It is not just shiny new apps jumping on the Ethereum bandwagon. The European Investment Bank last month issued a digital bond on the Ethereum blockchain worth €100m (£87m) with the central bank of France. Visa, meanwhile, has said it will begin settling some transactions using Ethereum.
Bullish analysts argue Ethereum is experiencing a surge in interest because of these use cases, leading to its “decoupling” from Bitcoin’s price moves.
“Bitcoin and Ethereum are now moving more independently than before,” says Deane of Quantum Economics, and Ethereum projects are attracting “adoption and use on their own merit”. While proponents remain misty-eyed, many real-world Ethereum projects have been beset by scams and hacks.
Scams, hacks and an electricity demand comparable to Hungary
Gerard says some Ethereum-based projects remain “laughably shonky” with many “straight up scammers”.
The history of the Ethereum blockchain is littered with projects that have collapsed or disappeared with investors’ money.
In 2016, the hack of an Ethereum-based project called the DAO saw $50m stolen and forced Ethereum’s development team to perform a “hard fork”, in effect a reset, that restored stolen funds. In 2017, a hacker deleted code from digital wallet provider Parity destroying 530,000 Ether coins – today worth $1.7bn.
The Ethereum network was also the launch point for “initial coin offerings”, unregulated fundraisings for new digital coins. Many of these ran on Ethereum’s underlying technology. Dozens have since been exposed as scams.
Ethereum is also notoriously slow and has previously become bogged down in crazes such as “Cryptokitties”, a kind of digital trading game.
Its backers are currently making efforts to upgrade the network to Eth2, which they hope will mean it uses less computational power and therefore less energy. According to Digiconomist, Ethereum currently has an electricity demand comparable to that of Hungary.
And while there has been emerging interest in such apps, speculation by amateurs and financial firms looking for quick returns has also pumped up the price of Ether. IG Markets analyst Kyle Rodda called the surging price “speculative excess”.
While the developers of the Ethereum blockchain may be anarchic dreamers happily buried in code, in the real world the market is still being driven by those after a quick buck.
Gerard puts it bluntly: “Investors have run out of sane investments and are now looking at insane investments.”