{"id":196202,"date":"2021-03-07T13:14:00","date_gmt":"2021-03-07T10:14:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/what-gives-ether-token-its-value\/"},"modified":"2021-03-07T13:14:00","modified_gmt":"2021-03-07T10:14:00","slug":"what-gives-ether-token-its-value","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/what-gives-ether-token-its-value\/","title":{"rendered":"# What gives Ether token its value?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2cc0d6345a5\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2cc0d6345a5\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/what-gives-ether-token-its-value\/#The_backstory_behind_Ethereum\" >The backstory behind Ethereum<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/what-gives-ether-token-its-value\/#Ethereum_transaction_costs_called_gas_fees\" >Ethereum transaction costs called gas fees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/what-gives-ether-token-its-value\/#The_assets_possible_speculatory_value\" >The asset\u2019s possible speculatory value<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/what-gives-ether-token-its-value\/#Value_in_Ethereum_20\" >Value in Ethereum 2.0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/what-gives-ether-token-its-value\/#Rising_competitors\" >Rising competitors<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># What gives Ether token its value?  <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDMvYmQ1NDY5OWEtNTA5Mi00ODVkLTliYmMtOWE0YjgxZjMwZGM1LmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>Bitcoin holds the top spot as the world\u2019s 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\u2019s asset, Ether (ETH), has a different value proposition, arguably valuable for a number of reasons.\u00a0<\/p>\n<p>\u201cEthereum 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,\u201d Scott Melker, a crypto trader and the host of <em>The Wolf Of All Streets<\/em> podcast, told Cointelegraph, adding: \u201cIt also has speculative value and is gaining increased attention and interest from institutional investors.\u201d<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_backstory_behind_Ethereum\"><\/span>The backstory behind Ethereum <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Ethereum is the network on which its tradable coin, ETH, runs. Ethereum <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/blog.ethereum.org\/2015\/07\/30\/ethereum-launches\/\">launched<\/a> 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.<\/p>\n<p>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\u2019s blockchain are called ERC-20 tokens, although ERC-721 tokens also exist as nonfungible tokens built on the network.<\/p>\n<p>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\u2019s blockchain. <\/p>\n<p>Much of the decentralized finance sector of crypto also began on Ethereum, with decentralized exchanges based on Ethereum\u2019s 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. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Ethereum_transaction_costs_called_gas_fees\"><\/span>Ethereum transaction costs called gas fees<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Part of ETH\u2019s value relates to gas fees. Whenever a person sends ETH, they must pay a certain amount of the coin to pay for the transaction \u2014 a similar concept to the fees users pay when sending Bitcoin (BTC). <\/p>\n<p>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.<\/p>\n<p>During the DeFi boom of 2020, Ethereum\u2019s network saw high traffic, spiking gas fees to exorbitant levels. High transaction fees continued into 2021. <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/ycharts.com\/indicators\/ethereum_average_transaction_fee\">Based<\/a> on data from YCharts, an average ETH transaction cost $39.49 in February 2021 \u2014 significantly higher than levels recorded in years prior. A fee of around $1\u2013$2 would be considered normal. \u201cEthereum Average Transaction Fee measures the average fee in USD when an Ethereum transaction is processed by a miner and confirmed,\u201d YCharts notes on its site. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_assets_possible_speculatory_value\"><\/span>The asset\u2019s possible speculatory value<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Speculation may have its part in ETH\u2019s value as an asset. Investors may buy ETH coins as a bet on the Ethereum network\u2019s possible future success and adoption into the mainstream world. ETH\u2019s 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. <\/p>\n<p>Tyler Winklevoss, co-founder and CEO of the Gemini crypto exchange, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=T7V6UiUtC0U\">expressed<\/a> 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. <\/p>\n<p>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. <\/p>\n<p>\u201cEther is the same thing for indexing a piece of the Ethereum network, which is a [&#8230;] decentralized global computer,\u201d he said. \u201cA lot of people equate Ether to digital oil,\u201d he added. \u201cIf you want to get into the crypto <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a>, my suggestion is own some Bitcoin, digital gold, and own some Ether, digital oil, and with those, you have most of your bases covered.\u201d <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Value_in_Ethereum_20\"><\/span>Value in Ethereum 2.0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Ethereum\u2019s 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. <\/p>\n<p>Eth2 includes the network\u2019s transition to proof-of-stake <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a>, which hinges on ETH holding at least some level of price value, according to Aditya Asgaonkar, a researcher at the Ethereum Foundation. <\/p>\n<p>\u201cProof-of-stake operates on the premise that if validators do something bad \u2014 if they are trying to attack the system or misbehaving in some way \u2014 then they\u2019ll be penalized,\u201d he <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=2xvaWX78ILU\">said<\/a> during an LA Blockchain Summit panel. \u201cThese penalties <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ly 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,\u201d he added.<\/p>\n<p>Therefore, validators need a 32-Ether stake to take part in backing the network. Validators that help <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/blockgeeks.com\/guides\/proof-of-work-vs-proof-of-stake\/#:~:text=In%20POS%2C%20instead%20of%20miners,in%20proportion%20to%20their%20stake.\">run<\/a> 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.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Rising_competitors\"><\/span>Rising competitors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>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\u2019s BNB coin for transaction costs instead of ETH, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/academy.binance.com\/en\/glossary\/bep-20\">according<\/a> to Binance Academy\u2019s explanation of BSC.<\/p>\n<p>Other network competitors include Cardano, Neo and many others. Over the years, the prospect of usurping Ethereum\u2019s network has been a hot topic. Surpassing Ethereum in prevalence would be significant, given Ethereum\u2019s wide usage.<\/p>\n<p>Due to the large number of applications, products and services built on Ethereum, it also benefits from something called the network effect. \u201cThe network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service,\u201d Investopedia <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/terms\/n\/network-effect.asp\">explains<\/a>, adding: \u201cThe 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.\u201d <\/p>\n<blockquote><p>\u201cHowever, 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.\u201d<\/p><\/blockquote>\n<p>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. <\/p>\n<p>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. <\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/what-gives-ether-token-its-value\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# What gives Ether token its value? &#8221; Bitcoin holds the top spot as the world\u2019s 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\u2019s asset, Ether (ETH), has a different&#8230;<\/p>\n","protected":false},"author":1,"featured_media":196203,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDMvYmQ1NDY5OWEtNTA5Mi00ODVkLTliYmMtOWE0YjgxZjMwZGM1LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74891,75326,4965],"class_list":["post-196202","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-ethereum","tag-ethereum-2-0","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/196202","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=196202"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/196202\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/196203"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=196202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=196202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=196202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}