Crypto exchange Coinbase says institutions are beginning to spend large amounts of capital on the second-largest cryptocurrency, Ethereum (ETH).
In a new overview of 2020, the US-based company says Bitcoin remains the favorite among institutional players, but notes that the big money clearly sees potential in the future of ETH.
“The case for owning Ethereum we hear most frequently from our clients is a combination of i) its evolving potential as a store of value, and ii) its status as a digital commodity that is required to power transactions on its network…
While our institutional clients predominantly bought Bitcoin in 2020, a growing number also took positions in Ethereum, the second-largest crypto asset by market capitalization. Ethereum performed well against USD in 2020, outpacing Bitcoin to finish the year up 487% at $745.”
The review points to Ethereum’s scaling issues as an ongoing challenge and highlights the potential for the smart contract blockchain to play a major role in the future of finance.
“Ethereum’s programmability brings new challenges and risks, but also incredible potential. Obvious issues with applications currently using Ethereum include i) scaling friction, i.e. how to improve throughput on-chain when frequent transmission of data is required; ii) relatedly, high costs associated with transaction fees (‘gas’ fees) when the network becomes congested; and iii) an increased attack surface with complex smart contracts, which can grow to hold large stockpiles of crypto assets and thus attract bad actors.
The potential benefits of applications built on Ethereum, however, are significant. In 2020 Ethereum developer and investment activity in decentralized finance (‘DeFi’) grew, as did use of Ethereum-based stablecoins such as Tether and USDC.”
Coinbase says it’s also crossed a new milestone in the number of users on its platform.
It now has 43 million cus...