Ethereum Prices have surged significantly as cryptocurrency popularity continues to increase. On January 1, ethereum was trading at $7.98 – Monday morning it was just over $407 – an increase of just over 5000%. So why is cryptocurrency popularity rising so fast? Bitcoin has also reached record levels, so why is this?
Before discussing that, what is ethereum? Most people know about bitcoin, but ethereum? Firstly, bitcoin and ethereum do not compete. Ethereum, now the world’s second largest cryptocurrency after bitcoin, was designed in 2014 to be used for what are known as ‘smart contracts.’
Smart contracts are computer applications used by corporations to automatically carry out the terms of a contract once defined conditions have been met. It is an IF – THEN situation. A pays in ethereum into a virtual contact for a service. If the service is not carried out within a defined timescale, then the payment is returned to A. If it is carried out, then the payment is released to B and the service to A.
It is a bit like an escrow service but cutting out the middlemen and lawyers. It takes humans out of the contract altogether. Actual payment is made using the ‘ether’ although most simply refer it to is an ethereum.
Bitcoins are different. They were developed in 2009 and are used in direct payment for consumer goods and services. In fact, the term ethereum applies to the blockchain technology used in the cryptocurrency. Why the Rapid Jump in Value?
The ethereum blockchain has received backing from large companies who appreciate the concept of smart contracts. An alliance known as the Enterprise Ethereum Alliance (EEA) was set up for corporations using the ethereum. It had well over 100 members by the end of May, many of them Fortune 500 companies.
The concept of a failsafe contract system that appeals to many different types of business. Particularly one that eliminates human error. Microsoft, Intel, JP Morgan, BP, Toyota, Merck and Santander are all members of the EEA. More companies seek membership almost daily.
A year makes a big difference in business. Last year, most ether was purchased using Bitcoin. This is an indication that it was mainly existing cryptocurrency users who were using ethereum – in fact, 83% ether was purchased using bitcoin a year ago. Now, according to CryptoCompare, that figure has dropped to 32% with the use of the US dollar and other currencies rising sharply.
It is expected that ethereum will continue rise during the year, but there will come a point where it will drop. How steeply, nobody knows, but some fear that ethereum clones could eventually compete. For now, however, increasing cryptocurrency popularity is exemplified by Vladimir Putin’s interest. Russia is looking at the blockchain, and if adopted, it would likely give another boost to Ethereum prices.
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