Ethereum, like other cryptocurrencies, uses blockchain technology. Blockchain technology creates distributed consensus about the state of the Ethereum network. New blocks are added to the very long Ethereum blockchain to process Ethereum transactions and mint new ether coins or to execute smart contracts for Ethereum applications. The Ethereum network is secured by the decentralized nature of blockchain technology. A vast network of computers worldwide maintains the Ethereum blockchain network. The network requires distributed consensus or majority agreement for any changes to be made to the blockchain. This makes tampering with data nearly impossible.
While Bitcoin pioneered blockchain technology as the first-ever cryptocurrency, Ethereum has expanded in Bitcoin’s decentralized digital currency by building a global network that is home to an interconnected marketplace of the decentralized application (dApps). The Ethereum is described as the “world’s programmable blockchain”, positioning itself as an electronic, programmable network with many applications; from decentralized autonomous organizations (DAOs) to Initial Coin Offerings (ICOs), stablecoins, decentralized finance (DeFi), and non-fungible tokens (NFTs). The network’s users can create, publish, monetize, and use a diverse range of applications on the Ethereum platform, and can use ETH or another cryptocurrency as payment.
Ethereum’s use cases are vast and expanding fast, offering blockchain projects enhanced efficiency, security, and decentralized equity to industries across the world. Its immutability and transparency make it an ideal platform for products and applications that need to run on an open network. Although Ethereum is often criticized for its scalability limitations, at the time of writing it is still by far the most popular platform for decentralized applications. Through this article, we will explore these applications that range from finance apps to health and politics.
- Decentralized Autonomous Organizations (DAOs)
DAOs are blockchain-based organizations that operate without any central authority. A DAO’s financial transactions and rules are recorded on a blockchain governed by code known as the smart contract. The smart contract represents the rules of the organization and holds its storage. No one can edit the rules or tamper with the data without anyone noticing since DAOs are transparent and public.
In contrast to traditional companies whose governance is based on executives, board of directors, activists, investors, etc. DAOs is based on community, all members or users of a DAO need to vote for any changes to be implemented. DAOs were one of the first innovations tested on Ethereum. Today, several DAOs, including MolochDAO and MetaCartel, operate in a similar fashion to the original DAO, pooling user funds to offer grants to Ethereum entrepreneurs.
- Non-Fungible Tokens (NFTs)
Non-Fungible Tokens (NFTs) are unique digital assets that are useful in gaming, art and ensuring the provenance of digital luxury goods. Anything can be an NFT; an image, a gif, a song, a video, in-game items and weirdly even a tweet.
Most NFTs live on the Ethereum blockchain, Ethereum has smart contracts and token standards that make NFTs possible. Unlike Ether, which is the native currency of Ethereum and is fungible, NFTs store extra information about the artwork and are non-fungible.
The hype over NFTs began in late 2017 with the launch of CryptoKitties’ digital cat collectables. Since then, the applications for the technology have grown rapidly and drawn mainstream audiences to cryptocurrency and blockchain technology. Today, many high-profile enterprises and people are experimenting with NFTs.
- Stablecoins
Stablecoins are cryptocurrency tokens pegged to another asset, typically a fiat currency. Fiat currency is a government-issued currency like the US dollar. Cryptocurrencies come with wild volatility. Consider the incident in 2010, when Laszlo Hanyecz bought 2 pizzas for 10,000 bitcoin. At the time the BTC were worth roughly $40 USD. Today, they amount to $383 million USD. There are many similar regretful transactions in cryptocurrency history. Stablecoins solve this problem of volatility.
Some popular stablecoins are Tether, USD coin, Dai, Binance USD, etc. And 74% of all stablecoins are issued on Ethereum.
- Decentralized Finance (DeFi)
DeFi or Decentralized Finance is a term for a variety of financial services and products in cryptocurrency. Currently, we have centralized finance (CeFi). Our financial system is regulated and controlled by our governments, banks, and other financial institutions. With a centralized authority, there comes a great deal of risks and failure. We have to trust banks and the government to keep our money safe, let us deposit, withdraw and invest it and use it without any restrictions. With DeFi, we can put technology and code at the forefront in the financial services industry.
DeFi is a system where all the financial services (buying, selling, lending, borrowing, investing, trading money, and more) are available on a public decentralized ledger system known as the blockchain. This makes them open and accessible for anyone to use on a more peer-to-peer network instead of going through third-party systems like banks or financial institutions. Unlike in fiat currency (issued by the government, like the US dollar), you don’t need to provide your identification and provide social security number, bank account numbers, or proof of address to use DeFi. It uses cryptocurrencies and smart contracts to provide financial services and products that let you borrow, save, interest, trade money, and more.
Most DeFi applications are built on the Ethereum blockchain. The smart contracts used in Ethereum offer flexibility and allow us to program decentralized applications beyond simple transactions. And you don’t have to trust any third party since DeFi is exclusively software-based. The code is the law, you cannot go against it. If you want to know what you are jumping into, review the code yourself and do a little research to know it won’t scam you.
- Ethereum Token Launches
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent to an initial public offering (IPO). Ethereum's use of crowdfunding to aid its protocol’s development through token launches evolved into what we now know as the ICO boom.
Some ICOs have yielded massive returns for investors, while numerous others have turned out to be fraudulent or have performed extremely poorly. When a company issues an ICO, investors can generally use fiat or digital currency to buy the new tokens. It is also common for investors to pay using other forms of crypto such as Bitcoin or Ethereum.
Early investors in an ICO are motivated by the hopes that the token will gain value after the cryptocurrency launches. This is the primary benefit of an ICO; the potential for very high returns.
- Enterprise Ethereum
Enterprise Ethereum refers to customized software and networks based on Ethereum that are created for private corporations and businesses. These networks are permissioned; the clients retain control over the network and the users. The Enterprise Ethereum Alliance (EEA) now has more than 200 member organizations with the likes of Samsung, Mastercard, and Microsoft.
There are numerous such sectors in which Ethereum is providing utility and creating value. For example, Ethereum provides an ideal solution for managing royalties in the music industry by distributing tokens that represent ownership rights. This enables the automated and fair distribution of royalty payments. In this massive global remittance industry, cross-border payments can be sent directly, quickly, and inexpensively by using a peer-to-peer protocol like Ethereum. This can cut out intermediary banks that charge fees for currency exchange.
Ethereum’s tamper-proof blockchain ledger can assure the provenance of products. Businesses can track a product’s journey on the blockchain from the manufacturer to the checkout aisle, knowing that the data has not been tampered with. Meanwhile, the customers can rest easy knowing that a product is genuine and the hands it has been on.
Additionally, through the use of cryptographic methods, Ethereum ensures secure information sharing. This is essential for the transfer of sensitive data like medical records and identity information.
Finally, Ethereum tokens democratize access to products that were once beyond the reach of many. Many Ethereum-based startups offer fractional ownership- owning a piece of a good rather than the whole thing- of luxury goods or real estate. This allows customers to diversify their investments.
To conclude, Ethereum is the network of choice for innovation in the blockchain and cryptocurrency space. With its flexibility and robustness, new applications continue to emerge. From DAOs to Enterprise Ethereum to DeFi, the future of Ethereum looks more exciting than ever. Alternatively, with Ethereum, the future of a transparent, decentralized world looks more promising than ever.
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