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By Abraham Cobos Ramírez, Lead of Crypto at Bitso
By now, you’ve probably heard much of bitcoin – the first and most popular cryptocurrency, designed in 2008. Since then, thousands of cryptocurrencies have been created, most notably Ether (ETH), Ethereum’s native currency – the most-used blockchain in the crypto world. But why has it become so popular?
At 19, Vitalik Buterin and his team designed a new, enhanced blockchain called Ethereum, which went live on July 30, 2015. Now, Ethereum’s market cap is at approximately $205 billion, with Bitcoin’s at more than $560 billion.
As we celebrate Ethereum’s 7-year anniversary, we can reflect on Ethereum’s evolution and impact on financial technology. Ethereum is doing more than just enabling novel applications and digital art. It is turning itself into a whole ecosystem where people can buy goods and services, become owners of land in the metaverse, and even vote for how money should behave. For now, let’s focus on some of its current main use cases:
1. Smart Contracts
Smart contracts program actions to automatically occur when specific, predetermined conditions are met. This may sound a lot like a traditional contract, however, traditional contracts require a third party like a lawyer to enforce the rules. With smart contracts, that enforcement is written in code, making it possible to automate a wide range of processes, which become faster and safer as a result. Smart contracts have led to the creation of a plethora of use-cases for blockchain technology, including dApps, DAOs, and NFTs.
2. dApps
Smart contracts have also enabled developers to build decentralized applications (dApps), which automate the functions of the apps and allow people to send more than just money without intermediaries. dApps have made it possible for people to exchange assets, buy digital property (NFTs), and even play games together without a third party monitoring their actions. Decentraland, for example, is a virtual world built entirely on Ethereum where users can navigate land, explore other users’ creations, and trade items in the Decentraland Marketplace.
3. DAOs
Ethereum has also enabled the creation of a new type of organization called a “Decentralized Autonomous Organization” (DAO). DAOs are entire communities of people who work towards collective goals without a central authority. In DAOs, smart contracts are specifically tied to voting, so community members propose and vote on actions, which are automatically enforced by the contract, creating highly democratic and flat organizations.
4. NFTs
Smart contracts have also made it possible to buy, trade, and use non-fungible tokens (NFTs) – unique crypto assets with value, which often take the form of images, music, or other forms of art. When NFTs are traded on the blockchain, smart contracts handle their transfers and track ownership, so each can be sent and received without a third party verifying the transaction. NFTs have even gone as far as enabling people to buy and sell houses without brokers!
Ethereum was designed to improve upon the original blockchain – bitcoin. Its creators managed to maintain the decentralization, lack of censorship, and anonymity created by bitcoin, while making Ethereum more programmable so developers could create a host of new decentralized tools that extend beyond peer-to-peer payments. ETH has become one of the most useful cryptos and it’s community is looking toward a redesign that would further extend its impact by drastically reducing Ethereum’s carbon footprint.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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