth and evolution.

High Liquidity

As the second-largest cryptocurrency by market capitalization, Ethereum is highly liquid. This means that it can be readily bought or sold on various exchanges without significantly affecting its price.

High liquidity also reduces the cost of trading (the spread), making it more feasible for both large and small investors to enter and exit positions. This is especially critical in volatile markets where investors might need to quickly adjust their positions.

Institutional Interest

As Ethereum grows in popularity and proves its utility, it’s attracting significant institutional interest. Major corporations and financial institutions are starting to acknowledge Ethereum’s potential and are investing in it.

For instance, the European Investment Bank (EIB) issued its first ever digital bond on the Ethereum blockchain in April 2021, signalling a growing institutional acceptance of Ethereum’s platform. Institutional investments usually indicate a high level of confidence in the asset’s future and provide stability to the market.

Interoperability and Layer 2 Solutions

The Ethereum ecosystem has a high level of interoperability, meaning that various projects can easily interact with each other. This is a major advantage in the fast-growing world of DeFi and NFTs, where users want to seamlessly move assets across different platforms.

Moreover, Ethereum’s scalability issues have given birth to innovative layer 2 solutions like Optimism and zkSync. These solutions help reduce the burden on the Ethereum network by handling transactions off-chain, thus increasing transaction speed and reducing fees. This makes Ethereum an even more attractive platform for developers and users.

Ethereum Improvement Proposals (EIPs)

Ethereum Improvement Proposals (EIPs) are technical write-ups that describe new features, processes, or environments affecting the Ethereum platform. Notably, EIP-1559, introduced as part of the London Hard Fork in August 2021 and Shanghai Hard Fork (“Shapella“, April 2023, EIP-4895), aims to make Ethereum’s transaction fee mechanism more predictable.

It also introduces a mechanism to burn some transaction fees, reducing the overall supply of Ether and potentially leading to increased price over time. Such continuous improvements ensure that Ethereum stays relevant and continues to deliver value to its users.

In conclusion, Ethereum offers not just a decentralized platform but a complete ecosystem for innovation and growth. Its proven smart contract functionality, thriving DeFi and NFT sectors, and robust developer community make it a compelling investment.

With the upcoming Ethereum 2.0 upgrade and continuous improvements through EIPs, the platform seems set to cement its position as a major player in the blockchain industry.

As with any investment, potential buyers should conduct thorough research and consider their risk tolerance before investing in Ethereum or any other cryptocurrency.