What is Ethereum?
Ethereum is a decentralized open-source blockchain featuring smart-contract functionality. Ether is the cryptocurrency generated by Ethereum miners as a reward for computations performed to secure the blockchain.
The project’s goal is to democratize the internet by creating a ‘world computer’. It seeks to replace the traditional model of servers or clouds hosting data with a new proposition – ‘nodes’ provided by volunteers. The creators of Ethereum aim to introduce an alternative solution for data and apps that isn’t dependent on big technology firms.
What determines the price of Ethereum?
The market through the forces of supply and demand. Simply put, like most assets, the price of Ethereum is based on how much people are willing to pay for it. Since Ethereum is stored and transferred online, the price is determined globally. It should be the same wherever you are. It can differ slightly from exchange to exchange, but big variations can’t arise, since traders would quickly arbitrage out any gap.
How many Ether are there?
The total supply of Ether was approximately 110.5 million as at mid-April 2020. In 2017, mining created 9.2 million new Ether, which led to a 10% increase in total supply.
There is no hard cap on the total supply of Ethereum, unlike Bitcoin, which is limited to 21 million. Ethereum has opted not to set an upper limit. This has raised concerns in the industry about inflation in the Ethereum ecosystem from inception. Advocates point out that the rate of supply of Ether will decline over time.
What the bears are saying
- Ethereum is slow: Like many cryptocurrencies such as Bitcoin, Ethereum has struggled with speed. Its proof of work mechanism has made the network congested and slower.
- Is it already out of date? Ethereum has an unfortunate disadvantage: it was one of the first. In recent years, new ICOs and cryptocurrencies have learned from Ethereum's teething problems and executed ‘improved’ variations of the network. This is a threat of unknowable magnitude, but well-backed upstarts, such as EOS, Tron, and others, - can potentially build better networks and scale greater heights
What the bulls are saying
- Regulation: The SEC ruled in June 2018 that Ethereum is not a security. This is a big deal and helps to legitimize the Ethereum network in the industry where regulation remains nascent. The ruling made clear that the platform does not come under the scope of US securities regulation, which dispelled a dark cloud.
- Community: This is what powers most projects in the cryptocurrency industry - and they don’t come bigger than the Ethereum community.
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This article is for informational purposes only and takes no account of particular personal or market circumstances, and should not be relied upon as investment, tax, or legal advice. For investment, tax, or legal advice and before taking any action you should consult your own advisors. Note that digital assets such as cryptocurrencies present unique risks for investors. Please see our disclaimer regarding risks specific to holding digital assets before investing.
This content is correct as of October 2020
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