Ethereum hits new record high above $3,400, extending its more than 300% rally this year

Ether's rise has been attributed to a growing number of developers building decentralized finance or DeFi applications on the Ethereum platform.

Ethereum hits new record high above $3,400, extending its more than 300% rally this year

Jack Taylor | Getty Images

GUANGZHOU, China — Ether, the digital coin linked to the Ethereum blockchain, hit an all-time high of $3,456.57 as the cryptocurrency extends a rally that has seen its price gain around 360% this year.

The digital coin pared some of those gains in Tuesday afternoon trade in Asia was trading at $3,271.90 at 12:12 p.m., according to CoinDesk data.

Interest in cryptocurrencies has surged over the past year with bitcoin continuously pushing new record highs. A number of factors including rising institutional interest and major companies such as Tesla buying the digital coin have been credited with its rise.

Bitcoin has been described as "digital gold" or a store of value in times of geopolitical tumult or financial market volatility as well as a hedge against inflation.

But Ethereum is different. It acts more as a platform that developers can build apps on. Ethereum is the name of the network or underlying blockchain technology, while ether is the digital currency used to power the platform.

So-called smart contracts are a key feature of Ethereum. These are contracts that can be automatically executed using code.

There is growing excitement about the use of Ethereum in so-called decentralized finance, or DeFi, applications. These are blockchain-based financial services, such as lending, which could in theory bypass banks and brokerages.

Last month, the European Investment Bank said it issued its first ever digital bond on a public blockchain using Ethereum.

A rising number of DeFi applications built on Ethereum and growing institutional interest in the technology could be behind the rapid price rise.

"Thousands of developers are building applications that recreate traditional financial products in decentralized ways on top of Ethereum, and as more and more users pour in to interact with these apps, they require ETH (ether) to conduct any transaction," Sergey Nazarov, co-founder of smart contract company Chainlink, said.

"Second, there seems to be growing institutional interest in the public Ethereum blockchain, as stakeholders play around with ways to leverage the public network."