Ethereum, conceived in 2013 by a 19-year-old Vitalik Buterin, has experienced numerous dramatic ups and downs throughout its existence. The blockchain has faced challenges since its inception, including an existential hack in 2016 and a significant technological upgrade in 2022. This year, Ethereum has come under unprecedented scrutiny regarding its current and future direction, largely due to its price performance relative to Bitcoin.
Ether, Ethereum’s cryptocurrency, has significantly underperformed compared to Bitcoin, the world’s most valuable cryptocurrency. As of recently, Ethereum was trading around $2,500, approximately 50% lower than its all-time high. This lackluster price movement has led some critics, like prominent Bitcoin supporter Max Keiser, to declare Ethereum’s demise. However, such statements are considered an overstatement by many in the crypto community.
Joseph Lubin, Ethereum cofounder and CEO of Consensys, acknowledged the project’s history of challenges, stating, “Bitcoin has died many times… Ethereum has died several times.” He emphasized that the community learns from these challenges. One of the significant issues Ethereum faced was the rise of ‘gas fees’ due to increased activity on the network. To address this, developers implemented layer 2 (L2) blockchains, which have successfully reduced transaction costs by over 99% since their peak.
However, some critics argue that this solution has come at the cost of reducing activity on the main Ethereum network. Kyle Samani of Multicoin Capital believes that a network’s value is closely tied to direct user activity. He argues that the shift to L2s has drained some of the activity that previously supported Ethereum’s cryptocurrency price.
On the other hand, proponents like Paul Brody, chairman of the Enterprise Ethereum Alliance, argue that focusing on short-term Ether price movements misses the bigger picture. Brody emphasizes that Ethereum’s true value lies in its role as a decentralized world computer. Developers are now focusing on optimizing the layer 1 network’s speed, which is expected to drive demand for Ether.
Danny Ryan and Vivek Raman of Ethrealize believe that as Wall Street and Big Tech firms explore blockchain technology, they will increasingly turn to Ethereum due to its robust infrastructure. Raman likened Ethereum to ‘digital oil,’ suggesting it is becoming the go-to platform for institutions looking to deploy real assets with trust.
While it remains uncertain whether Ethereum will emerge as the leading blockchain platform, its proponents remain hopeful. As Paul Brody stated, if Ethereum succeeds in becoming the primary platform for business, its asset price will naturally follow.
