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At the beginning of 2021, Ethereum's share price reached a new all-time high of over $1,800. In fact, the price of ether, which is the asset present on the trading platforms, has been in a fundamental upward trend since its first quotations in 2016.

Ethereum (ETH)
3.41%
1.258,25
42,91
⇣ 1.216,19
3 Mar
⇡ 1.307,03

What is Ethereum?

Ethereum was created in 2014 by Vitalik Buterin. It is the second most capitalized cryptomoney on the market, behind Bitcoin. At first glance, Ethereum's blockchain works on the same model as Bitcoin's since it is based on the open source principle and requires computing power from computers to validate transactions, which is called proof of work. The Ethereum network is also decentralized.

Ethereum makes it possible to do more than just monetary transactions.

Contrary to the classic functioning of the Internet, the centralized servers to which one connects to retrieve information or data are replaced by "nodes", which are in fact private computers located anywhere in the world and volunteers to contribute to the proper functioning of the protocol. In this way, Ethereum could be defined as a decentralized "world computer".

The features of Ethereum actually go further than those of Bitcoin, which was essentially designed for monetary exchange. Ethereum allows you to make more complex operations. This is where the notions of "gas" and "smart contracts", essential to understand the potential of Ethereum, come into play.

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Why is Ethereum in an uptrend?

2020, the beginning of a strong upward trend

After a year of consolidation in 2019, the year 2020 started off chaotic for the ether price. As a result of the COVID-19 crisis, assets lost 63% in a few days in March and returned to their end 2018 levels. In fact, at that time, the panic linked to the discovery of the global pandemic caused all financial assets to be massively sold off as investors sought to protect their portfolios.

But quickly, in a similar way to Bitcoin, the spring of 2020 was marked by the return of strong increases on Ethereum. By July 2020, assets had already recovered 160% from the low point of the COVID crisis and were trading at around $230.

A price driven by the advent of decentralized finance

It is from August 2020 that the trend really accelerated. Driven by the new uses linked to decentralized finance (DeFi), which would not exist without the Ethereum blockchain, the share price exploded, appreciated by more than 100% and reached an annual high of $490 on September 1, 2020.

After a life-saving correction of one month, which calmed the euphoria around decentralized finance, the course resumed its ascent to end the year 2020 at $735. The beginning of the year 2021 is already promising for Ethereum, which posted a performance of 80% for the month of January. The price now exceeds $1500, driven by good activity around its development and the prospects of a drastic evolution of the protocol, called Ethereum 2.0.

From the perspective of a medium to long-term investment, Ethereum therefore appears to be a solid asset, whose price has been showing a basic upward trend for more than five years now.

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Gas, an essential element for Ethereum operations

Ethereum does not use its blockchain to simply execute payments in a secure and transparent way, its network allows the execution of contracts or even decentralized applications thanks to the ether which is a kind of "fuel". These are actually the ethers that you exchange on the market places. Note that Ethereum's economic rules are not centered on the principle of scarcity as for Bitcoin, which will eventually have only 21 million units. There is no limit to the number of ethers in circulation.

Adjust the quantity of gas to properly use the Ethereum blockchain.

The proper functioning of the Ethereum blockchain involves transaction costs which are calculated according to the quantity of "gas" necessary to carry out an action. It is possible to define by yourself a quantity of gas before carrying out an operation on the Ethereum bockchain. The higher the value, the faster the operation will be carried out because the miners, those who use the computing power of their computers to run the network, will be interested in processing it and recovering the transaction costs.

Smart contracts, a major evolution brought by Ethereum

All the potential of Ethereum is expressed when it allows to act with smart-contracts, or intelligent contracts in French. But a better definition would be to describe them as computer programs capable of receiving funds, sending back funds, receiving instructions and making decisions according to an algorithm.

The many advantages of smart contracts

Moreover, once developed on the blockchain, they benefit from the security of the network, become autonomous and available 24/7 without interruption. Anyone can consult their operation and use them for their own applications. Smart Contracts are programs that run exactly as originally configured by their creators. They are notably at the origin of the frenzy of ICOs (Initial Coin Offering) in 2017 and the emergence of so-called ERC-20 tokens.

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Ethereum dazzling potential thanks to decentralized applications

A new technology that redefines finance

Ethereum makes it possible to create new applications that were impossible to develop with the Bitcoin blockchain. These decentralized applications have, especially since 2020, allowed the emergence of what is called Decentralized Finance (DeFi).

They allow you to benefit from financial services without going through an intermediary or needing his or her authorization. As a result, loan, liquidity, derivative and insurance services are developing at breakneck speed. Anyone who owns ethers can interact with these services. Ethereum thus enables the emergence of advanced services that are also of growing interest to the corporate world and traditional financial players.

Ethereum, a project that continues to meet a lot of needs

The project has a very large and active community, with a historical figure in the ecosystem in the person of Vitalik Buterin. It is also the project that sees the greatest number of developments and evolutions planned for the months and years to come. Starting with Ethereum 2.0, which will change the validation algorithm of the blockchain from proof of work to proof of issue, more ecological. All this activity should lead to an appreciation of the value of the ETH token in the future. Ethereum is definitely a cryptomony with a strong potential.

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