Perplexed about Ethereum, Its Working & Ethereum Price? We’ve Got You Covered

Bitcoin might be the talk of the town but Ethereum ain’t no no-hoper. In fact, it’s the second most popular and worthy cryptocurrency in the world having a market cap worth $351.71 billion. Similar to bitcoin, the Ethereum price also went through several crests and troughs and investors and beginners are almost going insane stressing over it.

In case you are one of them, I assure you; you don’t need to hammer yourself. This blog is designed to clarify all your doubts about Ethereum price, the factors influencing it, and more. The only thing you need to do is to remain with us until the end. We don’t want you to miss out on any crucial info.

Let’s start with Ether meaning-

What is Ethereum?- A Complete Overview

Ethereum can be defined as a software platform based on blockchain that can be utilized for sending and receiving value from all over the world via its native crypto coin, ether, without interference from any third party. But it is not just that. It has more to it.

A Russian-Canadian Programmer named Vitalik Buterin first proposed the idea of Ethereum in 2013. The coin was designed to extend cryptocurrency usage by letting developers build their own special applications. Unlike traditional apps, these applications known as “decentralized applications” or dApps are self-executing and all the credits go to the use of smart contracts.

Smart contracts are applications based on code. They are stored on the Ethereum Blockchain and automatically process some specific functions when predefined conditions are fulfilled. Smart contracts are the base of all dApps (decentralized applications) created on Ethereum, and other dApps created across other blockchain channels. 

In a nutshell, Ethereum is an open-source decentralized platform based on blockchain and focused on creating and sharing business, entertainment applications, and financial services.

Now, when we talk about Ethereum, there are two terms that are quite popular yet pretty confusing. They are Ether and Gas. What are they? What’s their use in Ethereum?

Hold on, we have explained them individually.

What is Gas?

In order to be able to use dApps, Ethereum users have to pay certain fees. The fees for using decentralized apps are known as “gas” because they differ on the basis of the amount required for computational power.

What is Ether?

We learnt that Ethereum is an open-source decentralized platform that can be utilized for sending and receiving value all over the world. Well, this platform has its own associated crypto coin which is known as Ether or ETH.

Ether is only second to Bitcoin in market value. Whether we talk about its market capitalization or the value of the coin, it always comes just after Bitcoin.

Who created Ethereum?

Unlike Bitcoin, where the creator Satoshi Nakamoto is a mysterious entity, the creators of Ethereum are known. They are Vitalik Buterin, Charles Hoskinson, Anthony Di Lorio, Mihai Alise, Joseph Lubin, Jeffrey Wilke, Gavin Wood, and Amir Chetrit.

Some of the founder members have moved to other projects while others are still working with Ethereum. For instance, Gavin Wood is working on Polkadot while Charles Hoskinson is working on Cardano.

Market Overview

With a market cap of more than $348.07 Billion, Ethereum is the second leading cryptocurrency in the world. Plus, it has support from great business leaders like Mark Cuban.

Studies suggest that ETH has been the most profitable investment option for those investing in the cryptocurrency market. For somebody who invested $1,000 in Ethereum in August 2015, their investment today i.e. in 2021 would be worth a startling $2.23 million.

The current market value of Ethereum is $3,339.59, which is higher than its previous values in August and the last few months after the fall.

To have a better insight into the same, have a look at the graph provided by Coingecko.com.

Ethereum vs Ethererum Classic

Are Ethereum and Ethereum Classic the same thing?

This is, probably, one of the most puzzling questions that confuse people quite often. So, we have explained the difference between the two very clearly with the help of a table:

How Ethereum Works

Just like any other cryptocurrency, the working of Ethereum is also based on a blockchain network. As you might know, a blockchain is a decentralized and distributed public ledger where every transaction is recorded and verified.

By distributed, it is meant that every individual taking part in the Ethereum network possesses a matching replica of this ledger, which let them track all the transactions initiated in the past.

While decentralized means that the network isn’t controlled or operated by any centralized entity such as the government or any financial institution. Rather all the distributed ledger holders manage the network themselves.

Transactions by blockchain employ cryptography to secure the network and scrutinize transactions. To confirm each transaction on the network, miners use computers and solve complex mathematical equations. Further, new blocks are added to the blockchain that is known as the heart of the system.

When the transaction is successful, participants receive tokens as their reward which is known as Ether (ETH). Just like Bitcoin, you can utilize Ether for buying or selling goods and services. Over the last few years, the market has witnessed an utter growth in Ethereum price which makes it a de-facto contemplative investment.

But the question is-what makes this crypto unique from Bitcoin? Well, it’s the applications that users create run on the blockchain similar to any other software running on a computer. These applications are designed to store as well as transfer personal data or manage intricate financial transactions.

As part of the mining process, the Ethereum network can perform computations and this is what sets Ethereum different from Bitcoin. This comprehensive capability of computing problems transfers a store of value and medium of exchange into an openly verifiable data store as well as a decentralized global computing engine.

What are the Factors Determining the Price of 1 Ethereum?

We all know that supply and demand are the major factors affecting the price of Ethereum or any other cryptocurrencies. But that’s not the only one. There are various other elements that as well that have a direct influence on crypto tokens. They are as follows:

Supply and Demand

Supply and demand are the most significant determinants for the price surge and dip of any crypto. The price of crypto depends directly on their supply and demand. If the demand for Ethereum increases, its price will increase accordingly. However, the price will decrease with the decrease in demand.

Eth 2.0 Staking

It’s a remodelled version of Ethereum’s network that let you stake ETH for interest. Although the ETH 2.0 network is still in its beta version, more than $1 billion of ETH locked in staking already exist which in turn, decreases the market supply of the token.

High Transaction Volume

It directly impacts the price of Ethereum. The amount of transaction fees on Ethereum’s blockchain increases with the high transaction volume. Ethereum miners are paid with these fees to sell their token on the crypto market which, in turn, surges the supply of Ethereum.

As the transaction price goes up, the demand for more ETH tokens increases because to be able to pay transaction fees, you must own Ethereum.

Competition

Thousands of new cryptocurrencies are born every month and most of them don’t have a long-lasting history. Obviously, there’s cut-throat competition in the crypto market and surviving it isn’t the cup of tea for everybody. However, the one that manages to stay in power can highly impact the price if the crypto shares some of its efficacy with Ethereum.

Media Coverage

This is another most important factor influencing the price of Ethereum. Most mainstream media are busy covering Bitcoin and DOGE. If the media turn their focus at least a little more toward Ethereum and make it reach to masses, the price is surely going to bounce.

Bitcoin’s Price

Bitcoin is one of the most powerful cryptocurrencies in the entire market. Hence, if BTC is bullish, it’s more likely that the price of other tokens will also go up, especially Ethereum. 

Adoption

When more people adopt something, its price automatically soars up. Therefore, we can say that adoption is a highly crucial element in determining the price of Ethereum. This statement becomes even stronger when there’s a large influx of new users or buyers investing in this crypto.

Now think of the situation where a big organization or corporation adopts Ethereum or any popular industry starts dealing in Ethereum. What is supposed to happen? Obviously, the price will increase. The inundation of new users intrinsically raises the demand for cryptocurrency. At the same time, it helps in stabilizing the market as well as mitigates the risk of volatility. Doesn’t this make Ethereum more alluring to potential investors? It surely does.

Future Potential

Many big investors invest in any stock on the basis of its future potential. If they find that some ABC stock is gonna perform exceptionally well in the future, he/she put money in that. Similarly, a lot of people invest in ETH on the sole basis of its future potential.

Most FinTech companies or firms, nowadays, are inclined towards employing smart contracts, automation, and blockchain technology in their everyday operations and Ethereum is one such cryptocurrency that is highly suited for smart contracts and automation.

Should You Invest in Ethereum in 2021?

With over 10,000 cryptocurrencies in the world, Ethereum holds the position of being the most popular crypto, besides Bitcoin. But you shouldn’t invest in it right away just because it is on the hit list.

There are various factors that you must ponder prior to investing. You must do thorough research on crypto such as Ether and ensure that your finances are in good health. Moreover, make sure that your retirement accounts are well-fed, you have a large emergency fund, and your debts are distant enough.

If you think you have already got the things in the checklist aforementioned, it’s significant to diversify your portfolio. Diversification will ascertain that you invest only a fraction of your investments in Ethereum and the rest in other cryptocurrencies.

Now, let’s talk about whether you should invest in this crypto or not.

Well, various stances suggest that Ethereum is worth investing in or at least giving it a try.

Why?

First things first, it possesses value and is a virtual currency. Secondly, if the crypto migrates to the new protocol, the Ethereum blockchain will become more enticing and thirdly, with more people using Ethereum distributed apps, demand for Ether may surge.

Apart from buying ETH directly, you may try your hand at investing in companies developing applications using the Ethereum network. But whatever you choose, always make sure that you consult a financial advisor before investing in any crypto and understand the potential risks well.

You should always be ready to handle the ups and downs or the volatility of the market. You may be able to turn the table overnight and become filthy wealthy or you may lose. Just prepare yourself for both consequences.

Risks of Investing in Ethereum

Before I tell you the risk of investing in Ethereum, you must first understand that any investment is a kind of risk. Whether you are investing in mutual funds, SIP, stocks in the stock market, or cryptocurrencies, you are risking your capital for potential returns. And Ethererum is no different!

When compared to other investments, cryptocurrencies are riskier and more volatile assets than traditional investments. However, they render a much higher and excellent return.

As a general rule of thumb, the market capitalization of a cryptocurrency and the level of risk associated with it are inversely linked. Ethereum, having the 2^nd largest market capitalization in the crypto world, is historically less risky than cryptocurrencies with smaller market capitalization.

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