April 23

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Ethereum (ETH) — An Entirely New Financial System

Cryptospace

As the first blockchain digital currency, Bitcoin revolutionized finance forever. 

What about Ethereum?

Building on top of Bitcoin’s blockchain innovation, Ethereum’s claim to fame is spearheading a revolution in digital contract management known as ‘smart contracts.’

In essence, smart contracts allow digitized contractual obligations to be automated with all the security of blockchain. Five years since its inception, Ethereum is still king of that space — and while the platform needs a series of upgrades in order to accommodate more transaction capacity, the future for Ethereum appears bright.

By enabling smart contracts and the decentralization of application hosting and governance, Ethereum is helping create an entirely new financial system based on automated contractual fulfillment.

Although Bitcoin tends to often steal a lot of the attention in the cryptocurrency community, the global relevance of Ethereum-based smart contracts is pushing its market cap at a faster pace than Bitcoin’s.

The overwhelming success of Ethereum, increasing in value 514,267% since 2015, has attracted institutional and traditional investors worldwide. According to professional trader Scott Melker, “It’s like investing in the internet in the early 1990s.” Despite an already large increase in price, many analysts have made a prediction of $10,000 by the end of 2021.

What is Ethereum?

Smart Contracts.

Ethereum is a decentralized platform that allows developers to build smart contracts on the blockchain. A smart contract is a series of predetermined guidelines for code to follow. The benefit of smart contracts that is disrupting  the financial system is that smart contracts can automatically interact with money on your behalf. For example, you could set up a smart contract to send your child money as a reward if they log in to their online schooling 5 days in a row.  By allowing smart contracts to be built on the Ethereum blockchain, money is now programmable. 

Decentralized Applications.

Beyond smart contracts, Ethereum is also a platform for decentralized applications, otherwise known as dApps. 

Decentralized applications run on the blockchain which allows for a public, open-source environment which is not controlled by a single entity or corporation. DApps have the same purpose as an application that users may find on their phone or the internet but instead, allow for more control and security. 

In a typical centralized application, users hand over their personal data to the company who owns the application, however, in decentralized applications, consumers are able to have more control over their own finances and data.  Ethereum is one of the largest platforms for decentralized applications which is why Ethereum is a very crucial investment in the cryptocurrency space. Ethereum is home to some of the top decentralized applications in crypto including UniSwap, Aave, Compound, 1inch, and more. 

The price of Ethereum has reflected  the continuous success of decentralized applications across the crypto space. According to DappRadar, dApps have accounted for 92% of all transactions on the Ethereum blockchain. Last year, the biggest contributors to the category were the DeFi dApps, Compound, Aave, and Curve. 

NFTs.

NFTs (non-fungible tokens) have started to become increasingly popular internationally. NFTs are unique pieces of crypto in the form of art which could be either images, sound files, or text. NFTs have brought a lot of positive attention to cryptocurrency with celebrities such as YouTuber Jake Paul, NHL player Auston Matthews, and influencer Gary Vee all recently dropping very successful collections. People have been spending millions of dollars on NFTs whether it be sports trading cards, highlight reels, music, and more. 

The ownership of NFTs is recorded on the blockchain which is what allows each NFT to be unique and unable to be replicated. The mass adoption and millions of dollars going into NFTs are extremely important for Ethereum investors because many of the popular marketplaces for NFTs, such as OpenSea, require users to buy each NFT using ether. This brings people who may not be initially invested in cryptocurrency and makes them purchase ether in order to participate. OpenSea is the number one marketplace for NFTs which is what is going to bring more and more millionaire NFT investors into Ethereum.

Source: Forbes.

What are the Benefits?

Decentralized Applications.

Ethereum adds many benefits to the cryptocurrency community. One benefit is that applications built on Ethereum are decentralized, which means it is less likely to be censored compared to a traditional application. You can never be blocked from using a dApp. As of now, we have seen a lot of manipulation regarding what people can and cannot post on various centralized applications such as Facebook and Twitter. 

A crucial benefit to having a decentralized versus a traditional centralized application is that once an application is deployed on Ethereum, even if the owner of the application wanted to block you from using it, they cannot.  

Decentralized Finance.

Decentralized Finance, otherwise known as “DeFi,” refers to the concept of an open financial system that addresses issues of security, manipulation, and control in a traditional financial system. 

By offering a global financial system, Ethereum allows for a “trustless” platform that can be accessed just by having an internet connection. 

Trustless systems are a big part of what makes blockchain such a desirable technology. By being trustless, there is no middleman in terms of financial transactions. You do not need to trust anybody and/or corporation with your money. Instead, the blockchain is powered by mathematical equations and a series of nodes that aid the mining process. 

This allows for an international system that can enable anybody to participate in the digital economy.  The Ethereum platform also allows for individuals to connect through peer-to-peer trading while eliminating the need to trust a traditional bank system which can oftentimes be costly and time consuming. 

Who is Behind Ethereum?

Ethereum was founded by Vitalik Buterin when he first introduced the concept of smart contracts at a Bitcoin Miami event in 2014. Vitalik initially developed the Ethereum whitepaper and coined the concept but was later joined by developers Gavin Wood, Joseph Lubin, and more. Later, Gavin Woods left the Ethereum foundation to start his own blockchain-based platform, Cardano. 

Vitalik is extremely active in the Ethereum community on various social media platforms. He is constantly posting Ethereum news and updates on his Twitter page.  You can find Vitalik’s Twitter @VitalikButerin where it is evident due to his 1.3 million followers, the amount of time and effort he puts into making Ethereum the best-decentralized platform. In addition to Twitter, Vitalik is also constantly guest-starring on various podcasts including The Tim Ferriss Show which is hosted by millionaire investor, author, and entrepreneur, Tim Ferriss. Since Tim already has a high-profile, more business-savvy audience, Vitalik’s participation in his community helps bring more adoption to Ethereum as an investment. 

Source: Bitcoin.com

Ethereum has one of the largest developer communities in crypto. Ethereum is essentially a community-run technology and collaborates with developers and people with various backgrounds worldwide. Ethereum allows anybody to work on developing the platform and only asks that they keep them updated through GitHub. There are also various forums, chat rooms, events, and meetup groups to allow tens of thousands of Ethereum believers to network. 

Updates on the Horizon.

Ethereum is still a relatively young platform which means there is a lot of room for growth through updates, partnerships, new investors, and more. 

Developers on the Ethereum network have promised to make major changes to the network in July 2021. The modification will change the way the transactions are processed and will also destroy ether coins in the process. This remodel is going to bring more scarcity and is predicted to send the price soaring. 

Ethereum’s most talked about the update is Ethereum 2.0 which is an interconnected set of upgrades released over time to make this crypto more scalable, secure, and sustainable. There are three major updates within Eth2.0 and so far, only one has been launched. Although not entirely as effective as some would have hoped, Ethereum has more major updates to follow which should attract a highly anticipated move towards a 5-figure Ethereum.

One of the biggest drivers of price for Ethereum is going to be its newest upgrade, the EIP-1559. The purpose of the EIP-1559 update is to help with the limitation of the current supply of ether by changing the way the transactions work. In this process, Ether coins will be destroyed to ultimately drive up demand. This brings in the basic laws of supply and demand and could be the biggest short-term price increase we have seen to date. 

With many partnerships from large corporations on the horizon, there is more anticipation than ever for both long-term and short-term investors. 

Source: CryptoExchang.

Investors and Partnerships.

There are many high-profile investors and influencers behind Ethereum which has aided in the success of Ethereum to date. Billionaire investor and owner of the Dallas Mavericks, Mark Cuban, has recently joined a list of investors who endorse Ethereum. Mark Cuban recently stated, “I think the applications leveraging smart contracts and extensions on Ethereum will dwarf Bitcoin.” Although not particular to Ethereum, we have been able to see the effect that celebrities have had on the crypto market in the past.  Fortune 500 companies such as Google, Microsoft, Apple, Samsung, and Intel among others have backed Ethereum’s blockchain through various decentralized applications. 

With many partnerships from large corporations on the horizon, there is more anticipation than ever for both long-term and short-term investors. PayPal recently announced that users are soon going to be able to buy, sell, and store their crypto on their platform. This news will bring an entirely new set of buyers into the main four coins which will be listed; Ethereum, Bitcoin, Litecoin, and Bitcoin Cash. 

Recent reports have emerged suggesting that Visa is joining forces with Crypto.com, one of the largest crypto trading platforms. According to reports, Ethereum holders will be able to pay using ether. This adds an entirely new store of value to the already growing coin. In addition to PayPal, other companies such as Visa have followed suit. Visa has partnered with the Ethereum blockchain in order to handle USDC transactions. Visa cards are accepted in more than 200 countries which has brought in new institutional investors worldwide. 

In addition to partnerships with global companies, Ethereum has recently started to partner with cities and governments as well. Perhaps among some of the biggest news in the crypto world, Vitalik has recently announced a partnership with the mayor of Miami, Francis Suarez. The two were featured on The Scoop podcast recently where they talked about collaborating to provide various Miami city services on the Ethereum blockchain. The outcome of this partnership could mean that other governments and municipalities will partner with Ethereum in the future. 

In addition to announcing the partnership with Miami through various city services, Suarez and Vitalik also discussed how the Ethereum blockchain could be used for real estate transactions and the transfer of important titles. As Ethereum’s diverse uses become apparent to more people of power around the world, the overall value of Ethereum will continue to the upside.

Institutional Investors.

According to recent reports,  Ethereum has attracted a significant amount of institutional investors. In Q1 of 2021, ETH-related investments have already totaled $4.2 billion inflows which is the highest level on record. Institutional investors in the cryptocurrency community are often accumulating coins in large sums which makes it no secret that these institutions are a big factor in what causes the drastic price pushes we see in crypto. 

Grayscale is the largest holder of cryptocurrency products with an estimated $43 billion invested into digital assets. As of recently, Grayscale has seen Ethereum as a store of value and has accumulated around 5.5 billion dollars worth of Ethereum to date. 

Ethereum’s Price History and Prediction.

In January 2002 the price of Ethereum was only trading at $186.26, now fast forward to January 2021, the price reached an all-time high hitting $1400. In one year alone, the price of Ethereum rose by 651.64%. Many curious investors may wonder if Ethereum is due for a major correction after such a large move upwards in the past year. Analysts predict a steady increase over time despite minor consolidation periods along the way.

The $10,000 short-term price prediction is talked about amongst the crypto community constantly. For Ethereum to reach $10,000, it would need to increase a little more than 4x from where the price is in Q1 of 2021. This is not a completely crazy scenario considering Bitcoin did almost three times that in the last year alone. In order for Ethereum to reach $10,000, the market cap for Ethereum would need to reach 1.1 trillion dollars from its current market cap of $120 million. Luckily for investors, Ethereum’s market cap increases significantly faster than the dominant Bitcoin.  

With the explosive growth of decentralized finance, the total value of DeFi is already around the 21 billion-dollar mark. Just last year, the total value was only $1 billion. As cryptocurrency becomes more mainstream, a 1.1 trillion dollar market cap is not absurd.   Although these examples are not direct comparisons, to put it into perspective, companies Amazon and Apple both have market caps of over 1 trillion dollars. There are nearly 15 billion dollars locked into DeFi projects which is another indicator of the rapid growth this industry already has, and has the potential for growth.  

Conclusion.

Ethereum holds the potential to create an entirely new financial system as we know it. Through both the upgrades to the technology as well as the number of high-profile investors coming into cryptocurrency, it’s no secret that Ethereum is one of the most dominant investments of 2021. 

Although Ethereum may be volatile, if you can handle the sudden dips in price, Ethereum is considered to be one of the safest long-term investments according to many industry analysts.  


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