Many newcomers assume that all digital currencies will die out and only one or two will remain in the long term.
But it cannot be said with the absolute correctness of this assumption, it is true that many cryptocurrencies will die, but some of them will remain because it offers real uses on the ground or has the possibility of developing blockchain technology in a manner and protocols not available in other projects, which makes the possibility of its expansion and spread in the future very possible.
Ethereum, the second largest digital currency after Bitcoin, has been able to occupy this rank for years thanks to its ability to take advantage of the weaknesses of Bitcoin and its direction is completely different from Bitcoin, and below we will go into some detail about why Ethereum remains in its current position and from where the currency derives its value.
Ethereum:
Ethereum was the first in the field of smart contracts and running decentralized applications, and today it is the largest in this field.
Ethereum also has a programmable money operation feature that enables financial assets to be used in a way that cash cannot.
The cryptocurrency community believes that cryptocurrencies are much easier than cash.
Where "Mark" can send "David" a certain amount of money in a short time and without large fees, only by having a phone and the Internet.
Ethereum saves more than that, as “Mark” can send “David” money only if “David” does what is required of him, through smart contracts. It is true that such options exist in the traditional economy but require the presence of third parties, unlike reliance on The blockchain kills it completely.
And the above example related to "Mark" and "David". The transaction can be customized between them in many ways that correspond to many of the required cases that users are looking for.
It is the ability to carry out more complex transactions than direct payment that defines the concept of programmable funds.
Many cryptocurrency programs (including Bitcoin) can handle the simplest form of these transactions, but the Ethereum blockchain is designed to support full customization and complexity.
In other words, today's Ethereum core value proposition is asking the question: What if we could implement "programmable transactions" to actually rethink every type of service the financial industry provides, from simple escrow accounts and trust entities to these complex ideas like raising capital. Secured borrowing, product structuring, lending, margin trading, and more of these financial services that are being worked on have come under the name of decentralized finance, whose applications have expanded significantly, especially in recent months.
Among the most important factors for Ethereum's prosperity and appreciation are:
1. Stable Currencies:
Cryptocurrencies are digital currencies linked to fiat currencies, and most often pegged to the US dollar.
They are primarily used today to make fiat currencies usable in the cryptocurrency world, and they are one of the fastest growing currencies in the cryptocurrency market.
Stable currencies offer many uses in the real world, as they are used by cryptocurrency investors who want to keep their money from volatility without withdrawing it from trading platforms.
How does this relate to Ethereum?
Ethereum has proven itself as an optional platform for issuing stablecoins, issuing the coin by programming the capacity of the Ethereum Flexible Digital Contract.
The two most important stablecoins, Tether and USDC, saw explosive growth last year, with total assets on the Ethereum network rising from less than $ 1 billion 12 months ago to more than $ 7 billion today.
2. Lending:
Developers have experimented with using Ethereum smart contracts to programmatically create a market for borrowing and lending to other digital currencies.
Compound is one of the most successful recent innovations in the digital economy as it provides the jobs you would expect from a traditional bank, as savers can deposit crypto assets and earn interest, while borrowers can access secured loans on the platform.
All this without the need for trusted third parties between the user who lends and the user who borrows, as they are all taken care of by decentralized software.
The Compound project was launched earlier this year, and today it has raised nearly $ 700 million in digital assets.
The competing protocols and projects gathered important assets, as shown in the diagram below.
In total, these platforms today control more than $ 2 billion.
While this does not replace the traditional banking system, it is not trivial for a completely new technology, and growth continues to gain big numbers, and for your knowledge a year ago, this space basically did not exist.
How sustainable is DeFi financing?
One interesting thing about the way the decentralized finance ecosystem has evolved is that these programs, which all run on Ethereum, can be combined in various ways to offer new solutions.
The common similarity is that building in the decentralized finance market is like cutting the "lego" game, where each decentralized financing tool is separately developed and then can be used with it in a set of distinct and different services.
The greater the number of these tools, the more new product groups are possible, and the more these tools are developed, the more the Ethereum platform will prove itself as a pioneer in space.
As an emerging technology development, decentralized financing of course comes with a fair amount of risk, and a proven track record of difficult use.
Just as Bitcoin is not guaranteed to be digital gold, Ethereum is by no means guaranteed to create a significant market for digital financial contracts.
However, many investors believe that broad exposure to a range of risks would present huge opportunities.
If Ethereum becomes the bedrock of a new and alternative financial services system, the upside will be massive.
Despite all the fintech companies and banking applications that have emerged in the past few decades, financial services are still lagging behind and the fees are substantial.
Therefore, blockchain technology is expected to have a prominent role in this regard in particular, which is represented in eliminating intermediary parties and reducing high fees.
Therefore, Ethereum and other similar projects are expected to further develop the digital economy field, especially with regard to the programmable money category.
Good written article and pleasure to read. As payments concerned, banking transfers,at least in Europe, - are free, instant , secure and no risk. Ethereum is no way close to it, totally opposite - very expensive to transact , exchange, not secure and with risks. Even with 2.0 it is hardly imagine it will compete. Also with smart contract, it sounds very limited and risky. Mortgages, education credits ? I do not think so. As technology and game, it is a great project and surely making a history. If someone ask you of best use case if Ethereum, where success is due to blockchain and smart contracts, which project you will name first and why?