Cryptocurrency Individual Retirement Accounts (IRAs) are becoming increasingly popular thanks to the rapidly rising adoption rate of top cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). As the world’s first cryptocurrency, BTC has so far been the primary choice for crypto IRAs, but this is gradually starting to change.
While BTC is strictly used as digital cash, Ethereum offers more versatility from a development perspective because it is a multipurpose cryptocurrency. The Ethereum blockchain is one of the largest crypto ecosystems on the market, with thousands of decentralized apps, DeFi platforms, and crypto tokens based on the ETH network.
Crypto enthusiasts exploring crypto IRAs
should definitely pay attention to Ethereum as a viable option to include in their IRA. Let’s take a detailed look at Ethereum to help you understand all the key characteristics of one of the most valuable cryptocurrencies
on the market.
A Brief History of Ethereum
The Ethereum blockchain was launched back in 2015 by a team of crypto veterans and blockchain developers led by programmer Vitalik Buterin. The idea behind Ethereum was to create an open-source, nonprofit blockchain that provides users with much more than just digital cash services like Bitcoin and Litecoin (LTC).
Instead, the Ethereum blockchain aims to provide developers with programming tools and resources for launching different kinds of tokens and platforms, such as DeFi apps, exchange platforms, staking protocols, crypto games, NFTs
, and virtual marketplaces. The ecosystem was powered by the Ether token, which is used to facilitate all transactions on the ETH blockchain.
The project was an immediate hit, as there weren’t any similar crypto projects on the market at the time of its launch. Other altcoins were mostly copying Bitcoin by providing virtual cash functionalities. Ethereum went much further by giving real problem-solving features to cryptocurrency and providing developers with free tech tools for developing platforms.
How Does the Ethereum Blockchain Work?
The ETH blockchain is a Proof of Work (PoW) blockchain, similar to Bitcoin in its basics. This means that the blockchain is fully decentralized, without any single authority or central server responsible for validating network traffic. Instead, all transactions are checked and validated by independent network nodes, i.e. Ethereum miners and their computers.
Every transaction needs to undergo a rigorous validation process that requires miners to use their rigs’ hashing power to find the right hash for each transaction. When miners find the right hash, they present it to the whole network as proof of work and wait for additional confirmations before they add it to the next block of the ETH blockchain.
This process consumes a lot of time and computing power, which is why miners earn a block reward of freshly mined ETH coins.
Ethereum’s Main Features
One of the revolutionary features of the ETH blockchain is the smart contract
, self-executing, automated pieces of computing code that are created in order to perform certain tasks without the need for human supervision or participation. For example, a company can use smart contracts to automate the salary payout procedure for their employees, or a crypto exchange can use these contracts to enable trustless transactions between complete strangers.
A smart contract operates on the basis of safe locks that make sure both parties need to fulfill their end of the deal before they can get the agreed-upon results. This way, when two strangers agree on an exchange of assets, both sides need to deposit the agreed amount of funds before they can get their share of the deal.
are the main utility of the Ethereum blockchain; however, without smart contracts, developers wouldn’t be able to create and launch dApps. These applications don’t use developer resources from centralized big tech companies that control all apps and platforms launched with their programming tools. Instead, Ethereum-based dApps are built with the help of the Ethereum programming language called Solidity
and the Ethereum Virtual Machine (EVM)
DApps can be launched for all types of businesses and entertainment purposes, from decentralized exchange platforms like Uniswap (UNI)
and DeFi protocols like Curve
to NFT marketplaces like OpenSea
and crypto games such as Axie Infinity (AXS)
Developer teams that want to quickly launch their own cryptocurrency as part of their dApp or DeFi ecosystem don’t need to create a whole blockchain from scratch. They can always use the Ethereum chain to launch a crypto token, thanks to the ERC-20 token standard
This token standard includes a set of rules and parameters for launching cryptocurrencies based on the ETH network, and it’s totally free. Anyone with some programming knowledge and a solid project can launch their crypto as an ERC-20 token. This was one of the most innovative features of the ETH blockchain when it was launched because before Ethereum developers had to either create a whole blockchain from scratch or fork an existing chain like the BTC network.
Another very important Ethereum token standard is the ERC-721 standard, which is the token standard for non-fungible tokens (NFTs) built on the Ethereum chain. The ERC-721 standard paved the way for key NFT marketplaces like OpenSea
and played a key role in the popularization of NFTs
, which are exponentially growing in terms of popularity and adoption rate.
So, How Many Ethereum Are There?
Now that we’ve laid out the key characteristics of the Ethereum blockchain, let’s take a look at the numbers behind the Ethereum ecosystem.
Ethereum is PoW-based crypto that’s going through a transition process to a Proof of Stake model
where mining won’t be possible anymore. Until then, the Ethereum supply is constantly on the rise thanks to miners. The easiest way to monitor the current supply of ETH coins, along with the Ether price and market capitalization, is through the Ethereum page on Coinmarketcap
The circulating supply of Ethereum is well over 100 million coins, and the number is constantly increasing. There isn’t any ETH hard cap that regulates the maximum amount of coins, unlike Bitcoin, which is capped at 21 million coins.
Ethereum’s Performance in 2021
Ethereum’s GAS fees are known to be some of the highest on the crypto market, and this didn’t change for the better in 2021. In fact, Ethereum fees have only gone up thanks to the high influx of new ETH chain users. The fees are especially high during periods of high traffic when users compete with each other in so-called gas wars by setting exponentially higher transaction fees to get their transfer processed as fast as possible. The trend of sky-high gas fees is especially visible on the NFT market, which is dominated by Ethereum and received a huge increase in market cap during 2021. Around 41 billion USD worth of ETH
was transferred in NFT related transactions.
In terms of price action, 2021 was the best year so far for Ethereum since the coin managed to reach a new all-time high
of 4,891 US dollars per coin.
Although new dApp and smart contract centered blockchains like Solana (SOL) and Avalanche (AVAX) are becoming increasingly popular, Ethereum is still firmly dominating the market when it comes to smart blockchain networks with high interoperability features. Ethereum managed to constantly hold over 15% of the total crypto market cap throughout 2021, while the Ethereum mining figures remained within the optimal 18 million Ether annual amount.
A Few Ending Words…
The information about Ethereum presented in this post aims to provide you with relevant knowledge about the second-largest crypto on the market in order to enable you to make your own decisions on whether you want to include ETH in your IRA or not.
If this article peaks your interest in exploring Ethereum IRA options, feel free to contact one of our Coin IRA crypto specialists