4 Selling Points of Ethereum
After Bitcoin, Ethereum is the second largest global cryptocurrency, rising by more than 360% value in 2021. Bitcoin and Ethereum are similar in many ways. Both are a blockchain technology with a digital currency that can be traded. Both are decentralized – that is, they’re not regulated or issued by a central bank. But they also have distinct differences, and Ethereum has unique selling points compared to Bitcoin.
Before we go into those, here’s a quick health warning. As with any cryptocurrency, Ethereum is somewhat volatile. If you’re not keen on risk or are in the game to preserve capital, then you may not enjoy using crypto. You can always start by investing a small amount of money that you’re willing to lose. Alternatively, if you want to better learn how to use cryptocurrencies, head to learncrypto.com, a free education platform that can help you to develop your confidence with handling cryptocurrencies through relevant, easy-to-comprehend content.
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Ethereum’s selling points
Like Bitcoin, Ethereum is a digital currency that relies on blockchain technology. That means that if you purchase Ethereum, you’re converting US dollars into ‘ether’, its digital currency which acts like money, in that you can trade it via online exchanges or store it in cryptocurrency wallets.
Ethereum therefore has the advantages of other cryptocurrencies. It’s less vulnerable to inflation, it’s a liquid financial asset, transactions are peer-to-peer, it’s very secure, there are no banking fees incurred, and transactions are pseudonymous (individuals can only be identified via a blockchain address).
Diversifies your portfolio
Finding a mix of assets for your investment portfolio diversifies it, and, in turn, spreads out the risk of any investment you may have made. To use the cliché, you’re ensuring that you don’t put all your eggs in one basket.
If your portfolio is already well balanced and diversified, adding a cryptocurrency like Ethereum to it could be beneficial. As detailed above, cryptocurrencies are less vulnerable to inflation because their performance doesn’t correlate with the stock market. Should the latter take a hit, having a cryptocurrency in your portfolio may act to buffer this. Be aware that this does make Ethereum more volatile – but there are always pay-offs to investing in volatile stock, not least because it offers better returns.
However, although Ethereum has the above function and its many selling points, it was primarily envisioned to enable the deployment of smart contracts and decentralized applications known as dapps.
In layman’s terms, this means that because Ethereum is programmable, developers can use it to write code and create applications on the platform. Confused? Think of Ethereum like any other application that can be developed on Apple’s App Store or Google’s Android system. However, unlike apps built on those digital infrastructures, Ethereum is decentralized. It can be run without interference from a third party, cutting out the middle man. The idea is that this ensures greater security, as fraud, scams, and hacks can be avoided as a result of the blockchain’s security.
In turn, ‘smart contracts’ are established on a peer-to-peer basis by way of Ethereum.
As outlined, they securely validate agreements via decentralized means. Potential uses include direct peer lending, buying and selling digital artwork, making payments without the middleman payment processing company, sending money directly to artists for music streaming rather than via a record label or streaming platform, and online gambling (amongst others).
Ethereum’s programmability is one of its major advantages for those interested in ever-developing blockchain technology.
Building new cryptocurrencies
Ethereum also allows developers to build new cryptocurrencies such as Chainlink and XRP. Other digital assets such as NFTS – non-fungible tokens – can also be created using Ethereum, and the company suggests that these digital tokens are enabling content creators to take greater control of their own work like never before.