Why Ethereum Is The Backbone of The Crypto Economy
Disclaimer: The text below is a press release that was not written by Cryptonews.com.
Understandably, the attention of crypto investors is fascinated by Bitcoin. It has a market dominance of close to 40% and is the world’s most widely-adopted and highest-priced cryptocurrency. However, while Bitcoin has done more than enough to take the crypto economy where it is today, in the future, Ethereum will be decisive about the industry’s evolution and the speed at which it evolves.
Ethereum as the Engine of the Crypto Economy
Ethereum isn’t based on a clear monetary vision like Bitcoin, so its popularity and structural importance aren’t due to its cryptocurrency (ETH). Ether is just the tip of the iceberg. What proves to be the change-maker is the multi-billion dollar economy powered by the Ethereum ecosystem and its ability to adapt to its users’ needs.
Today, Ethereum is the most highly versatile decentralized computing platform. It has become the centerpiece of many use-cases across the crypto economy, including anything from cross-border payments, OTC derivative settlement and clearing to building autonomous governance structures and streamlining back-office processes.
Back in the day, Vitalik Buterin developed Ethereum intending to augment and improve Bitcoin and expand its capabilities. Over the years, it managed to achieve much more. Today, it is used to program, decentralize and trade virtually anything one can think of. Furthermore, it is one of the reasons (if not the main) why the crypto industry has captured the interest of Wall Street and progressively earned the trust of regulators all across the world.
What Has Ethereum Gave Us So Far
Currently, Ethereum powers between 60 to 70% of the crypto industry. So it is safe to say that without it, people wouldn’t be talking about decentralized finance (DeFi) today.
One of the key contributions of the Ethereum network is that it empowers the crypto industry to replicate and digitize conventional financial products like credit lines and interest-earning. Some of the most popular projects in that field include MakerDAO, Uniswap, Aave, Compound, and more.
Furthermore, Ethereum powers stable coins like USDC, Tether and PAX, which many retail crypto investors and institutions have exposure to.
The NFT craze also wouldn’t have been possible without Ethereum. Today, many of the highest-priced NFTs and markets like OpenSea are live because of the network.
The ecosystem also powers many other crypto-native products and services, including wallets, exchanges, trading venues, cryptocurrency newsletters, portfolio management apps, decentralized insurance platforms, KYC & identity solutions and many more. Without it, concepts like decentralized autonomous organizations (DAOs) and smart contracts that eliminate potential points of failure in transactions and relationships between different parties wouldn’t have existed.
In a nutshell, over the years, Ethereum has established itself as the preferred environment for the majority of the project developers in the niche, allowing the crypto industry to grow and innovate. Furthermore, the variety of use-cases and the powerful network effect complement each other to progressively multiply the number of developers using the network.
What Will Ethereum Give Us Going Forward
Ethereum can give us the blueprint for building the crypto environment of tomorrow. In a world marching towards carbon neutrality, cryptocurrencies are receiving much scrutiny from virtually all corners of the market. Currently, studies suggest that Bitcoin mining alone could push global warming beyond 2°C. While Ethereum mining emits 11 times less CO2, it still isn’t a viable option when pursuing a future of sustainability.
The latest series of upgrades of the Ethereum network, known as Eth2, replaces mining with staking to reduce computing power significantly. As a result, Ethereum’s carbon footprint is estimated to drop by 99.95%. The bottom line is that such improvements will allow crypto assets to become a part of the solution for the net-zero pathway rather than the problem that prevents it.
Among the key benefits that Ethereum might give us in the long term is to unlock the era of Web 3.0, where decentralized applications allow users from all across the world to interact and make transactions without intermediaries. As a result, it can give big tech companies’ offerings a run for their money. Furthermore, it can unlock the crypto economy and make it affordable and accessible to virtually anyone worldwide. That way, humanity can address the problem with the unbanked population that today stands at over 1.7 billion.
Another essential but often ignored contribution of Ethereum is opening the niche for competitors. New projects like Solana, Cardano and Avalanche are entering the market with blockchains with greater scalability and processing capacity. However, so far, none of them has succeeded in becoming the “Ethereum killer.” While dethroning Ethereum seems unrealistic in the future, the increased competition and natural selection principle enforced by the new entrants will help further grow and develop the niche.
Ethereum isn’t showing signs of slowing down. Some analysts even see a potential “flippening,” where ETH tops BTC in value. Whether or not that happens is a point of another discussion. The more important thing is to leave speculation aside and focus on the broader picture.
Since the wave of decentralized finance will likely become more prevalent in the global economy and there would be a need to accommodate millions or even a billion new users, it is safe to assume that, in the future, Ethereum will continue to be the backbone of the crypto economy. Everything else will be just a byproduct of its growing importance.