Standard Digital Assets: Ethereum
Ethereum is a Standard Asset
As a Layer 1 protocol, Ethereum is the behemoth that DeFi 1.0 and wide ranging use case dApps has been built on. Unlike Bitcoin, ETH was not the first Layer 1 protocol to exist but it is the most adopted one to date. It currently sits at the number 2 spot in overall cryptocurrency market capitalization, where it has been at for roughly 4 years.
Ethereum was launched in 2016 by blockchain virtuoso Vitalik Buterin and team for the purpose of bringing this technology forward into the everyday lives of people and business. While it has not been around nearly as long as Bitcoin, it has achieved many feats that Bitcoin could not due to the different nature of its existence. Bitcoin has served well as a peer to peer payment network and a digital store of value, Ethereum provides the building blocks for decentralized applications to bring real world value on chain.
Smart contracts allow Ethereum to have a much wider range of use cases than Bitcoin such as decentralized banking, logistics, gambling, real estate, gaming, art, and music, which is only a small sample of what will be built on them 10 years from now.
Let’s break down what makes Ethereum a Standard Asset:
Has it shown staying power by being resilient during bull and bear market cycles?
After 10 days of being launched (July 30, 2015), Ethereum rallied its way to the 4th largest coin by market cap. It stayed in that exact spot until February 2016 when it overtook Litecoin and XRP for the number 2 spot. Since then there have been numerous cycles that Ethereum has gone through. As time passed many of the coins that were even in the top 100 have all faded away into the crypto abyss never to be seen again. However, Ethereum despite the turmoil it has endured, held its number 2 spot with almost perfection, giving it up a couple times for only a few days at a time.
As we have already explored how Bitcoin has competed against gold over the past 12 years, we will look into how Ethereum has found strength against the number 1 digital asset over time. Shown below on the logarithmic scale, Ethereum has continued to steal market share over Bitcoin since 2015. With this bull cycle in full swing, it is apparent that ETH is steadily growing in value against the king of digital assets in multiple cycles, providing outpaced returns from BTC.
Is Ethereum a top asset in its given vertical by utility and market cap?
Ethereum is the top Layer 1 smart contracts platform by utility and market cap. It is also the top DeFi protocol in the space. While it is known that Ethereum has been the main smart contract platform for years now, there have been others trying to gain market share over Ethereum. Protocols like Solana and Avalanche are new names to this race and have innovations that helped them reach where they are now. Even with these competitors’ market capitalizations combined, they only reach 1/5 of what Ethereum is worth. Despite the notorious high transaction fees to use the network, Ethereum has over 3,000 launched dApps on their chain. With the kind of scale that Ethereum is reaching via Layer 2 and Rollup integrations from Arbitrum, Optimism, and others, the cheap transaction fees boasted by the up and coming protocols will be matched by ETH. Good luck taking away market share after that.
EIP-1559 upgrade making ETH an even more productive asset.
Has Ethereum shown consistent adoption over time?
Through two bull cycles, Ethereum has seen exponential growth over time that has led to incredible returns for those holding it patiently. Since 2016, Ethereum is up by roughly 1 million percent and 2 thousand percent during this run so far! Similar to Bitcoin, the returns over time are lessening due to their high market values but this lower volatility also ensures more security during downside action that is sure to happen again once this bull cycle is completed. No other digital asset has seen the same level of adoption while having impeccable fundamentals like Ethereum, making it an essential to our treasury.
Now it is clear that Ethereum is a Standard Asset.
When adding assets to our treasury, we can only be exposed to the best that the digital space has to offer. There is no other smart contract platform that comes close to the level of adoption that Ethereum has. In multiple cycles from now, Ethereum will still be as crucial to the infrastructure of the digital asset world as it is today, even more so as projects continue to utilize and integrate Ethereum into their business models. Ethereum is not the “Silver” to Bitcoin’s “Gold”. It is in a league of its own and that is why Ethereum is a Standard.