Look no further than the centrality of the bitcoin dominance rate in the cryptoeconomy to get a feel for how bitcoin has been king of the hill in the ecosystem for over a decade.
Yet in recent years, the top mainstream cryptocurrency conversations have shifted from focusing solely on bitcoin to focusing on both bitcoin and ether (ETH), the latter being the second largest crypto per market cap and the native money of the Ethereum network, the space’s leading smart contracts platform.
BTC and ETH have followed starkly different trajectories to get to where they are today, but their comfortable positions atop the cryptoeconomy speak to the fledgling, generally unmatched successes of their underlying blockchains so far.
Simply put, to date Bitcoin has facilitated censorship-resistant digital payments well, and in its shorter lifespan Ethereum has facilitated a variety of complex, censorship-resistant digital transactions well. Their track records are proven at this point, even if still ever unfurling.
By virtue of past performance then, the de facto cryptoeconomy duo enjoys a considerable moat from the rest of the competition when it comes to factors like quality, reliability, and practicality. Bitcoin and Ethereum are top of the line, end stop.
And what’s impressive about Ethereum in particular, then, is how far it’s come so fast.
What Ethereum Did
This July, the Ethereum network is coming up on its 5th birthday. However, the five years since Frontier — the inaugural live version of Ethereum — have really felt more like a decade considering all the work and progress that has been made around the “World Computer” since then.
In the ensuing years after Frontier, Ethereum has undergone multiple major upgrades and productively weathered a handful of early crises, all the while attracting a growing army of developers, designers, legal experts, and researchers, as well as benevolent patrons, open-source public goods experiments, and innovative enterprises — both traditional and on-chain.
So when it comes to what Ethereum has already done, it’s already secured a majorly advantageous network effect that has positioned the platform to become increasingly valuable in a multitude of ways as it continues to grow.
Even more fundamentally, though, Ethereum has already proved that the dream of its whitepaper — the pursuit of actualizing an “alternative protocol for building decentralized applications” for a new arena of public goods — was indeed a fruitful one worth pursuing.
That reality is certainly worth looking back on, insofar as the wisdom of the past can guide us as we go forward in continuing to build out a new finance sector for a better future.
What Ethereum Does
Ethereum’s fledgling history is impressive, to be sure, but it’s all the things that an increasingly advanced and more mature Ethereum can and does do in the presently that’s really something else.
For instance, last week Ethereum creator and co-founder Vitalik Buterin took to Twitter to highlight some of the major advancements that Ethereum enjoys presently in 2020 that the blockchain project didn’t have back in 2017.
Mind you, 2017 was when the cryptoeconomy experienced its wildest bull market to date — largely catalyzed by Ethereum-powered initial coin offerings, no less — and the ETH price peaked at $830 that December ahead of its January 2018 all-time high of $1,431.
The hype factor was real back then, as Ethereum was considerably more immature at the time, technically speaking, than it is today when ETH is trading at around $130 at press time.
Things Ethereum has in 2020 that it did not in 2017:
* ZK Rollups (eg. Loopring), >2k TPS capacity
* PoS testnets
* Uncle rates < 10% with 10m gas blocks
* Gitcoin grants
Move the goalposts faster, or else we'll catch up!
— vitalik.eth (@VitalikButerin) March 27, 2020
So while the ETH price may currently be down some 90 percent from its historical price record, never has the platform and the dApp possibilities it powers been more robust, more flexible, and more open for building.
For instance, let’s consider some of the key examples that Buterin listed in his aforementioned tweet. First there was Uniswap, which has become Ethereum’s darling decentralized exchange in less than two years and one of the smart contract platform’s first major success stories. The project is a feat of engineering, all at once being simple, elegant, and powerful in its design and poised to run “for as long as Ethereum exists,” its team has previously noted. Moreover, Uniswap is only one among multiple DEXes that are facilitating considerable levels of commerce right now.
Buterin also mentioned Tornado.cash, which is an impressive and relatively new privacy tool for Ethereum that is powered by zk-SNARKS technology. “It improves transaction privacy by breaking the on-chain link between recipient and destination addresses,” its creators have explained. The solution makes ETH capable of being a so-called privacy coin in the here and now.
MakerDAO is another major bright spot for Ethereum today, even as the project has recently worked to rectify nearly $5 million in protocol debt and an acute Dai liqudity crunch. Maker has been the decentralized finance arena’s most popular dApp to date, enabling users to take out automated Dai stablecoin loans backed by crypto collateral like ETH, BAT, and USDC. The project sets the tone for both DeFi and the DeFi lending sector and has potentially given rise to a new, albeit young world currency in the Dai. That’s here today, and it’s just the tip of the iceberg.
Sure, Ethereum has no shortage of current limitations coming from a variety of angles, but earnest efforts abound around the project’s ecosystem to tackle these limitations in critical and meticulous ways. This dynamic also shouldn’t be overlooked, i.e. the excellent, productive, and high-motor community that Ethereum has developed thus far and continues to demonstrably accrue.
What Ethereum Will Do
In the months and years ahead, Ethereum will begin its multi-phase Serenity upgrade that will advance the platform’s capabilities in virtually every regard. In other words, Ethereum’s powers are soon set to increase exponentially.
The Serenity upgrade will start with “Phase 0” later this year, at which point Ethereum’s long-planned transition to Proof-of-Stake (PoS) consensus, in which stakers will hold 32 ETH in special wallets in order to secure the network, will be activated.
In the later “Phase 1,” shard chains will be activated and prove quite important, insofar as they will pave the way for major future transaction scalability on Ethereum. In the ensuing “Phase 2,” extremely powerful and versatile “Execution Environments” will be introduced, with an EE being akin to a customizable blockchain that can live readily and definitively atop Ethereum 2.0.
Additionally, researchers and builders in the Ethereum ecosystem are currently making considerable advances around Optimistic Rollups (ORs), a relatively new layer-two scaling mechanism that boost Ethereum 2.0’s scaling power-ups that much more.
Altogether, Ethereum is going to look extremely different in 5 years. The platform’s continued maturation will put it in a position to continue attracting new users of all stripes, which will improve its network effects — and thus its value — in general.
Accordingly, Ethereum’s top sectors like DeFi seem poised to boon in the years ahead as Ethereum becomes more practical than ever. But also the platform’s niche sectors, like digital collectibles and blockchain gaming a la Ethereum’s “NFT” arena, have the potential to grow and achieve breakout success going forward, too.
Amid this kind of promising atmosphere, it’s not necessarily hard to envision a world in which Ethereum’s ETH eventually, or even just temporarily, becomes the biggest crypto in the cryptoeconomy. It may be years off if it ever does happen, but stranger and more dramatic things have happened in the space before.