Ethereum is a decentralized digital currency that is not only is as a medium of exchange and store of value (explained later), but it also provides the building blocks for other projects to create their own blockchain based contributions. Any party can – without permission – use Ethereum to crowdfund projects or build decentralized applications, opening up the potential to develop powerful automated applications – many of which are yet to be imagined. Ethereum allows for the creation of services or applications that lack a central point of failure, which means they are resistant to censorship and that they can operate without the fear of being taken down by any governing bodies.
Current use cases for Ethereum
1. Self-Sovereign Wealth
Ethereum is a cryptocurrency, and as such it provides those who invest in it true wealth ownership. While western financial institutions have given citizens a sense of security when it comes to money, the truth is that you do not own these assets, the bank does. Furthermore, this currency (“fiat currency”) can be inflated by governments and central banks, transferring citizens’ purchasing power to the hands of the elite. Banks are entitled to freeze accounts or even confiscate money based on nothing more than a ruling party’s self interest. Whilst this problem may seem alien to many in the West, it is a reality for those in developing countries and even more so for those experiencing civil war. Those who invest in cryptocurrencies can easily store their coins or tokens in private wallets which are protected from threats like these. The ability to privately store wealth allows the owner to spend their money freely whilst also preventing their assets from ever being confiscated.
2. Store of Value
Ethereum is also issued at a fixed and known rate (expected to be limited to roughly 100M tokens) and so it makes it an excellent store of value which cannot be diluted by a 3rd party. Since it is a globally accepted asset it’s also an excellent choice for countries who may be facing hyperinflation or issues with authoritarian governments. Individuals in these situations who fear for the protection of their wealth or livelihood can store their money in Ethereum to protect it in the event of a collapse of their economy and or their government issued fiat currency. That’s not the only thing that Ethereum is useful for though. Unlike Bitcoin, which is more or less a payment token, Ethereum has many other useful features that sets it apart in the cryptocurrency space, many of which are in use today.
3. Borderless Fundraising
While Ethereum is a currency and can be used for financial transactions, it also can act as a fundraising system for other blockchain based projects. In fact, it is the most popular option for ICOs who are looking to crowd source capital for their own blockchain innovations. Users are able to pay in Ethereum, and then trade for these newly issued tokens which are stored and secured on the Ethereum chain. This not only gives new projects an easy way to gather resources for their product launch, but it also creates an ecosystem that allows for free market investments into various public projects and exciting new technologies. Ethereum allows for investors of any region to invest in new businesses regardless of their location by giving them access to brand new financial markets that they may have been excluded from in a more traditional finance environment.
4. Decentralized Applications (dApps)
These newly tokenized assets can also build their offerings right into the Ethereum network by launching their own decentralized applications on the Ethereum blockchain. These dApps can then create or utilize existing smart contracts to automatically perform tasks for their users. While there are somewhere around 1,000 applications currently running on the Ethereum network we have barely scratched the service of this technology’s capabilities. In truth, the best offerings are most likely still yet to be developed, but there are some stand out apps here that investors may want to familiarize themselves with:
Augur, one of the first projects to be built on top of Ethereum, launched their long waited prediction market dApp in July 2018. Augur is a decentralized betting platform where users are able to wager on the outcomes of any real world events. As well as betting on markets, users are able to create markets; allowing individuals to benefit from the wisdom of the crowd and to make better forecasts. The entire system is controlled by smart contracts, which allows for trustless distribution of funds and profits, and users will also be able to stake their tokens in order to become system arbitrators who insure the legitimacy of the markets. Augur is more than just a betting platform, it is a decentralized Oracle (a trusted source of information) whose outcomes can be used in other smart contracts. Augur is digitizing reality, and in doing so it allows the global community to program on top of reality.
With so many tokens on the Ethereum network, it can be a challenge to swap assets in a fully trusted and secure way. Ethereum is now home to a handful of fully-fledged decentralized exchanges which mitigate this risk entirely – allowing users to trade assets without either party needing to know or trust each other, and with no middleman acting as a custodian. 0x Protocol is building the base layer for allowing this functionality to take place at scale, and in May 2018, Paradex (a decentralized exchange built on the 0x protocol) was bought by Coinbase. Decentralized exchanges will make trading cryptoassets safer and cheaper, with high profile exchange hacks becoming a thing of the past.
These are just a taste of the vast potential that the Ethereum blockchain holds for app developers, users and investors. Many of the future use cases of Ethereum are unimaginable, although the first pilots of various projects have begun to take place:
Future possible use cases for Ethereum
1. Supply Chains And Logistics
Despite the leaps and bounds that have already been made with the Ethereum network, there’s still more developments on the way. Not just by the Ethereum team themselves, but also by the multitude of other projects who are looking to add their own functionality to the network. Likely one of the most fascinating uses for blockchain technology will be in the logistics sector. The immutable ledger that most blockchain projects utilize, and the low overhead that platforms of this nature require provides a unique opportunity to make this area more efficient for businesses of any size.
While there are many blockchain companies looking to launch these smart supply chain solutions, investors can look to projects such as Chronicled and Ambrosus to see the concept in (the early days of) action. These providers will allow for goods to be tracked from the manufacturer all the way to the consumer. Not only does this allow for more efficient inventory tracking to prevent loss of company funds and merchandise, but it’s also instrumental in increasing the quality of delivered merchandise. Many of these solutions will integrate IOT devices which can monitor factors such as temperature to ensure that perishable items like fresh meat and medicine have not been compromised during their journey. This also means that if retailers or manufacturers need to pull contaminated merchandise that has been recalled that the entire process happens faster and with more certainty that all of the affected items have been taken care of.
This solution can also help to battle the growing counterfeit industry, which is not just limited to designer shoes and sunglasses but products of all types from food to pharmaceuticals. Counter-fitting is estimated to create billions of dollars in lost revenue for brands and corporations, and in the case of fraudulent drugs, they are responsible for thousands of deaths each year. Thanks to the immutable recording process and the transparency of the blockchain, retailers and even consumers themselves can verify the authenticity of products they have purchased or are planning to purchase, effectively increasing the difficulty for these counterfeit operations, and possibly making the venture no longer profitable for them.
2. Tokenized Assets
The blockchain also has the ability to bring added efficiency to more traditional financial assets and markets, and Ethereum is poised to be a leader in this area. While in the past, the principles which govern cryptocurrencies have only been applied to digital assets, that may not be the case much longer. More and more projects are working on ways to digitize physical assets as well. The span of products or services which can be tokenized is vast, and possibilities exist for everything from commodities, natural resources, consumer loans, debt, and even real estate.
There are some projects of this nature already operating, such as Digix DAO (DGD) which offers investors the ability to trade tokenized gold on the blockchain. DGD tokens are backed up by physical gold and purchasers are issued certificates for their assets to verify their authenticity; these certificates and transactions are stored and secured on the Ethereum ledger. These tokens can be redeemed for physical gold at any time from partner storage facilities which are routinely audited by third parties for accountability. DGD tokens are one of the first tokenized assets in the industry; it is anticipated that equities, commodities, debt and other securities will be tokenized in the coming years – generating a multi-trillion dollar market.
One of the benefits of using the blockchain for tokenizing assets is that it makes these assets available to investors who would not normally have access to them. Financial inclusion is another facet of day-to-day life that is taken for granted in the West, however for at least 1.7 billion people, access to financial markets is virtually impossible.
The blockchain and cryptocurrencies have an opportunity to entirely reshape the way gambling is conducted online – creating a more safe and transparent environment for players and casinos.
Smart contracts allow for fair distribution of funds and with randomness generated within the blockchain itself, “dice rolls” and payouts can be made without a 3rd party custodian. Smart contract code is also open source, meaning that games can be audited for randomness, and users can be sure that they are getting a fair deal in regards to the games they are playing. Platforms like FunFair.io are already working on providing an Ethereum-based protocol to allow just that, removing the 3rd party casino and allowing players to participate without fear of funds being stolen or games being rigged. According to Bitcoin and Ethereum casino review aggregator, TheBitcoinStrip, (alleged) malicious behavior from casinos makes up for over 80% of player complaints. Despite the benefits that Ethereum could bring to the industry, regulators may struggle to keep up with the technology as many of these decentralized gambling platforms bypass “know your customer” and anti-money laundering checks which are required to keep the space safe. In fact, many of these platforms may not even use accounts, instead utilizing a private wallet like Meta Mask to ensure that deposits and bets are always kept safe. While the gamblers and casinos may benefit enormously from the use of Ethereum, there are still questions regarding how it the industry will be regulated, an area which has remained grey thus far.
In closing, while Ethereum is currently one of the highest market cap cryptoassets, it is far from achieving its full potential. Yet Ethereum is still one of the most interesting cryptocurrencies around, and its technology is likely to make an impact in more ways than we can imagine. Investors owe it to themselves to do their own research and see exactly what this chain is truly capable of. Further reading about the investment opportunity of Ethereum as well as other useful resources can be found in our How to Buy Ethereum guide.