To buy Ethereum? The Case for having ETH in your Portfolio

This article first appeared in https://dollartriumph.com

Earlier this week, Ethereum hit a new record high of $3,400. Since the start of year, it has seen its price gain over 350%.

The growing interest in cryptocurrencies has surged over the past year, with many individuals and institutional investors starting to allocate a portion of their portfolio to it.

Cryptocurrencies have also taken on a reputation of becoming a fast ticket to financial freedom or in true r/wallstreetbets context – your rocketship to the moon.

With many experts declaring that we are in another crypto bubble similar to 2017, I have decided to delve deep into the rabbit hole and find out myself if that is the case.

An argument against the bubble case is that the run up is driven not only by retail investors but other big-names investors and institutions.

I spent the past weekend scouring the net for information on the cryptocurrencies available and trying to decide on the best of the lot – Ethereum.

Ethereum – The Beginning

Launched in 2015, Ethereum is an open-source, blockchain-based, decentralised software platform used for its cryptocurrency, ether. It enables SmartContracts and Distributed Applications to be build and run without any downtime, fraud, control, or interference from a third party.

Unlike the face of crypto – Bitcoin, Ethereum is different.

The supply is not limited to 21 million and the primary purpose of ether was not to establish itself as an alternative monetary system. Rather, it aims to facilitate and monetise the operation of the SmartContracts and decentralised application platform.

Undoubtedly the second-largest virtual currency on the market, behind only Bitcoin, it is much faster to acquire ether currency than bitcoin (about 14 or 15 seconds compared to 10 minutes for Bitcoin).

With Decentralised Finance or DeFi applications garnering popularity in recent times, that has accelerated the growth of Ethereum as a number of applications are built on the platform. Developers are building applications that recreated traditional financial products on the platform which results in more users acquiring ETH to conduct any transactions.

Perhaps a better explanation of why Ethereum will prosper is to use a real world example.

The key strength of Ethereum lies in a “Money Legos” expression. Think of a Lego stacking and joining one another. You can pick and match from any Lego set in the world, regardless if its Star Wars, Harry Potter or even Justice League.

The core philosophy is to build for interoperability, allowing the ecosystem to benefit from individual progress and driving the platform forward.

Due to the nature of the platform where most projects/contracts published on the blockchain are open-source, anyone can build their own application on top of the other applications previously published without having to ask for permission.

All applications and projects will benefit from these integrations as no authorisation is required to built them. Instead of a major platform/entity like Google or Apple App Store owning the data and taking a lion’s share of the revenue, everyone will profit from it equally.

This in my opinion is the biggest reason why Ethereum will succeed – it is how the world wants the Internet to look like. The massive network effect and the ability to be open-source is why adoption of the platform is so readily accessible.

It allows a continuous creation of innovation and is unstoppable once it gets going.

Another key feature lies in the form of SmartContracts. These contracts are not controlled by any users, instead they are deployed to the network and run as programmed the moment the established conditions are met.

This removes the middleman and ensures that the contract is enforceable and unbreakable the moment it is drawn up.

A perfect analogy to describe this: a vending machine – to get snack from the vending machine, you will need money + selection of the snack. Once both criteria are fulfilled, the snack will be released. SmartContracts removes the need for an intermediary, or in this case, the shopkeeper.

That’s not all, more good news are coming – Ethereum 2.0

Tired of being the alternative crypto, ETH is making big moves with the 2.0 version. In a classic blockchain process, all data has to undergo verification by all participating nodes. This means that a bottleneck may be created due to the hold up of the slowest verifier.

To improve the efficiency and ability to scale, the new version will introduce a processing technique known as sharding – which allows parallel processing, by breaking up the data verification tasks up among sets of nodes and each will be responsible for verifying that data it has received.

This will increase the overall capacity and ensure that the new Ethereum blockchain should be faster and more efficient than its predecessor.

2.0 is also looking to redesign the SmartContract layer to a new WebAssembly – eWASM. This will allow Ethereum app code to be executable on web browsers which will open the doors to more users without them learning the current set up – Ethereum Virtual Machine (EVM).

For those big on the environment, this will also mean that Ethereum will consume lesser energy to upkeep and be better for the environment as opposed to other cryptocurrencies.

There is still so much I am discovering about Ethereum and its capabilities. There seems to be growing institutional interest in the public Ethereum blockchain as the world starts to tap onto the benefits of cryptocurrencies.

I do see the benefits of having ETH in your portfolio as I am convinced that it will be a mainstream adoption in time to come.

If you are looking to purchase ETH, do note that Moomoo and IBKR does not offer cryptocurrencies at the moment. You will have to look for other brokers which allows that.