The Investment Case for Ethereum
An overview of the bullish narrative based on Ethereum's fundamentals.
- Ethereum runs on a clever mechanism that could increase its demand and price in the coming years.
- The technology relies on a set of fundamental traits such as software upgrades that may also have a positive impact on the price.
- Phemex offers a fast and convenient way for investors to buy Ethereum with more than 90 fiat currencies.
Share this article
As blockchain technology attracts more users, it’s important to understand what makes Ethereum a valuable investment.
Ethereum launched as a decentralized network capable of running software programs, popularly known as smart contracts. To be able to run these software programs, users must own and pay for transactions in Ether, the native cryptocurrency of Ethereum. Hence the term “gas” when paying to use applications on Ethereum.
This is why many describe Ethereum as the world computer.
A Bullish Future for Ethereum
Its value derives from the assumption that people will want to own ETH to run these programs, as part of a “pay as you go” system. A similar analogy could be using credits on a pay phone app like M-Pesa (popular in countries like Kenya), through which users can deposit, withdraw, transfer money, pay for goods and services, access credit and savings, or simply use it as talking time.
And it’s not too crazy to think smart contracts will continue to increase in popularity as they expand to accommodate more real world use cases. Some of these use cases include trading assets or borrowing and lending without involving middlemen such as banks.
Furthermore, smart contracts enable these agreements to be fully transparent.
Ethereum’s increasing adoption is evidenced by the fact that blockchain users are paying the most to use it. More fees are spent on Ethereum than even the most widely known blockchain network —Bitcoin.
At the time of writing, users have paid $46,798,105 to use Ethereum over the last 7 days. That’s 34 times more over the same timeframe than the second most paid to use blockchain, Binance Smart Chain ($1,289,164 in added fees).
Despite the expected increase in demand for ETH, there are other factors that can contribute to the growing adoption of Ethereum, potentially making it a good investment.
Let’s go over some of the most important considerations:
Decentralization: Ethereum uses blockchain technology as its foundation. In essence, blockchains allow users to store, validate, and replicate information in a decentralized way. This means that it is almost impossible for individuals to corrupt the information stored on Ethereum.
Software updates: Since its launch, there have been many attempts to upgrade the technology with the objective of making it more efficient while maintaining decentralization.
One of the most anticipated software updates is what the Ethereum community calls “The Merge” (also known as ETH 2.0) that will attempt to offer greater security and stability to Ethereum.
To validate transactions and secure the network, Ethereum users offer their computer power to run complex math problems (a process commonly known as Proof of Work).
The plan is that, in the summer of 2022, Ethereum will exclusively use a security system by which users lock up their coins to receive passive income. It’s like an internet bond that pays interest to savers, making it a very attractive proposition for long term investors.
This new approach is called Proof of Stake and it is believed to be a lot more friendly for the environment. This is one of the key narratives why many think the value of Ethereum will continue to grow.
Scarcity: another aspect that could potentially bring FOMO (Fear of Missing Out) among crypto investors is the recent implementation of the “ETH buyback” proposal.
Through this mechanism, a portion of the fees used to process transactions gets burned. This means that if the ETH burning rate is higher than the issuing rate, ETH can become a scarce asset over time.
Developer community: Finally, Ethereum has the largest developer community in the industry, which allows it to constantly foster new and innovative applications. A fun fact is that since 2018, the Ethereum developer community has grown x6 faster than the Bitcoin developer community.
Feeling bullish about the future of Ethereum and want to prepare for the next run up?
Phemex has recently launched its Buy Ethereum page offering investors an easy way to purchase ETH tokens with their credit or debit card. Additionally, the page features a comprehensive FAQ section to answer all popular questions regarding Ethereum itself and how to use. On Phemex, not only can users buy Ethereum, they can also use it to trade or earn passive interest income. Along with ETH, users can buy 50+ cryptocurrencies such as BTC, SOL, LUNA, ADA, USDT and USDC with 90+ fiat currencies.
Users can also learn multiple crypto trading strategies to maximize their Ethereum gains by visiting Phemex’s academy technical analysis section.