Ether is the currency of the Ethereum network. Its value proposition is not as high as the one of bitcoin because bitcoin is the most popular cryptocurrency and it has been around much longer than ether. At the same time, Ether has experienced great success since its launch because it has several features and benefits that bitcoin and other cryptocurrencies do not provide.
While today many people view Ether as just another cryptocurrency, this was not the idea behind the coin. The Ethereum network is much more than a financial network because it allows developers to create their own applications and projects on the network. The network is able to operate because participants take actions, provide computing power and engage in transactions. Vitalik Buterin and other Ethereum network co-founders envisioned Ether as a value token that users on the network would exchange for efforts, energy and computing power that other users on the network provide in the form of block creation, block validation and the development of the network. This is the main difference between ether and bitcoin. From the beginning, Satoshi Nakamoto coded the bitcoin network with a goal of turning it into a global digital currency platform on which users can engage in peer-to-peer transactions and use bitcoins to pay for anything and everything.
Ether token has a much more specific use. It is a way to fuel and support the development and deployment of applications, including smart contracts, on the Ethereum network.
While the market for the Ether currency is interconnected with the Bitcoin market, the market for Ether developed in a very different way. The value of bitcoin as a currency is based on the laws of supply and demand. The more people use bitcoin, the higher it goes in price. The bitcoin network adds bitcoins by mining them and the number of coins is limited. There can only be 21 million of bitcoins. Ether token does not have a hard cap. In 2014, 60 million of Ether tokens went to users who purchased them and 12 million were given to the Ethereum foundation. These tokens were pre-mined. Currently, it takes about 12 seconds to add a block to the Ethereum blockchain and miners get 5 ethers for every block that they add to the blockchain. This means that the Ethereum network adds about 18 million tokens per year. There is no cap on how many tokens the network can have. However, the value of ethers keeps growing just like the value of bitcoin keeps growing because more and more people are joining the network and demand is outpacing the supply.
Factors that have an impact on the price of Ether
The number and quality of Initial Coin Offerings (or ICOs) have a profound impact on the price of the token of the Ethereum network.
The network allows developers to create their own decentralized applications and the more developers choose to do so, the higher the value of the currency that serves as a means to pay for actions, computing power and block creation on the network.
Also, when developers start a new ICO, they would typically exchange some of their new tokens into ether tokens. Many of the new tokens have appreciated in value very significantly over short periods of time, in turn driving demand and value of the ether token.
Media coverage and attention to the network also have an impact on the price of ether. When the price of the token started growing significantly in the beginning of 2017, media started paying attention, which in turn attracted even more attention and the price of ether kept going up.
Media attention and apps on the network may have not only positive effect on the price of the token but can also have a negative influence. For example, when hackers successfully attack one of the popular apps on the Ethereum network, the price of ether typically goes down significantly. This happens despite of the fact that the Ethereum network is working in the way it’s supposed to and the only reason hackers are able to succeed is because app developers, not Ethereum network developers, have made a mistake or mistakes in their code.
Both the bitcoin network and the ethereum network are still very young, which in part explains the extreme volatility of the price of the tokens on the networks. While the volatility may be indicative of cryptocurrencies not being a suitable investment for those who are looking for stability and predictability, it also provides a lot of opportunities to traders.
Historical prices of ether
The value of Ether currency has increased dramatically since its introduction to the market in 2015. Initially, the price of the token was around $1. In 2017, it peaked above $800 per token. However, for a while since the introduction of the token in 2015 its value did not go above $2. For most of 2016 and first month of 2017 the price remained around $15. By June of 2017, the price has surpassed $300. In July of 2017, it went down below $200 to only recover again later in the year.