How did Ethereum Become the Second Most Popular Blockchain?
In this blog post we examine
- the factors that made Ethereum one of the most popular blockchains and
- introduce some basic statistical data about the Ethereum network.
Ethereum As A Case Study
We have discussed the qualities that make for a good investor. However, it is also important to consider what makes an asset a good investment. For the purposes of this post, we shall focus on Ethereum.
To begin with, the Ethereum platform’s native digital asset ETH is widely considered to have one of the highest ROI by many leading names and analysts in the sector. ROI is an acronym for return on investment.
CoinMarketCap lists ETH’s ROI as over 5,000% as the platform uses the first tradable price for its metric. Through independent research, we were able to find that ETH’s ICO price was at around $0.31 with the token trading at around $146 at the time of writing, which marks an ROI of around 47,000% ROI. ETH has clearly shown that it is one of the best-performing assets in the crypto markets.
Due to its high ROI, ETH is undoubtedly popular with cryptocurrency investors. However, there are many factors that work together to contribute to this winning status. The first of these is the technology underlying it. Ethereum was the first blockchain-based smart contract platform, ushering the sector into what is commonly referred to as blockchain 2.0.
The entry of the smart contract platform provided technological support for blockchain technology to be used to create entire ecosystems, as opposed to just digital currencies for transacting and storing value. Ethereum gained popularity shortly after it was launched due to its innovative approach to blockchain technology.
While a number of smart contract platforms have since been launched, Ethereum continues to dominate year after year. According to StateoftheDApps, a platform dedicated to analyzing the decentralized application (DApp) market, Ethereum is the smart contract platform with the highest amount of engagement across the board.
Additionally, statistics published periodically by ConsenSys, a technology company dedicated to building on Ethereum, further illuminate the platform’s leadership. In ConsenSys’ 2019 report, the firm stated:
This year brought a new wave of innovation and blockchain growth. The Ethereum network improved via both network upgrades and increased developer mindshare. DeFi brought hundreds of millions of dollars in value into the Ethereum ecosystem while over 520 new decentralized applications were created throughout the course of the year.
In 2019, Ethereum positioned itself as a leader in the decentralized finance (DeFi) market, attracting significant amounts of funds in this manner. This strategy worked out well for the platform, buoying its popularity while simultaneously strengthening its position as a market leader both through increased user numbers and corresponding wallet activity as well as through boosted developer interest.
What is clear is that Ethereum’s popularity is driven in part by the fact that it is possible to create varying DApps of different utility as well as complete ecosystems on its blockchain. In fact, according to StateoftheDApps, the most popular applications on the Ethereum platform are very varied, including gambling, social, finance, and even gaming.
While Ethereum’s users are a large part of the puzzle of its success, its developers are just as important. Ethereum consistently places among the platforms that feature the highest number of developers.
In 2019, a report compiled by Electric Capital, a venture firm focused on FinTech and blockchain-based innovations, showed that the Ethereum blockchain had far more developers than any other crypto ecosystem. The paper stated:
The report identifies that 18% of all open-source crypto developers work in the Ethereum ecosystem. Even more, Ethereum has 4x more devs than the next ecosystem, which is Bitcoin.
This state of affairs has been constant since the entry of the Ethereum platform into the market, suggesting that there is a correlation between developer numbers and the price activity of its cryptocurrency.
The researchers at Electric Capital believe this to be true while adding that developer metrics are important to look at because they provide hints for the future of a platform. The report added:
Crypto is about network effects. The open-source ecosystem with the most value is likely to be the ecosystem with the most developers. These metrics will continue to vary each year, but they’re important to watch in order to determine what ecosystem is growing and accruing developer mindshare.
Additionally, the Ethereum Foundation, a non-profit organization dedicated to growing and bettering the smart contract platform plays a significant role. According to the website, the Ethereum Foundation’s mission “is to promote and support Ethereum platform and base layer research, development and education to bring decentralized protocols and tools to the world that empower developers to produce next-generation decentralized applications (dapps).”
To this end, the organization employs a relatively large number of people to achieve its goals. The Ethereum Foundation is one of the largest employers in the crypto sector as it gives work to up to 90 people, each working on different sections of the platform. This large group of people is divided into seven groups, each with a specific focus to best maximize productivity.
The Foundation owns a large number of ETH, which is sold to fund the organization. Its employees are behind the platform’s network upgrades, which are moving the Ethereum blockchain to what is now commonly referred to as ‘Ethereum 2.0’. Ethereum 2.0 is a major planned network upgrade that will move the Ethereum blockchain from its proof-of-work consensus mechanism to the more sustainable and secure proof-of-stake, among other positive changes.
Additionally, the organization also gives grants to developers working on exciting and innovative programs based on the Ethereum platform. This incentivizes developers to create cutting edge applications of high quality to stand the best chances of winning a developer grant.
Ethereum also provides would-be developers with a significant amount of information pertaining to the developing process in an easy to access manner. Prominently displayed, there are tutorials, guides, resources and other relevant tools to help a new developer get started. Given that the smart contract platform uses its own unique programming language, these resources are important and highly necessary to help the developers.
Lastly, Ethereum’s in-house developers help the ecosystem by creating standards for smart contracts. Standards such as the ERC-20 token, widely used in the ICO craze of 2017, as well as the non-fungible ERC-721 token, help developers to put out smart contracts of high quality. Through the use of these standards, developers are able to launch applications that are less likely to have errors or bugs in their coding since they are employing a battle-tested template.
What is clear is that Ethereum takes an intentional approach to its blockchain design, both in its internal structures as well as its interactions with its developers and its users. Ethereum’s leadership has succeeded in creating a technological innovation with high utility where entire ecosystems can thrive, which it continually improves, while simultaneously attracting other talented parties to build on the platform, further widening its reach. These factors are undoubtedly the reason why its native digital asset ETH continues to perform well despite fierce competition.