ICOs, Technology and Madness Make the Bull Case for Ethereum

Bitcoin has been on the raise lately breaking all time highs regularly. While the price raise of Bitcoin has dominated the headlines, other digital currencies such as Ripple and Ethereum have very quietly posted even more impressive performances. Specifically Ethereum’s growth has been outpacing Bitcoin by a large margin.

To put the previous statement in perspective, consider that the price of Ether( Ethereum’s main cryptocurrency) has risen over 5000% from the beginning of the year crossing $400 a few days ago. Bitcoin, on the other hand, has seen its value raise above $3000 and over 200% this year. That put the year-to-date growth between Ethereum and Bitcoin to about 25 to 1 which is pretty impressive.

What I find remarkable about Ethereum’s bull run is that it wasn’t so much based on speculation as much on solid market trends. That foundation is likely to contribute to the long term viability of Ethereum in the digital currency market. From those foundational factors, there are two that I would like to discuss today: ICOs and the technological limitations of Bitcoin.

ICO Madness

Initial Coin Offerings(ICOs) might very well be the killer application for digital currencies after Bitcoin. Conceptually, ICOs are a fundraising mechanism that allows an organization to receive digital currencies of immediate liquid value such as Bitcoin or Ethereum in exchange of newly issue cryptocoins associated with a company.

Sounds crazy? Not really. The mechanics of ICOs have well-known similarities with established money exchange models such as venture financing in which companies exchange money for shares without an immediate liquid value. Option investing is another asset exchange mechanism that can be compared to ICOs as investors purchase contracts based on the future (vs. the current) price of a security. The foundation of ICOs has been around for a long time and, interestingly enough, Ethereum applied some of those principles in its early days by raising $18.4 million in 2014 on a pre-sale of Ether or Bitcoin.

While ICOs were initially seen seen as a fundraising toy for startups, its recent success stories seem taken from Alice in Wonderland. Earlier this month, a startup called Brave launched an ICO for a new web browser and ended up raising $35 million in about 30 seconds. Well known companies such as Kik nad Omige are also very committed to ICOs.

How are ICOs related to the price of Ethereum? Well, Ethereum’s architecture makes it incredibly simple to implement custom cryptocurrencies and, consequently, it has become the platform of choice for ICOs. Currently, Ethereum accounts of more than half of the ICO events in the market; a trend that is likely to increase in the near future. More importantly, if ICOs become an establish fundraising mechanism, Ethereum could become something like the IMF of the cryptocurrency world making it an invaluable asset.

Bitcoin’s Technology Limitations

Despite its massive bull run, Bitcoin is still subjected to well-known technological limitations some of which are directly benefiting Ethereum’s market position. first of all, bitcoin transactions continue to be slow and expensive (about $1.50 per transaction) compared to other cryptocurrencies. The Bitcoin blockchain has been under a considerable amount of stress lately during the market raise and many Bitcoin holders have been divesting themselves of bitcoin to acquire Ether.

CEO of IntoTheBlock, Chief Scientist at Invector Labs, I write The Sequence Newsletter, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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