Ethereum is the second-largest cryptocurrency by total market value after Bitcoin, and it is often compared to its iconic and better-known predecessor. But while Bitcoin revolutionized decentralized networks and launched the cryptocurrency space as we know it, Ethereum’s contributions are in many ways broader. In addition to a decentralized payments system, Ethereum also provides a global network of decentralized applications, or dApps. The breadth of use cases of dApps and the Ethereum network more generally could eventually lead it to surpass Bitcoin in adoption around the world. Here are some of the most important ways that Ethereum can be used.
“Ethereum” refers to the broader network which is powered by the crypto token “ether,” although the latter is often called “Ethereum” as well. In addition to a host of other applications across industries, Ethereum makes available a very popular cryptocurrency with a total market value of over $144 billion as of Nov. 20, 2022. With all of Ethereum’s many uses, it can be easy to forget that it powers a hugely valuable and broadly-used crypto token as well.
A key feature of Ethereum from the time of its founding is smart contracts. These are self-executing contracts which do not require outside verification and which can be used to verify and facilitate transactions on the Ethereum blockchain. Smart contracts execute by themselves when preset conditions are met, eliminating the need for an intermediary in the process and increasing efficiency. Smart contracts also make possible the creation of dApps, which exist on Ethereum’s decentralized blockchain.
Non-Fungible Tokens (NFTs)
NFTs are digital assets characterized by being unique and scarce. An NFT allows its owner to prove ownership over a digital asset. Fungible tokens are those that can be exchanged for an identical alternative—Bitcoin and many other crypto tokens are fungible because it doesn’t make a difference which specific Bitcoin you hold. NFTs are not fungible, which means that each is verifiably unique. Ethereum has been widely considered to be the blockchain of choice to facilitate the launch of the NFT marketplace.
Initial Coin Offerings (ICOs)
ICOs proliferated in 2017 and 2018 as a huge number of new altcoins were launched, and a large number of these offerings were facilitated on the Ethereum network. Similar in principle to initial public offerings for publicly traded stocks, ICOs are a means of crowdsourcing funding to launch a new token, dApp, or other blockchain-related technology. Smart contracts have been key in making ICOs possible.
Decentralized finance, or DeFi, is a movement to adapt traditional financial products and markets to new technology available through blockchain and Ethereum. These new offerings include aspects of decentralization, censorship resistance, and smart contract programmability that is possible on the Ethereum network. DeFi products include peer-to-peer borrowing and lending platforms, stablecoins, decentralized exchanges, and more. DeFi also aims to avoid the risk of government-related market interference, of the limitation of trading hours based on time zones, and of the denial of access to financial services to any individual.
After the read-only Web 1.0 which included static websites and limited user-to-user interaction, Web 2.0 emerged in the mid-2000s. This version of the World Wide Web can be characterized as “read-write,” in that it provided opportunities for users to interact with one another through websites that were still centrally organized and managed (a social media platform like Facebook is a good example). Many Ethereum supporters advocate for its role in the development of Web 3.0, or Web3, which is “read-write-own.” It builds off of Web 2.0 to include blockchain and cryptocurrency technologies in an effort to facilitate ownership by individuals, rather than central companies. Web3 has deep ties to Ethereum, including the fact that the term itself was first coined by an Ethereum co-founder.
The idea of the “metaverse,” or a virtual reality supplementing the non-digital world, has been massively popular in recent years. Major tech firms like Microsoft and Meta Platforms (formerly Facebook) have scrambled to enter the metaverse-building space, a monumental task given that the metaverse would include everything from social components to finance to gaming and much more.
Many crypto enthusiasts believe that the Ethereum network is among the best situated to facilitate the creation of the metaverse. The idea of the metaverse is closely linked with Web3, and advocates of a blockchain-based metaverse may see a conflict between one created with Ethereum and one launched by a central company such as Meta Platforms. Ethereum’s potential role in the metaverse remains to be fully realized.
- A key feature of Ethereum from the time of its founding is smart contracts.
- DeFi includes aspects of decentralization, censorship resistance, and smart contract programmability that is possible on the Ethereum network.
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