[Crypto Q&A] Where is the value in Ethereum derived from?

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In addition to utility value, Ether also has speculative value. This is value that is derived from speculative activities (such as trading and investing) which currently accounts for most of the value behind all crypto-assets.

Although there are many cryptocurrencies out there competing with Bitcoin to get the market share, none of them have been able to challenge the latter but one of course named Ethereum, which has become the second most popular crypto in the world. But what is Ethereum and how it is different from Bitcoin? Ethereum-Bitcoin Ethereum is often touted as a “world computer.” What that fancy language really means is that Ethereum is a platform for the creation of decentralized applications (dapps), using what are known as smart contracts. Smart contracts are bits of code that automatically execute an action after certain requirements have been met—say, sending a slice of an app’s profits to investors after a predetermined date has passed.

It’s because it is the ‘juice’ that keeps the Ethereum network running; one has to spend small amounts of Ether to send transactions that may involve value transfers or (more importantly) function calls on smart contracts. As such an investment in Ether represents a belief that the Ethereum network will continue to grow in volume/transactional size i.e. that more and more businesses and individuals will start using the cryptocurrency for a wide range of purposes (see, for example, Slock.it‘s recent activity involving Decentralized Autonomous Organizations structured as trusts with the purpose of making decentralized investments). Smart contracts are what investors are really excited about, and have contributed to Ethereum’s sharp rise in value. So these are some reasons due to which it has value.

market

buy & sell

from function

popularity