2021-03-12 13:30:00

Etherum is rising faster than Bitcoin – is it a good investment?

Ethereum is well known in the cryptocurrency world but lacks the star status of Bitcoin among mainstream investors. 

It is second to Bitcoin in terms of market value, at £145bn compared with Bitcoin’s £750bn, but its price has risen even more quickly this year, up 145pc versus 97pc for Bitcoin. 

One Ethereum token now costs $1,770 (£1,270) not far off its all-time high of $2,000. But what exactly is it, will its price keep rising, and should investors buy some? 

What is it?  

Ethereum is a cryptocurrency, like Bitcoin, which runs on its own “blockchain”, an online ledger which tracks the transfer of information.

It was created by Vitalik Buterin in 2013, a developer who was just 19 at the time. His vision was for a decentralised payment network, with its own cryptographic currency, that allows anonymous payments to be sent across the internet without the need for a bank or other third party.

As the second-biggest cryptocurrency after Bitcoin, Ethereum has inevitably drawn comparisons to it. Its rapid rise has also led to claims of a bubble. But advocates say Ethereum has several advantages over Bitcoin that make it more useful.

The first is that Ethereum allows for “blocks”, the records of cryptocurrency transactions, that can be created much more quickly than Bitcoin. While Bitcoin has been more widely adopted by online retailers and even some physical stores, Ethereum’s fans believe its efficiency makes it better for transactions, rather than storing value.

But the major advantage of Ethereum is that the technology allows for third party applications, not just the currency, to run on the network. Bitcoin’s appeal lies in money that is not controlled by any one party and does not have to run through a central server, but Ethereum allows not just money, but all sorts of other things to run on the network. 

Storing files on a cloud storage service like Dropbox means the user is trusting Dropbox to take care of it, but on a decentralised storage network, they are placing their faith in fellow users who have an interest in maintaining it.

A number of apps are being built on Ethereum, and the network is also being used by start-ups to raise money with initial coin offerings, which exchange Ethereum or other currencies for special “tokens” that grant access to a service.  

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