Early yesterday, after spending days hovering tantalisingly close, Ethereum broke through the $1000 USD barrier for the first time. In doing so it sparked debate and opinion not only about its current merits but also about its longer term prospects.
The fact that Ethereum had lost second spot, at least temporarily, on the Coinmarketcap index to Ripple only a few days before added extra context to the discussions.
Perhaps this incident, where the perceived value of a token of no real utility could surpass a platform and currency that supports so much of the distributed ledger infrastructure, says more about the speculator mindset of investors than the actual projects themselves.
Victim of Its Own Success?
So let’s start there, speculation after all is about judging potential growth and performance.
Although ether is a useful and functional currency, the real beauty of Ethereum is the fact that other companies can build applications upon it easily and relatively cheaply. A whole network of companies, known as the Ethereum Alliance, has recognised this and thrown their considerable weight behind the Ethereum blockchain.
J.P. Morgan, whose CEO Jamie Dimon was notoriously negative about Bitcoin, is one big investor as is Intel, Microsoft and BP. The reason big players from various industries support Ethereum is that it is proven to work.
It has shown it can handle smart contracts in the real world and not just in theory. This in itself is enough for other, smaller investors to believe both Ethereum can grow in value.
Scaling Still in Search of a Solution
The high level of adoption is a double edged sword though because the volume has degraded the speed of transactions and raised issues of scalability for the network, as could be seen during the ICO frenzy in the summer and the more recent CryptoKitties debacle.
Of course, this has not gone unnoticed by the developers. On their own blog, founder Vitalik Buterin made clear that, “With the Ethereum blockchain reaching 1 million transactions per day, and both Ethereum and other blockchain projects frequently reaching their full transaction capacity, the need for scaling progress is becoming more and more clear and urgent.”
As well as tackling the issue internally, Vitalek is open to finding solutions cooperatively and have schemes in place to “Empower more independent teams to collaborate with the Ethereum Research team’s base-layer scalability research.”
It is fair to say that others have already seen the merits and failings in the network and now the competition for being the number one smart contract platform is numerous and increasing.
Waves, Cardano, QTUM, Lisk, NEO and a host of others are attempting to take the crown. Despite the attractions of many of these projects though, at this stage it is perhaps telling that the other smart contract platform that is performing the most transactions per day after Ethereum is Ethereum Classic.
For this to change something major has to occur.
If the rumoured partnership between Litecoin and EOS prove to be more than whispers in the ether then this could prove to be the much vaunted Ethereum killer. Until a unique structure like that materialises though, Ethereum’s first mover advantage and strength of the core team should hold firm.
Correspondingly, and most importantly for both users and speculators alike, the functionality and monetary value of Ethereum should also continue to improve.