Ether, the cryptocurrency which runs the Ethereum blockchain network, fell over 10% the last couple days which was caused by a backlog of network orders from recent Initial Coin Offerings (ICOs). The cryptocoin had reached a high of over $400 a coin earlier this month but is down to around $320 as of this writing.
Ethereum Was Soaring
Ether began the year valued at around $8 per coin. However, starting in March of this year, the value of Ether began to skyrocket. Contributing to the Ether’s spike were the growing number of ICOs based on Ethereum. Since these ICOs used Ethereum’s network, every transaction within each ICO had to be powered by “gas” a micro unit of Ether. Also, the buzz generated from these ICOs probably increased Ethereum’s exposure to more mainstream audiences thus increasing Ether’s popularity as a cryptocurrency as well. At any rate, the value of Ether hit $400 earlier this month, a huge milestone considering no other cryptocoin besides Bitcoin carries a value over $100 a coin. Clearly, there are now only two big players within the cryptocurrency scene: Bitcoin and Ethereum.
ICOs Lead to Bottleneck
This week saw the launch of several notable ICOs that drew record investments. First, there was the launch of Bancor’s ICO which raised over $150 million in just a few hours making it the largest cryptocoin crowdsale ever. Mobile messaging platform, Status, raised over $100 million a few days later. There were a few smaller ICOs but those were the two largest. What’s more important, however, is that all of these ICOs ran on Ethereum’s network which put a huge strain on the networks ability to process transactions. In fact, it was reported during Status’ ICO that Ethereum’s network was so backed up that a number of investors trying to take part in the ICO had their orders fail.
Working on a Solution
As a direct result of the network backlog, the price of Ether soon plummetted. According to price charts on Coindesk, Ether began the week at around $380 per coin and almost immediately fell to $320 once reports of the backlog came in. Clearly, investors frustrated with the growing number of failed transactions lost some trust in Ethereum’s network. The network’s scalability and lack of processing speed is a known issue of Ethereum which has been recognized by the developer’s of Ethereum. According to some reports, the developer’s are currently working on solutions to Ethereum’s processing and scalability issues. The number of ICOs does not appear to be slowing down so hopefully they figure it out soon otherwise we could see similar backlogs and price drops again in the future.