Can $ETH ETFs and Smart Contracts Surpass $BTC’s Lightning Network?

• Ethereum ($ETH) exchange-traded funds (ETFs) are seeing greater inflows than Bitcoin ($BTC) ETFs, with $118M vs $74.9M.
• Ethereum's use case with smart contracts makes $ETH ETFs more representative of the broader crypto economy.
• $ETH could be poised formass financial adoption if its ETFs gain sufficient traction and developers keep building on the blockchain.

$ETH has long played second fiddle to $BTC, but this might change with the launch of $ETH ETFs on July 23.

Compared to $BTC's store-of-value appeal as the ultimate digital gold, $ETH brings real utility through smart contracts that power decentralized finance (DeFi).

Let's see whether $ETH ETFS can surpass $BTC's Lightning Network achievements and what this means for the crypto industry.

Evaluating How ETFs Impact Ethereum's Long-Term Utility

After an enthusiastic launch on July 23, Ethereum ETFs achieved a $1B trading volume one day later, surging to a $2.6B peak since launch.

$ETH ETFs offer investors immense potential as financial institutions slowly warm to crypto. Katalin Tischauser of Sygnum Bank expects that Ethereum ETFs could amass $10Bin Assets Under Management (AUM) within their first year.

Sygnum Bank's Head of Research, Katalin Tischhauser, discusses the future of Ethereum spot ETFs in an interview with The Block.

"Ethereum's lesser name recognition is likely to mean slower adoption, and with its market capitalisation a third of Bitcoin's, we expect the...

- Sygnum Bank (@sygnumofficial) July 31, 2024

This week's$118M Blackrock $ETH ETF inflow supports this hypothesis, especially when compared to the $74.9M IBIT ETF inflow (for $BTC). This marks the first time Blackrock's $ETH ETFs outperformed their $BTC alternatives.

The early success of $ETH ETFs is likely due to Ethereum's out-of-the-box capabilities, programmable blockchain, and flexible smart contracts. The network also houses multiple protocols without needing a layer 2 solution like the Lightning Network.

These self-executing smart contracts power almost 60% of the blockchain economy, from NFT trading to DeFi.

They also provide transparency, security, and efficiency by writing the terms of the agreements directly into the code.

The dominance of Ethereum's smart contracts on the crypto economy means two things for investors:

1. $ETH offers unique real-world use cases and real-world value. Unlike BTC, it's not just a store of value.
2. ETH ETFs reliably represent the broader crypto industry performance.

Behind $ETH are numerous exchanges, traders, NFTs, DeFi protocols, and many profitable projects (like Uniswap) that support its ongoing development.

Compared to $BTC ETFs, Ethereum ETFs offer a more direct correlation to the performance of the crypto market.$ETH ETFs vs Bitcoin's Lightning Network - What's More Useful?

The Lightning Network is a second-layer solution intended to add utility to $BTC by enhancing its scalability and transaction speed.

The project has become a part of most of Bitcoin's infrastructure, and many popular exchanges (like Binance and Coinbase) use it. Its $BTC capacity has also skyrocketed over the years.

The Bitcoin 2024 conference showed the Lightning Network's reliability and potential for the industry.

But while this is a welcome addition, it doesn't fundamentally change Bitcoin's core functionality.

Bitcoin will likely remain the crypto world's reserve currencythanks to its simplicity and robustness as a decentralized, immutable ledger.

Ethereum offers inherent flexibility right from inception. It can execute complex financial instruments and derivatives through smart contracts, which aligns well with the financial system's predisposition towards such tools.

When it comes to finance, simplicity isn't always the bestoption, particularly given the U.S. dollar's status as the world's reserve currency, wherecomplex financial products are thenorm.

The Road Ahead for $ETH ETFs

As Ethereum ETFs and smart contracts gain traction beyond the crypto industry, $ETH could play a pivotal role in the future of finance.

ETH's price could also show significant upside potential, as only 10% of $ETH's supply currently sits on exchanges; any sudden demand boost could dramatically impact $ETH's token price.

While Bitcoin will remain a digital store of value, Ethereum's broader applications make it more versatile and practical for everyday financial operations

References

Lightning Network In A Class Of Its Own At Bitcoin 2024 Conference (Bitcoin Magazine)

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