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Why is Ethereum so underrated compared to PayPal?

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As of press time, PayPal's market capitalization is $100 billion larger than Ethereum's, and analysts point out that Ethereum's potential value is much larger than its current size.

4 Reasons Why Ethereum Is "Underrated"

Originally written by Anjali Jain& NBSP;

Original compilation:Unitimes

Since its launch, the Ethereum network has attracted interest from investors and developers due to its security, smart contract capabilities, and perceived growth potential. ETH, the network's native currency, is the second largest by market capitalization, after Bitcoin. At the time of this writing, the price is about $1,900, less than half its all-time high of $4,356 in May, but some analysts say it's not justified.

In a recently released video, analyst Lark Davis explains several aspects of the Ethereum blockchain and compares it to PayPal, the top online payment system, highlighting how undervalued Ethereum's native assets are. At the time of writing, PayPal's market capitalization was $340.2 billion, $100 billion more than Ethereum's $217.41 billion.

1. Transaction Settlement & NBSP;

However, when considering the volume and value of transactions between the two platforms (namely the PayPal and Ethereum networks), it seems unfair to evaluate only by market cap criteria. In the first quarter of 2021 alone, $1.5 trillion of transactions were settled on the Ethereum network, while PayPal's total transaction volume in 2020 was just $936 billion. At the current rate, Ethereum's transaction volume in a month is equivalent to PayPal's transaction volume in a year.

The chart below shows the quarter-on-quarter growth in transaction volume on the Ethereum network, showing the huge potential for future growth of transaction volume on the network.

Photo source: & have spent Messari

Even the Bitcoin network lags far behind Ethereum's daily settlement. According to Money Movers, about $9.93 billion is settled daily on the Bitcoin network, while more than three times that amount is settled on the Ethereum network.

2. Users & NBSP;

In terms of the total number of users on the platform, PayPal is the clear winner. PayPal had 392 million active user accounts in the first quarter of 2021. While the total number of unique addresses on Ethereum is 160 million, most users have multiple accounts, so the actual number of users is probably only a third of that number.

However, it's worth noting that PayPal has only amassed these users since its founding in 1998, while Ethereum is only six years old. The chart below shows the growth of users on the Ethereum network.

Image above: The history of the number of unique addresses on the site. Source: etherscan

3. Transaction Fee & NBSP;

In terms of transaction fees, PayPal charges different users different fees, ranging from 2.9% to more than 4% of the transaction value. Currently, the average transaction fee on Ethereum is $2.15, according to BitinfoCharts. This is the lowest average cost since December 20, 2020, when the average cost was $2.00.

Above: Average Gas prices for the Ethereum network so far this year. Photo source: etherscan

While Ethereum's Gas fees are likely to rise as demand for transactions increases. For example, while Ethereum's transaction fees were less than $2 for most of 2020, the bull market at the beginning of this year until the May crash led to a spike in Ethereum Gas transaction fees. ETH transaction fees soared to $69.92 on May 12, a day after ETH hit an all-time high of $4,164. A full week later, the transaction fee rose to $59.57, another short-lived high.

But analyst Lark Davis points out that Ethereum is moving toward a better future. The shift in the POS consensus and things like Polygon; The L2 expansion plan will lead to further reductions in transaction fees, while the Ethereum network is expected to be introduced in 2022. sharding (sharding) structure, which will keep Gas bills low.

In addition, PayPal offers a zero dividend as an asset class; However, with Ethereum's introduction of beacon chains in December, an investor could earn an average 8 percent annual return on staking ETH.

The analyst speculates that this proportion will rise to 25% once the current PoW and Ethereum 2.0 chains merge. It also has a higher value proposition, as ETH rewards can be rebet to boost returns in future years. Even the Defi app that runs on the Ethereum network offers a good return on investment in excess of 5-10% on USDC or other assets. The analyst added:

"The Ethereum blockchain is much more than a simple payment method. It's a complete ecosystem of financial products."

4. Adopt & have spent

The adoption of Ethereum by large financial institutions is another indicator of its future potential. The European Investment Bank, for example, issued $121 million worth of digital notes using Ethereum in April. Recently, the Bank of Israel chose the Ethereum network to test its legal Digital currency, the Digital Shekel.

At the same time, defy the years; (Decentralized Finance) Has been instrumental in driving Ethereum adoption. Many financial advisers believe that Defi is a better investment for Wall Streeters than Bitcoin. Defi Capital assets can be equated with stocks, liabilities, high liquidity, and short-term returns: These assets are more understandable to venture capitalists than complex blockchains, mining, staking, etc.

In a recent Bankless podcast, Jim Bianco, president of market Research firm Bianco Research, said that investors "understand [DeFi] tokens because it's very similar to what they've seen in the space. I can see that one day, The capital structure of the company includes not only stocks and bonds, but also tokens."

Many top companies currently hold bitcoin and other cryptocurrencies, including ETH, on their balance sheets. Data from crypto asset managers also confirms that a growing number of advisers and investors are looking at cryptocurrencies, and Defi in particular, to diversify their portfolios.

According to Coingecko, the total value of the current lockdown in DEFI is $64.87 billion, which is a significant number considering the global market value of cryptocurrencies at $1.5 trillion. At its all-time high, DEFI was valued at more than $142 billion, but the larger market correction has slowed that pace. According to investors, the Defi boom is here to stay.