On May 6, 2017 at 4 pm EDT, Ethereum’s developers announced that the popular cryptocurrencies network is moving to upgrade from “Ethereum” to “Ethereum Classic” to better reflect the network’s original intentions. This upgrade was made as a result of a disagreement in December 2016 over the direction the Ethereum project should be going in: should it continue down the path of building a decentralized world computer that can run decentralized applications (dApps) and be used by anyone in any country, or should it shift its focus to being more oriented towards building a store of value for traders?

Ethereum is the second largest cryptocurrency by market capitalization, and is the #3 cryptocurrency by market value as of writing. This means that Ethereum, like Bitcoin, is a decentralized, peer-to-peer cryptocurrency that allows people to create new digital assets (or “tokens”) and store them on a decentralized public ledger. The goal of this post will be to identify the reasons Ethereum is rising in popularity, and to examine the risk of this rising popularity and whether it will continue.

Goldman Sachs said Tuesday in a note to clients that the blockchain with the most potential is Ethereum, suggesting that its ETH could become the dominant digital store of value.

Goldman predicts that the total capitalization of the Ether (ETH) market could surpass the total capitalization of the Bitcoin (BTC) market in the coming years, according to a report by Business Insider.

Currently, [Ether] seems to be the cryptocurrency with the most potential in the real world because Ethereum, the platform on which it is a native digital currency, is the most popular platform for developing smart contracts.

Smart contracts are software programs that automatically execute digital contracts. This technology has contributed to the emergence of decentralized financial protocols (DeFi) and decentralized applications (DApps) based on cryptocurrencies.

Analysts have noted that Bitcoin has become a stronger brand due to its pioneering advantage, but they say it lacks the usability of Ether and lags behind in terms of transaction speed. Due to its focus on fiat currency and network security, bitcoin does not yet offer the same level of functionality as Ethereum.

Because Ethereum is a younger network, it could also grow faster than Bitcoin. While bitcoin has grown 261% in the past year, ETH has grown 856% in the same period.

Despite Ethereum’s preference for Bitcoin, analysts also say that gold is a better store of value than digital assets. They characterize gold as a protective hedge against inflation and cryptocurrencies as a risk-adjusted hedge against inflation.

This competition between cryptocurrencies is another risk factor that prevents them from becoming safe havens at this stage.

The comment comes a month after analysts at Goldman Sachs’ investment strategy group told clients that cryptocurrencies were not even an investable asset class. Analysts said:

The digital asset ecosystem may be revolutionizing the future of everything, but that doesn’t mean cryptocurrencies are an asset class.

Banks aren’t the only ones who have noticed that Ethereum has significantly outperformed Bitcoin. The founder and CEO of Celsius Network, a cryptocurrency custody and lending company that manages $17 billion in digital assets, told Kitco News Monday that Ether has already eclipsed Bitcoin in the number of holders among users of the platform and thinks it will do so in the broader world by 2022 or 2023.

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