Why does Ethereum have an instrinsic value?
 

Why does Ethereum have an instrinsic value?


Ethereum is a decentralized, open-source blockchain and the first network to launch smart contract functionality.

Ethereum was launched in July 2015, and in the span of a few years, it increased considerably in value due to its wide range of decentralized application (DApp) offerings. The explosive rise of decentralized finance (DeFi) and nonfungible tokens (NFTs) have sealed its success as the most actively used blockchain network.

Furthermore, its native currency, Ether (ETH), has solidly maintained its second position by market capitalization and daily volume in the cryptocurrency space.

What is Ethereum’s intrinsic value?

Before identifying what is unique about Ethereum, let us first explore the definition of intrinsic value and how it applies to digital currencies like Ethereum.

In finance, the intrinsic value represents the perceived or actual value of an asset or a currency. It should not be confused with the market price because assets can be over or undervalued.

Fiat currencies like the United States dollar or the euro have intrinsic value because they are issued by monetary authorities like central banks and are primarily used in their economy.

What is the intrinsic value of digital currencies? Governments’ central banks do not back cryptocurrencies like Bitcoin (BTC) or ETH, but their intrinsic value could be defined by their scarcity, use cases, and technological application. Over the years, cryptocurrencies have gained a reputation as a store of value and promise they can also become units of exchange in the future.

What is the true value of Ethereum?

Given that intrinsic value is an investor’s perceived or actual value of an asset, utility is crucial to why Ethereum has attracted interest and capital across the crypto community.

In contrast with Bitcoin, which was created as a money alternative to national currencies, Ethereum was built as a platform that could facilitate programmatic smart contracts and applications using Ether.

Smart contracts

Ethereum’s smart contracts have emerged as the platform’s primary utility, considering that they power valuable real-world use cases like DApps, DeFi, and NFTs applications. They allow the automatic execution of agreements without the intervention of intermediaries like banks for financial transactions or lawful entities for legal arrangements.

Billions of dollars worth of assets are already locked up in payments, loans, insurance, and any DeFi application shaping the future of finance. Ethereum smart contracts will likely change the way financial and public services are managed including categories like governance, supply chains, markets, and digital identification.

Despite fierce competition from other blockchain networks, Ethereum remains the most popular platform for DApps, hosting the highest number of DeFi projects, NFTs, and ERC-20 tokens.

Created on 4th May 2022

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