Research Themes
Jun 2021

Ethereum: It’s Like a Spreadsheet with Macros

Ethereum is the leading blockchain protocol for decentralized apps and finance. Citi’s Ronit Ghose hosted a recent call with Emilio Frangella, a full-stack Blockchain developer at AAVE. They discussed its pitfalls, potential and how Ethereum 2.0 – with significant scalability and sustainability – may be achievable this year. We summarize the key takeaways.
Citi Global Insights

Ethereum v Bitcoin

Bitcoin has so far led the march in crypto, dominating the space in terms of market value, brand and popularity. Ethereum was launched in 2015. It allows users to create decentralized apps on top of the Ethereum platform. Ethereum hosts approximately 2800 such apps, and the total value locked in decentralized finance contracts amounts to $63 billion. Decentralized finance, or DeFi, extends blockchain use to financial services – savings, lending and insurance. In the future, use could extend further from non-financial services to execution of smart contracts.

The Next Iteration

Ethereum is set to undergo radical upgrades to address its scalability and sustainability. Energy usage is set to drop to that of a small town from current consumption levels, which are more on par with a country or province. That said, Ethereum 2.0 has been promised before but has yet to appear.

Bitcoin v Ethereum

  • Both are based on blockchain technology.
  • Bitcoin was created to make decentralized and anonymous peer-to-peer payments. It can be seen as a payments network built on a distributed database and a lot of nodes. Each of these nodes has a copy of the database (ledger) and adds transaction details only after the network has agreed on it.
  • Ethereum is a network. Ether is the currency used on that network. It goes a step further than Bitcoin by letting network users and developers create their own decentralized applications and establish smart contracts, allowing users to exchange anything of value, including shares, real estate, insurance, etc.
  • Emilio Frangella from AAVE said: “If Bitcoin is an excel spreadsheet with new transaction data added in subsequent rows, Ethereum is a spreadsheet with macros.”




Ronit spoke to Emilio on the same day that cryptocurrencies crashed across the board (May 19), with prices of Bitcoin and Ethereum declining intraday as much as 31% and 44%, respectively.

It was a reminder that cryptocurrencies, such as Bitcoin, remain highly volatile – as seen in Figure 1.

Figure 1: Volatility of Bitcoin versus Gold versus Fiat Currency

Note: We define volatility as the standard deviation of daily returns for the preceding 30 days.

Source: DataStream, Citi Research

Bitcoin volatility continues to be approximately ten times higher than major exchange rates. Data from Chainalysis suggests that the main sellers in this most recent crypto-crash were retail investors rather than institutions. Despite the price volatility, crypto supporters argue that the long-term thesis remains intact.

For more information on this subject, please see Global Diversified Banks - Global Financial Insights: Ethereum 101.

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.




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