Ethereum is gaining Ground on Bitcoin for good reason and is one of the better Cryptocurrencies to trade .
Ethereum has raced ahead with technology that not only does everything Bitcoin can do faster, in higher volume, and at lower cost. Ethereum, on the other hand, was never intended as a Bitcoin competitor. Ethereum is actually a platform for new kinds of decentralized (often financial) applications (dApps) that run on a peer-to-peer network of computers. These dApps are designed to dis-intermediate the kinds of relationships and transactions for which we have traditionally required things like banks, public registries, and the legal system.
For technologists, this is exciting stuff, and a vibrant community of software developers has enthusiastically embraced it. Hundreds of projects, startups, and companies at every scale — including the likes of Intel, Microsoft, and Samsung — are building software using Ethereum. And everyone who wants to use any of these dApps on the public Ethereum blockchain will need to pay a small fee in Ether each time they do so.
The utility of many of these dApps are based on network effects, so Ethereum as the underlying protocol is a network upon which other networks are being built. It is therefore a group-forming network — a much faster growing and more resilient kind of network effect than Bitcoin enjoys. In group-forming networks, even if the utility of individual groups is low, the network effect of all being part of the same underlying network can dominate the overall economics of the system. In other words, the value of the whole becomes greater than the sum of its parts. That’s particularly interesting in the case of Ethereum as that value is captured within the Ether price.
Platforms requiring network effects are however, famously hard to bootstrap — but here Ethereum has an ace up its sleeve. Token sales, or Initial Coin Offerings (ICOs), allow Ethereum projects to sell their own native token to the crowd. A token is a cryptocurrency that has special purpose within the dApp to which it corresponds. The purpose and value of these tokens varies, but what they all share in common is that their sale not only provides funding for the dApp’s development, it also catalyses the creation of a community around the dApp that is financially incentivized to see it succeed. The more successful a dApp becomes, the greater the demand for, and therefore value of, the token required to use it.
Bitcoin’s dominance is slipping because its utility is limited and weakening versus other more recently developed, less politicized cryptocurrencies. Financial markets don’t like uncertainty, and Bitcoin is gearing up for a messy divorce. Ethereum was never intended as a competitor to Bitcoin, it’s something very different. But the value of Ether is underpinned by utility within the kind of group-forming network that tends to grow rapidly when it picks up steam. That’s why its value is increasing faster than Bitcoin, and why many pundits are predicting it will continue to do so long after Bitcoin’s market cap has been exceeded.