Cryptocurrency exchange Coinbase’s disclosure that Ethereum blockchain’s ether (ETH) was the most traded crypto in the June quarter, ahead of Bitcoin (BTC), the most common crypto, has set off speculation if the trend will last. Ethereum, because of its flexbility and scalability, has emerged as the favorite platform of DeFi (Decentralized Finance) and NFTs (non-fungible tokens), the two fastest growting digital asset segments of the blockchain ecosystem.
Ethereum powered 26% of trade volume on Coinbase in the second quarter of 2021 while Bitcoin contributed 24%. Comparatively, in 2020, Bitcoin led the second quarter, contributing 57% of trade volume compared to Ethereum’s 15%. The year-on-year growth in overall trading volume on Coinbase in the second quarter was a stupendous 1,550%, which was $462 billion, up from $28 billion.
The question is if the tilting point between stabiilty and innovation is already touched. While Bitcoin continues to be a crucial store of wealth, says Mati Greenspan, the CEO of Tel Aviv-based Quantum Economics, as quoted by Fox Business, the most innovations in the crypto space are happening around Ethereum.
The breakthrough of Ethereum owes much to the rise of DeFI and NFTs, the two current rages of the crypto world. Ethereum is likely to continue to benefit from their growth as more players enter the DeFi and NFT space. Especially in the NFTs segment, the players are on a digitizing frenzy of everything from art to real estate to NBA tickets. As the NFT adoption gathers further pace, Ethereum will soar. Spurred by the twin segments, ETH climbed 344% this year to touch $3,240 while BTC saw a more moderate gain of 58% to hit $46,490. However, Ethereum, with a market cap of $380 has much catching up to do vis-a-vis Bitcoin which leads with $871 billion.
There is ground for speculation that Ethereum 2.0’s upgrade launched last week could help it do consistently better than Bitcoin in the coming weeks and months. The Ethereum Improvement Proposal (EIP)-1559 is said to be the most important update after the blockchain’s launch in 2015. Also called the London Upgrade, it addresses a major pain point of Ethereum by reducing gas cost or transaction fees and enhances flexibility and scalability.
An explosion of DeFI platforms like MakerDAO and Compound as welll as DeX (Decentralized Exchange) like Uniswap has helped Ethereum use flourish. DeFi’s offer of traditional financial instruments with a decentralized architecture, outside the control of big financial institutions and governments, helping users earn interest is attracting big money. The liquidity of Uniswap, a decentralized exchange for NFTs enjoying a 54% market share, grew from $20 million to $2.9 billion in 2020. The total investments in DeFi protocols were estimated at $11 billion by mid 2020 that grew to a whopping $52.06 billion in 2021 first quarter. The flexibility of some DeFi protocols that enables “wrapping” to allow trading of synthetic versions of assets such as gold, oil, and Bitcoin has also been a major boost to the blockchain.