Jams in the chain
Unlike the Bitcoin blockchain, Ethereum's main function is not to create a single currency, but rather to host computer programs or smart contracts.
These allow in particular to automatically initiate transactions when a certain condition is met. For example, in the case of sports betting, the money played can be instantly distributed among the winners once the result is known, without the need for any outside intervention.
More than two-thirds of Initial Coin Offerings (ICOs), fundraising in virtual currencies, are also made from Ethereum.
The number of ICOs skyrocketed in 2017, contributing to the rise of ether, the price of which multiplied by more than 160 in a year, before starting to fall in January.
The problem was that all the activity around ICOs sometimes saturated the blockchain.
When it is difficult for the network to cope with the number of transactions, expenses increase and you have to pay more for an operation to be treated with priority. Average expenses typically hover around a few cents on the dollar, but temporarily exceeded $ 5.5 in early July, according to bitinfocharts.
To improve the capacity of the system, profound modifications of its architecture have been planned but the delays are accumulating and this, according to Jerôme de Tychey, president of an association that promotes in Ethereum, could have put off some investors.
Since May, ether has lost almost 75% of its value, taking its capitalization from about US $ 82.5 billion to US $ 23.1 billion.
Another consequence of the success of ether is the numerous ICOs carried out in this currency. According to a study by Diar, an online magazine specialized in crypto assets, companies that raised funds before the price spike “have huge reserves” of cryptocurrencies, in some cases higher than their capitalization, and when they put them to the sale contribute to the fall in prices.
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