I assume that you are a crypto lover and eagerly following a few coins including ethereum due to their recent price rise and volatility. In this article let me try to articulate my conviction about ethereum as a long term investment tool for wealth generation along with potential warning signals.
I am sure most of the crypto investors started their investment journey in this space by buying some bitcoin. Ethereum was little known to public apart for the hard core blockchain developers and few lucky tech savvy investors who were able to get it when it was trading below USD10 in last year. The price of ether, the fuel or crypto currency behind ethereum, has risen a mammoth 5000% increase in less than 6 months.
1. Ethereum is a disruptive technology
Ethereum project was bootstrapped via an ether pre-sale in 2014. It is developed by the Ethereum Foundation with contributions from great minds across the globe. Ethereum is a decentralized platform that runs smart contracts. Smart contracts are applications that run exactly as programmed by the developers without any possibility of third party interference, downtime and censorship with least minimum chance for fraud compared to centralized applications.
The applications built on ethereum (known as DAPPS or decentralized applications) run on a custom built blockchain, a decentralized powerful shared global network that can move value around and represent the ownership of property using its coin named ether. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past and many other business use cases that have not been thought through, all without the involvement of an intermediary.
I believe ethereum blockchain has the power to change the current centralized technology landscape over a period of time. Few examples are:
- A national currency system running on top of ethereum
- Land registry
- Voting systems
- Decentralized and secured storage ideas
- Prediction systems
- Health care and medical history reports
- Patent and intellectual property storage and so on...
2. Ethereum is still evolving as a technology, but with a moat
Ethereum blockchain technology is just 3 year old and it is evolving through its teething problems. I can relate it to what internet was in 2000. In 1995, the total internet usage population was less than 1%. The number of internet users has increased tenfold from 1999 to 2013. The first billion was reached in 2005. The second billion in 2010. We reached third billion mark in 2014. Around 40% of the world population has an internet connection today with 3.37 billion users.
Though we cannot compare internet and distributed blockchain neck to neck, I am sure the later will survive the initial hiccups related with scalability and performance. Let us not guide the success of ethereum by the number of ICOs coming every day. But at least 10 out of these thousands of ICOs will emerge victorious in the next 5 years. These 10 ten ideas will definitely touch at least 2 billion people through their DAPPS in the next 5 years.
Over time it may be proven that Ethereum retains the advantage simply because it is not a single item as Bitcoin is, but instead it is part of a platform – a movement towards smart contracts and transaction efficacy that has no equal. Being inextricably linked to this platform, it stands a much greater chance of continued and rapid valuation, with a strong capacity to recover from stumbles.
3. Growing Community with clear leadership
Ethereum development community is unofficially headed a leader with clear vision, Mr Vitalik Buterin. He was initially part of the bitcoin core development team and later on moved out to create ethereum along with few others. They have clear road map ahead for the scalability and performance issues. To give a clear heads-up on how the ethereum community is growing, Ethereum Stack Exchange is cleared for final graduation and immediately dropped beta status.
Ethereum was one of the fastest ever graduated Q&A sites in the Stack Exchange network (~ 500 days). Ethereum joins an elite of 35 technologies which deserve it's own fully-fledged Stack Exchange Q&A site in the network, in one line with communities like java, Ubuntu and Android.
4. Crypto is the best place for systematic investment plan
At least for next 2 years, crypto currency space including ethereum is the best place for systematic investment plan. Ethereum is now trading at $280 - $320 range. Start your first SIP now. Keep some money aside for $210, $160 and $90 ranges.
You know, people talk about this being an uncertain time. You know, all time is uncertain. I mean, it was uncertain back in – in 2007, we just didn’t know it was uncertain. It was – uncertain on September 10th, 2001. It was uncertain on October 18th, 1987, you just didn’t know it.
– Warren Buffett
I have deliberately avoided technical terms like gaslimit, Viper, solidity and many more. But if you are a tech savvy investor, do read about these to build up your conviction. I am not doing any ethereum price prediction for 2020, 2025 and so on as markets sometimes behave so irrationally. But I am sure this one will be one of the best performing "stocks" in your overall investment basket, over a period of time.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.