What is Ethereum Cryptocurrency & Why Will its Value Rise?

by Eva Fox August 28, 2021

What is Ethereum Cryptocurrency & Why Will its Value Rise?

Photo: Bernardmarr

Ethereum is a cryptocurrency and platform for building decentralized blockchain-based online services powered by smart contracts. Ethereum was originally created not so much as a payment system but as a base for the affordable implementation of blockchain technology in third-party projects. Not only have new startups shown interest in it, but also large developers, banks, airlines, and the international charitable organization, UNICEF.

The Ethereum cryptocurrency (ETH) is also a powerful investment vehicle that is expected to experience tremendous growth in the near future. @CroissantEth/Twitter posted a thread showing that ETH will become a multi-trillion dollar asset.


TVL in DeFi
Total Value Locked (TVL) is a metric that is used to measure the overall health of the DeFi and yielding market, which can be tracked on many services.

Decentralized Finance (DeFi) is a financial instrument in the form of services and applications built on the blockchain.

"Ever since the beginning of this year, the total value locked in DeFi has gone exponential. On January 1st, 2021 the TVL was a modest $16B. Today, this number is now a staggering $85B. This would place $ETH at the 20th largest bank in the world by market cap," wrote @CroissantEth.

ETH in smart contracts
Due to the meteoric rise in DeFi, the amount of ETH allocated to smart contracts has also hit record highs. In fact, an incredible 26% of all ETH is now in smart contracts. @CroissantEth expects this trend to continue.

Developers
ETH is growing faster than even Bitcoin in terms of active developers.
Since Q3 2019, ETH has grown on average over 300+ developers per month. The ecosystem undoubtedly attracts some of the world's best innovators.

Burnt ETH (EIP-1559)
EIP-1559 is a hard fork of Ethereum that has revolutionized the network fees model. The coin-burning mechanism that is part of it has turned ETH into a deflationary asset.

EIP-1559 has been nothing short of astounding, wrote @CroissantEth.
It introduced fluctuating burns to ETH acting like a dividend for all users, while simultaneously making transactions fees smoother and faster for the network. As of August 26, More than 102,492 ETH has been burnt.

Staked ETH
The amount of ETH being staked for ETH 2.0 is now worth upwards of $23B. That's approximately 6.1% of all ETH. This is expected to increase significantly after the merge to Proof-of-stake (PoS). EIP-1559 and PoS account for more than 7.2M ETH being taken out of the supply in months.

DeFi users
The total number of ETH wallets that have ever interacted with the leading DeFi protocols is ~3.2M:
UNI - 2.5M
COMP - 328k
SUSHI - 233k
AAVE - 74k
MKR - 73k
CRV - 45k
YFI - 31k
SNX - 18k

Stablecoins
Stablecoins are growing some extraordinary value for ETH as an asset, says @CroissantEth.
USDC: $27B
DAI: $5.8B
TUSD: $1.4B

They are very popular for their easy use in DeFi, and VISA will soon accept transactions settlement in USDC. USDC alone grew from $4B market cap to $27B this year.

Network use
Ethereum is now regularly settling more value per day than Bitcoin, the largest cryptocurrency by market capitalization. This will only continue to grow with upgrades like ETH 2.0. As block space has more demand with time and adoption, ETH will become more scarce, says @CroissantEth.

Supply on exchanges
The ETH dollar balance on centralized exchanges continues to fall, approaching levels not seen three years ago. This indicates that many holders are not aiming to sell soon, and it may be a catalyst of its own if it happens to continue.

ETH issuance
EIP-1559 and the merge to PoS will result in a massive sell pressure decrease for ETH. Higher Annual Percentage Yield (APY) for staking upon the merge, along with a sudden surge of people locking their ETH for the yield will result in unprecedented levels of volatility.

In conclusion, @CroissantEth wrote that given all of the above information, it becomes clear that there are some internal forces that will drive up the price of ETH. At the same time, he draws attention to the fact that he did not even mention such potential trends as NFTs, Gaming, Yield farming, Lending, DEXs, and Layer two.

© 2021, Eva Fox. All rights reserved.

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Article edited by @SmokeyShorts, you can follow him on Twitter









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