Despite Value Potential, Ethereum Among The Biggest Losers

Ethereum attracted the world’s attention in 2017 as one of the most value-driven use cases for cryptocurrency and blockchain technology. However, after starting the year on a historic bull run that took Ether well over the $1,200 price point, the once favorite among value-based investors slid below $200 earlier this month.

Ether has maintained above the $200 price point since, but this sudden downturn begs the question – what happened?

Ethereum and ETH

By January 2018, Ethereum’s value had increased more than a 1,000% since the year prior. While this type of gain points towards speculation in any market, much of it is due to the value proposition created by Ethereum’s blockchain technology.

Ether transactions running on Ethereum’s blockchain are quick, and they take no more than a few minutes to process. The transaction is completely secure, and due to there being no middle man in this process, there is no need to trust a third party with your banking or wallet information.

Ethereum is a successful application of blockchain technology, but that’s not what sets it apart from the crowd. Ethereum allows smart contracts and Decentralized Applications (“dApps”) to be produced by third-party developers and function on the Ethereum blockchain. Users take advantage of this platform to run a great variety of blockchain-based products and services.

Not having to start from scratch allows these new enterprises to avoid downtime, security issues, design flaws, and other problems inherent in the development and release of new technology. As a result, smart contracts have offered a unique and substantial value to the growing cryptocurrency market.

Smart Contracts

Smart contracts are a huge breakthrough in the application of blockchain tech, and ultimately they may become a major part of online product and service offerings. Currently, when two entities enter into a contract, they generally require an intermediary to ensure the parties abide by the terms of the contract.

Smart contracts, however, allow the parties to carry out the terms safely and securely between themselves. Since they’re self-executing, there is no need for someone to oversee the contract to ensure the parties receive the benefit of their bargain as intended. So, for example, smart contracts can be used to ensure artists, musicians, software developers, and similar creative professionals receive appropriate royalties for their work. A self-executing contract can ensure the artist or developer was automatically paid without the need for an intermediary to oversee and manage the transaction.

Smart contracts offer huge potential benefits to the market, and we’ve seen scores of new tech being developed on the Ethereum blockchain. Ethereum’s Market cap is still a respectable $23.75 billion, ranking Ethereum second by market cap behind the ever-dominant Bitcoin. However, up-and-comer Ripple (XRP) is hot on its heels at a $22.6 billion market cap.

But if Ethereum offers such a robust value proposition, why have we seen such a major slide in the price of Ether this year? As the cryptocurrency markets continue to perplex those of us trained in traditional finance and economics, we will all be watching with eager interest to see whether Ethereum will return to its place as the promising next-gen application of blockchain technology it started out as this year.