By Case study of Ethereum (ETH) token

By November 21, 2020DApps
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  • Ethereum and Bitcoin are not the same
  • Over upcoming years the supply rate of Ethereum will get declined
  • Ethereum tokens are the base layer for smart contracts
  • Ethereum could increase its value in a few years

Ethereum (ETH) token, being the cryptocurrency for the Ethereum blockchain, benefits several macroeconomy and technological drivers. It is observed that slowly the issuance of ETH is slowing down, and the trading amount is reducing, with the increasing demand of investors. However, the sign seems to increase the demand for Ethereum tokens in upcoming years.

Is Ethereum unrelated to Bitcoin?

Where Bitcoin (BTC) validates, stores, and replicates the data of transactions in distributed networks of computers, Ethereum is one step further, as it also does such things for computations with the ability to run programmed commands, known as smart contracts. The use of smart contracts can eliminate the need for mediators in transactions. However, we can conclude that where Bitcoin is digital money, Ethereum is a smart contract platform.

Ethereum used the first-mover advantage

As the dominant smart network for decentralized finance, Ethereum used the first-mover advantage to provide services for creating decentralized applications or DApps. Several significant firms build their products on Ethereum, like Nike, Ernst and Young, and Barclays. Several organizations that have not started blockchain projects follow such a firm’s lead instead of taking risks.

Update to Ethereum 2.0

However, since its launch, Ethereum has gone through several minor updates, and now the platform is launching Ethereum 2.0, which will make the platform more scalable. The update will move the system to proof of stake from proof of work, as an energy-efficient proof of work depending on the collateral posted by people. However, there are some risks of technical problems with the implementation. Indeed the success of the update will increase the value of the token.

Comparison among the supply chain of Ethereum and Bitcoin

It is observed that Ethereum is below Bitcoin to issue its tokens, as Ethereum only issues the amount of token that could help its network to keep it functional, for which a fixed amount of assets are added to the network every year. According to several critics, the low supply rate prevents the token from being a store of value. However, it seems like, in upcoming years, the flow of issuance will get slower.

Will Ethereum token get locked up?

If the supply of Ethereum continues to decline, two factors will cause Ethereum to lock up it’s trading. Firstly, the DApps rely on the Ethereum blockchain, and if such apps get popular, the supply of Ethereum tokens for trading will decline, as the majority of the tokens are locked up for use in such smart contracts. Secondly, the Ethereum 2.0 staking could impact the supply of tokens, reducing the number of such tokens for speculators and investors.

We can conclude that Ethereum is the base layer for smart contracts. As technical factors will reduce the number of available tokens for trading, its platform will increase for smart contracts, which will increase the transactions, and the value will get boosted.

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Over upcoming years the supply rate of Ethereum will get declined

Ethereum tokens are the base layer for smart contracts Ethereum could […]

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