Betting on Ethereum? Watch the ICO Market
Even as I sit here and write this week-in-review post the value of ether (ETH), Ethereum’s cryptocurrency is headed to an all-time high of $80. That is an increase of $30 in the last week and about $70 over last year. So, my question is what is contributing to the growth of ether? I have a few ideas and a word of caution, but I would invite your insights in the form of comments below.
Let’s start with Ethereum itself. It is a great platform. It deserves to be doing well. The big advantage Ethereum has over Bitcoin is the ability to program against the blockchain using solidity, a JavaScript-like language, and smart contracts. It is my opinion that Ethereum will face serious scale issues soon. The size of the database continues to grow at a fast rate, currently pushing over 40GB. As the database grows, fewer nodes will be able to host the entire chain. But, for now, Ethereum is our platform of choice for prototyping blockchain applications.
That said, I think there is an artificial component to the price of ether. The problem is not with Ethereum, but how people are using Ethereum. Because of its flexible platform and smart contracts, many new crypt currencies are running their Initial Currency Offerings (ICO’s) using Ether. Aeternity, another project that we are excited about and following closely, for example just finished their first round of their ICO. During their initial round, you could purchase between 650 and 750 of the new AE coins for one ether. And Aeternity is not the only ICO using Ethereum to sell their new coin. I am just using Aeternity to illustrate my point because I am a fan of where they are headed and have spent time studying their model. My point here is that the sale of new ICO tokens pulls ether out the system putting upward pressure on the price of ether, at least temporarily. What happens when the tokens are issued, and the ether comes back into the system? My guess is a dip in price. If you are speculating on ether, watch the ICO market closely. These activities could indicate changes in the value of ether.
There is another factor to watch and that is the general trend of the alt currency market (https://coinmarketcap.com) in general. A move upward for Bitcoin, for example, seems to have the effect of bringing up the price of Ether. Except for Litecoin, the top ten currencies seem to move in lockstep. Could this signal the start of a crypt-bubble? My concern is that much of this activity could be more about speculation than the actual value within the currency.
I am watching Aeternity closely. They are providing another bite at their ICO on May 29th. We are looking at Aeternity for several reasons. First, their hybrid consensus model which makes mining more accessible is important to a project that we are contemplating. The use of state channels holds promise for scalability. Finally, decentralized oracles could be of use to our projects. Even if there is something odd about pulling data from centralized data stores and creating decentralized oracles, this gives developers the ability to write smarter contracts.
I do not speculate in the alt-coin market. However, I do pay attention to the movements in these currencies because I buy what I need to run my applications. As the price of ether goes up, the costs of transactions across the Ethereum rises. Decisions about which blockchain to tie your DApp to cannot be made without carefully monitoring scalability and stability of the token’s value.
Blockchain News and Articles Worth Reading this Week
· Ethereum is the AWS of the Blockchain
· Three Industries You Didn’t Know Blockchain Is Disrupting
· Dubai Plans to be the First Blockchain City
· What to Tell the Board About the Blockchain
Finally, we have recently launched a project to aggregate all the blockchain and P2P whitepapers we can find in one place. P2P Whitepapers is an attempt to centralize the whitepapers of a decentralized world.
