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What gives Ether token its value?

Republished by Plato

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Bitcoin holds the top spot as the world’s first and largest cryptocurrency. The coin carries worth based on its position as a store of value capable of transacting value globally and comparatively easier than other similar assets, such as gold. Ethereum’s asset, Ether (ETH), has a different value proposition, arguably valuable for a number of reasons. 

“Ethereum derives its value from a number of different factors, including gas fees, its usage as collateral, its ability to be lent and borrowed, its use as a medium of exchange for trading and NFTs [nonfungible tokens], and the fact that it can be staked for interest,” Scott Melker, a crypto trader and the host of The Wolf Of All Streets podcast, told Cointelegraph, adding: “It also has speculative value and is gaining increased attention and interest from institutional investors.”

The backstory behind Ethereum

Ethereum is the network on which its tradable coin, ETH, runs. Ethereum launched in 2015 based on a concept from a programmer named Vitalik Buterin roughly two years prior. In short, Ethereum acts as a platform on which developers can build projects or solutions.

The Ethereum network has become a staple in the crypto space over the years, with many projects based on it. A large number of initial coin offerings used Ethereum in 2017 as a funding vehicle. Crypto assets based on Ethereum’s blockchain are called ERC-20 tokens, although ERC-721 tokens also exist as nonfungible tokens built on the network.

When a project builds on Ethereum, it may come with an asset for use within that ecosystem. That asset would likely be an ERC-20 token. It is not uncommon, however, for projects to switch over to their own mainnet blockchain after launching initially on Ethereum’s blockchain.

Much of the decentralized finance sector of crypto also began on Ethereum, with decentralized exchanges based on Ethereum’s blockchain hosting trading for numerous tokens associated with the niche. DeFi lets participants borrow and lend crypto assets, among other capabilities. As noted by Melker, ETH can play a part in this ecosystem.

Ethereum transaction costs called gas fees

Part of ETH’s value relates to gas fees. Whenever a person sends ETH, they must pay a certain amount of the coin to pay for the transaction — a similar concept to the fees users pay when sending Bitcoin (BTC).

A big difference with ETH, however, is that sending ERC-20 tokens incurs gas fees. To send an ERC-20 token, the transactor must also hold ETH in the same wallet to pay for the transaction. Trading on DEXs also comes with gas fees. Someone might buy and hold ETH for gas fees, giving the coin a base level of demand in the market.

During the DeFi boom of 2020, Ethereum’s network saw high traffic, spiking gas fees to exorbitant levels. High transaction fees continued into 2021. Based on data from YCharts, an average ETH transaction cost $39.49 in February 2021 — significantly higher than levels recorded in years prior. A fee of around $1–$2 would be considered normal. “Ethereum Average Transaction Fee measures the average fee in USD when an Ethereum transaction is processed by a miner and confirmed,” YCharts notes on its site.

The asset’s possible speculatory value

Speculation may have its part in ETH’s value as an asset. Investors may buy ETH coins as a bet on the Ethereum network’s possible future success and adoption into the mainstream world. ETH’s price could possibly also represent speculation on the success or failure of a portion of the crypto industry, given the number of projects built on the network.

Tyler Winklevoss, co-founder and CEO of the Gemini crypto exchange, expressed this thought process in an interview with Casey Adams, an entrepreneur and podcaster, in December 2020. Winklevoss compared crypto industry innovation to that of the internet, although investing in a small portion of the internet during its early years, other than through roundabout methods, would have proven difficult.

Buying ETH arguably offers that type of fractional investment of a broader developing sector. Winklevoss explained by comparing such a purchase to hypothetical partial race track ownership, which would profit more on activity rather than on individual race results.

“Ether is the same thing for indexing a piece of the Ethereum network, which is a […] decentralized global computer,” he said. “A lot of people equate Ether to digital oil,” he added. “If you want to get into the crypto game, my suggestion is own some Bitcoin, digital gold, and own some Ether, digital oil, and with those, you have most of your bases covered.”

Value in Ethereum 2.0

Ethereum’s scaling has been an issue, as seen with the CryptoKitties fad in 2017, and with the DeFi craze that began in 2020. Ethereum 2.0 aims toward a faster experience, but the upgrade is a process and has seen delays.

Eth2 includes the network’s transition to proof-of-stake technology, which hinges on ETH holding at least some level of price value, according to Aditya Asgaonkar, a researcher at the Ethereum Foundation.

“Proof-of-stake operates on the premise that if validators do something bad — if they are trying to attack the system or misbehaving in some way — then they’ll be penalized,” he said during an LA Blockchain Summit panel. “These penalties apply to their stake, which is in the coin ETH, so ETH price has to be, like, greater than zero for the penalties to have any kind of effect in terms of incentive,” he added.

Therefore, validators need a 32-Ether stake to take part in backing the network. Validators that help run the blockchain in a PoS system are paid out for the amount of contribution to the network provided by them. Demand generated by validators accumulating Ether in batches of 32 and the desire to earn yields from staking creates market demand for the coin.

Rising competitors

In light of the competitive crypto market, Binance Smart Chain has surfaced as one of the alternatives. The network acts similarly to Ethereum, except BSC uses Binance’s BNB coin for transaction costs instead of ETH, according to Binance Academy’s explanation of BSC.

Other network competitors include Cardano, Neo and many others. Over the years, the prospect of usurping Ethereum’s network has been a hot topic. Surpassing Ethereum in prevalence would be significant, given Ethereum’s wide usage.

Due to the large number of applications, products and services built on Ethereum, it also benefits from something called the network effect. “The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service,” Investopedia explains, adding: “The Internet is an example of the network effect. Initially, there were few users on the Internet since it was of little value to anyone outside of the military and some research scientists.”

“However, as more users gained access to the Internet, they produced more content, information, and services. The development and improvement of websites attracted more users to connect and do business with each other. As the Internet experienced increases in traffic, it offered more value, leading to a network effect.”

Essentially, the more something is used and built on, the more prevalent it becomes, similar to a wave, gaining momentum as it goes. In the case of Ethereum, the network effect means added trust as the platform is well known and prominent.

In the ever-changing world of crypto, assets rise and fall in popularity and price. Over the years, ETH has shown price strength as well as dominance as a platform on which developers can build. Time will tell, however, if a faster and cheaper network will usurp Ethereum in the long run, or if Ethereum 2.0 will scale the blockchain to meet market demand.

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Source: https://cointelegraph.com/news/what-gives-ether-token-its-value

Blockchain

Mike Novogratz’s Galaxy Digital Filed for Bitcoin ETF With the SEC

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The number of companies filing to receive approval to launch a Bitcoin ETF in the US continues to increase with the addition of Mike Novogratz’s Galaxy Digital. If approved, the Galaxy Bitcoin ETF will trade on the NYSE Arca exchange. 

  • Based in New York, Galaxy Digital is a diversified financial services firm dedicated to the cryptocurrency and blockchain industry. The company has made another pro-crypto step by filing with the US Securities and Exchange Commission to launch its own Bitcoin exchange-traded fund. 
  • The document reads that if the Commission approves the application, the Galaxy Bitcoin ETF will issue common shares of beneficial interest that trade on NYSE Arca.  
  • The value of the shares will follow the performance of the Bloomberg Galaxy Bitcoin index, which includes multiple pricing sources. 
  • “In seeking to achieve its investment objective, the Trust will hold bitcoin and will value its Shares daily based on the value of the Index, which is calculated based on data from bitcoin pricing sources selected by Bloomberg Index Services Limited.” 

  • With Galaxy Digital’s application, the number of US-based companies striving to launch a Bitcoin ETF continues growing. However, the SEC has yet to approve the first such product. VanEck’s filing seems to be a step ahead as the Commission put its Bitcoin ETF proposal for discussion in March. 
  • At the same time, Canada has led the way with several operational BTC ETFs. In fact, Galaxy Digital already has a functioning one in North America. Novogratz’s firm partnered with CI Global Asset Management, and the CI Galaxy Bitcoin ETF launched on the Toronto Stock Exchange (TSX) on March 9th.  
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Source: https://cryptopotato.com/mike-novogratzs-galaxy-digital-filed-for-bitcoin-etf-with-the-sec/

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Blockchain

Where fiat holders lose out, Bitcoiners can gain from inflation

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Currency instability and hyperinflation seemed unreal until a global pandemic struck, sending many nations into economic turmoil. Most economists began to wonder if the end of the pandemic would mean the birth of another Venezuela, which faced a 438% (hyper) inflation rate. However, like several other Bitcoin enthusiasts like Max Keiser thinks that inflation and the price of Bitcoin are correlated.

The aforementioned data is the long-term compounding of past, present, & possibly future base money, since 1970.

In a recent interview Matthew Mežinskis spoke about the inflation rate of the global monetary base, weighted averaged by each base money’s equivalent in USD. What’s important to note here is, it matched the overall 12.8% CAGR (6-year doubling time) we already saw above.

Source: https://platoblockchain.net/wp-content/uploads/2021/04/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation.jpg

For all of 2019, central banks were actually on track to deflate their currencies. This would have been a first in the modern fiat era. So interestingly, no matter what one argues for money printing, 2019  ended with positive inflation, weighted at 1.5%.

Furthermore, he touched upon the role of monetary metals like gold. Gold’s rate of growth had, in fact, been around 1.8% per annum for the last 170 years.

Source: https://platoblockchain.net/wp-content/uploads/2021/04/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation.png

Almost similar with silver – it’s almost as politicized as its “bigger brother of gold”. Lastly, he shed some light on Bitcoin. He added:

“Remember why the overall compound growth, thus far, is so high, and why it will never be that high again. And now is about the time for a clarification note on the Bitcoin system’s compound annual growth rate, specifically.”

Bitcoin’s finite supply, which may overcome inflation risks is what comforts many. However, this narrative keeps evolving as well.

Source: https://platoblockchain.net/wp-content/uploads/2021/04/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation-1.jpg

What’s interesting to note here is, the phrase “supply issuance” for Bitcoin’s chart titles, and not “inflation.” Bitcoin’s “inflation,” economically, was already baked in. As already demonstrated, its growth rate is known until 2141, per the protocol. So when it comes to bitcoins, “inflation” is not the best term.

Even though the price of Bitcoin may indeed surge, its path to the target could be volatile. In the past, the asset’s price has appreciated and even collapsed several times. But some stated that even as Bitcoin increased in price, the rate of inflation, and forecasts for inflation, “remained stable.” Some provide a contrary opinion that economies need a bit more inflation, not less. At the same time, they do not expect hyperinflation to occur again, after the last great recession.


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Source: https://ambcrypto.com/where-fiat-holders-lose-out-bitcoiners-can-gain-from-inflation

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Blockchain

Holdefi: A Unique Decentralized Lending Platform Shaping the Future of DeFi

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The DeFi industry offering an alternative to traditional financial services is evolving at a rapid pace. There are few platforms that are using the latest advances in the blockchain space to create DeFi solutions that could not only outperform their peers but also capable of adapting to new developments in the blockchain technology itself.

Holdefi is one such open-source, non-custodial decentralized lending platform that offers an attractive passive income stream to investors while enabling the masses to borrow at attractive interest rates. Like its counterparts, Holdefi allows users to instantly secure credit against crypto collateral. The platform does not require the borrowers to provide their KYC or prove their creditworthiness before borrowing. All they have to do is to deposit their crypto assets as collateral to secure a loan in any of the supported cryptocurrencies including stablecoins like USDC, DAI, USDT and BUSD. Users can deposit collateral in one or more types of crypto assets. Similarly, they can borrow different cryptocurrencies using single collateral as long as the value meets the platform requirements.

Attractive Interest Rates and Better ROI

Holdefi uses a mechanism that calculates interest rates for borrowing based on the market and competitive conditions. By doing so, it will balance the demand and liquidity to provide an attractive interest rate to borrowers. Meanwhile, lenders providing liquidity to the supply pool will receive a portion of the interest payments in proportion to the invested amount.

Lenders on Holdefi will get a bigger share of interest payouts in comparison to those on other DeFi platforms as borrowers do not receive any reward or interest on their collateral deposits. So, the lenders end up receiving a proportional share from the overall interest received by the platform from its borrowers.

What Makes Holdefi Stand Apart from the Rest?

Holdefi is an advanced DeFi solution based on the Ethereum protocol. Powered by a native ERC20 standard HLD token, the project is designed to work flawlessly on Ethereum’s existing PoW protocol while being future-ready to operate on ETH’s upcoming PoS upgrade.

The platform witnesses significant upgrades that impart certain qualities of CeFi platforms without affecting decentralization. One such sought-after feature of CeFi is the availability of collateral insurance. While such an option is not available with other DeFi projects, Holdefi solves the issue by separating the collateral deposits from borrowers and liquidity provided by investors into different pools. That way, the collateral won’t be utilized, and borrowers can withdraw it at any time, thus eliminating the need for insurance.

The separation of liquidity and collateral pool will also have a positive effect on Holdefi when ETH 2.0 is implemented as it will speed up the process while keeping transaction costs at a minimum.

Using HLD

HLD is a native ERC20 utility token of the Holdefi ecosystem. Apart from being a mode of value exchange within the ecosystem, it also acts as a governance token imparting voting rights to tokenholders. It can also be used for liquidity mining, staking, and revenue sharing between the participants.

The project has set the maximum supply cap for HLD at 100 million of which 13 million was offered to investors through private and public sales. Recently, Holdefi successfully concluded its private and public sale.

The public sale, a 2-day event starting March 31 was completely sold out within hours of launch. Meanwhile, those who didn’t participate in the token sale can purchase HLD on Uniswap and PancakeSwap

Buy HLD and HODL?

Holdefi is one of the few platforms that has made significant improvements to DeFi lending. It offers a lot of flexibility to users while maintaining strong security features. The future-proof design of Holdefi ecosystem is an added advantage that will make it popular with the crypto community.

While there is no definitive forecast on whether HLD will be an asset due to the volatile nature of crypto markets, Holdefi is an innovative project that is playing a major role in shaping DeFi platforms of the future.

Learn more about Holdefi at – https://holdefi.com/

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.newsbtc.com/news/company/holdefi-a-unique-decentralized-lending-platform-shaping-the-future-of-defi/

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