Haters gonna hate, but winners always win
Founded in 2015, the Ethereum platform and its native ETH token have existed mostly in the shadow of Bitcoin. However, Ethereum has been gathering momentum, particularly since the summer of last year. In July 2020, it was reported that the use of the Ethereum network surpassed that of Bitcoin. Since early 2020, Ethereum has been the subject of heightened interest, particularly in the context of the ‘Summer of DeFi’ where the total amount of value locked (TVL) in Ethereum finance dapps rose exponentially.
On January 1st, 2020 the TVL in Ethereum DeFi dapps was $677 million dollars. By January 1st, 2021 it had risen to $15.7 billion. At the time of writing the figure stands at over $60 billion. It’s clear to see that value is pouring in and so are users.
In short, Ethereum is still king of the hill across all metrics and still provides developers the most palpable reasons to develop on it. It has safety, speed, scalability on the horizon in the shape of rollups and a shift to a proof-of-stake consensus mechanism and long-standing developer resources and support. Here are five reasons why developing a decentralized app (dapp) on Ethereum is still a good idea.
First mover advantage
Ethereum is not a passing fad as the constantly expanding platform and technology behind it will only keep growing as time goes on. As a fully decentralized system, it’s virtually impossible for Ethereum to go offline. The potential offered by Ethereum-based apps means that ETH is here to stay, too – the platform’s native currency is necessary for the completion of contracts and deployment of dapps. Furthermore, the idea of a competition between Bitcoin and Ethereum is misplaced as the two platforms and their respective BTC and ETH tokens serve different purposes.
Part of the ‘here to stay’ idea is born from the fact Ethereum has a big first-mover advantage in the space. Being the first blockchain to efficiently deploy smart contracts and subsequently, the running of dapps means the support and community around Ethereum is huge. If developers have questions, somebody else probably had the same question in the last 5 and a half years. Meaning the answers are likely to be available. Something incredibly important in any disruptive tech sector.
Blockchain of choice for stablecoins
Ethereum’s flexible digital contract functionality lends itself extremely well to the issuance of stablecoins. Stablecoins are cryptocurrencies pegged to a fiat currency in order to minimize the volatility factor. The two stablecoins with the highest significance are Tether and USDC – both based on Ethereum and both went through a period of extensive and moderately consistent growth in 2020, with assets increasing from $1 million to over $7 million over 12 months.
Ethereum’s capabilities can be applied to various aspects of not only asset management but also regular life and are being frequently updated and expanded. As new functionalities are being added to the ecosystem it is becoming more stable and efficient. For example, the integration of Chainlink, which facilitates communication between blockchain-based protocols and off-chain sources of information, is supercharging the already highly beneficial use of smart contracts.
This suggests that we’ll keep seeing expansion in the amount and diversity of practical applications offered by Ethereum dapps, ensuring further growth of the platform and adding to the value of ETH.
The Ethereum 2.0 Update
Towards the end of 2019, Ethereum’s previous version was running into major efficiency issues, as well as increasing ETH prices. The Serenity update in mid-2020 resolved these issues, providing opportunities for growth for the platform. As a result, Ethereum was able to go through a period of explosive growth – as evidenced by the rise in the total value of DeFi. It brought significant enhancements to the platform, including major improvements in efficiency through sharding. Further updates will see Ethereum transition to a proof-of-stake consensus mechanism. The developers hope this will massively reduce gas fees and increase transaction times and the scalability of the applications running on the network.
In July 2021 one of the most significant and controversial alterations to the Ethereum blockchain is now scheduled for inclusion. Ethereum Improvement Proposal (EIP) 1559 will be packaged with the London hard fork this coming July regardless of miners’ discontent with the proposal. The proposal has earned some of the largest support to date from Ethereum application creators and users alike, given the current issues around selecting a correct transaction fee. On the other hand, miners and mining pools, have been gathering in opposition against the proposal as it progresses.
DeFi and NFT markets boom
As mentioned, decentralized finance (DeFi) has seen huge growth throughout 2020. This trend continues, as dapps facilitating lending, borrowing through the use of smart contracts are suddenly becoming more popular. The total value locked in DeFi at the time of writing is over $60 billion dollars. That’s an increase of almost 300% since the start of 2021. Furthermore, according to the DappRadar dapp rankings of the 4,842 dapps tracked across all platforms 2,224 are running on Ethereum or in other words, almost half.
Non-fungible tokens or NFTs have also been receiving massive interest since late 2020 with a real spike occurring in early January 2021. Some of the first NFT projects live on Ethereum. NFTs like CryptoPunks, which are selling for over $100,000, and Axie Infinity, where users can breed NFTs from two they already own and then sell those on. Whilst premier NFT marketplaces such as Opensea and Rarible have risen to prominence on Ethereum. As a result, NFTs saw all-time-high transaction volume and generated more than $1.5 billion in Q1 2021.