NEW YORK — Ethereum has outperformed major digital currency rivals this year, bolstered by the surge in decentralized nance (DeFi) and the anticipation of a technical adjustment this summer, but it faces hurdles that could stall its rise.

With a jump of more than 350% in its price this year, ethereum has the second-largest market capitalisation after bitcoin, but not as much cache and perhaps more operational challenges that could prevent it from eclipsing its major rival.

In the crypto world, the terms "ethereum" and "ether" have become synonymous. Technically, ethereum is the blockchain network in which decentralised applications are embedded, while ether is the token or currency that enables or drives the use of these applications.

Ethereum's market cap on Friday was $410 billion, second to bitcoin's at more than $1 trillion, according to data tracker CoinGecko.com. It hit a record high of $3,610.04 on Thursday and was last up 1% at $3,524. Bitcoin, meanwhile, has risen a more modest 97% this year. Since hitting an all-time high of just under $65,000 in mid-April, bitcoin has actually fallen roughly 18%.

A rise in institutional interest has increased ethereum demand, but supply has been limited. The token's supply in exchanges in April hit its lowest in nearly 2-1/2 years, according to Kraken Intelligence, a research blog from cryptocurrency exchange Kraken.

"It's more than just a coin. It's a whole ecosystem that allows other applications to be built," said Bradley Kam, chief executive o cer of blockchain domain provider, Unstoppable Domains.

At the heart of ethereum's ascendancy is DeFi, which refers to peer-topeer cryptocurrency platforms that facilitate lending outside traditional banking institutions. Many sites run on the ethereum network, using an opensource code with algorithms that set rates in real time based on supply and demand. The value locked — the total number of loans on DeFi platforms — was $79 billion as of Friday, DeFi Pulse data showed, up nearly 600% from $11 billion in October.