Reasons Why Ethereum Could Be Doomed

Ethereum is the second largest cryptocurrencies in terms of popularity and market cap. However, it is still shrouded in controversy amidst technical and operational deficiencies that raise serious concerns about its long-term prospects.

Below are some of the factors that any would-be investor should pay close attention to, before investing in the cryptocurrency.

Initial Coin Offering Risk

Just like other cryptocurrencies, Ethereum has risen in value because of its ability to facilitate Initial Coin Offerings. The ICO market has ballooned to over $3 billion and in the process strengthened the price of Ethereum in the exchanges.

Ethereum without a doubt is the number one platform for ICOs, something that puts it in a precarious position. The digital currency price could take a hit on projects using the platform for ICOs deciding to liquidate the amount of Ether raised and dump the same in the market.

There is growing suspicion in the cryptocurrencies space that most of the ICOs are outright scams. With regulators moving to crack down on ICOs, Ethereum could significantly take a hit.

Immutability Constraint

A key selling point of most cryptocurrencies has always been their ability to create an undisputed record of events that cannot be altered in any way. That is not the case for Etherum. The introduction of hard fork after the DAO was hacked removed the immutability aspect on the blockchain.

What this means is that any record of transactions carried out on the blockchain could be wiped out in case of another hack. Ethereum Classic which was formed from the hard fork, on the other hand, is highly immutable.

Network Congestions

Network congestion has emerged as a big problem for Ethereum. The amount of ICOS carried out on the Ethereum Blockchain network has significantly affected the number of other transactions that the cryptocurrencies handle.

Fast transaction speeds for transactions has emerged a key selling point for other cryptocurrency which are slowly eliciting strong demand at the expense of Ethereum.

Exploits and Weakness

If history is anything to go by, then Ethereum is not immune to attacks that can result in potential loss of people’s funds. The cryptocurrency has already suffered two major breaches one of which resulted in the split of the initial cryptocurrency.

The second exploit was the most significant as it showed the lack of a multisignature solution synonymous with immature technologies.

Inflation Concerns

Currently, there is no cap on the amount of Ether coins allowed in circulation at any given time. Unlike bitcoin which has set its cap at 21 million coins, Ethereum coin value will continue to depreciate as more coins hit the market.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Image courtesy of Laura Thorne via Flickr