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What Is Ethereum and Why Should You Care?
Written by William Peaster
Ethereum, like Bitcoin, is a new kind of global public good underpinned by blockchain.
Yet unlike Bitcoin, which is designed singularly for payments, Ethereum is designed to to be an internet of value for powering an array of different applications, including financial ones, artistic ones, gaming ones, and beyond.
What makes Ethereum special, then, is how it’s built and managed by its own users. This open-source, community-run model is what makes Ethereum like a decentralized app store that’s open to anyone, anywhere, and any time.
In this way, Ethereum offers a platform for using and building permissionless, trustless, and anti-fragile apps. Permissionless, because an internet connection is your only gate to using Ethereum. Trustless, because you don’t have to trust a centralized third party to use its apps. And anti-fragile, because Ethereum’s apps are backed by smart contracts that can run in automated fashion without outside interference indefinitely.
You can’t get these kinds of powerful guarantees wrapped up in one package through mainstream, centralized avenues. There’s simply never been anything like Ethereum before, and it’s opening up new horizons of opportunity for the 21st century’s increasingly globalized frontiers.
On Ether (ETH)
At the heart of Ethereum is ether (ETH), the native cryptocurrency of the platform. Akin to how the United States has the dollar or the European Union has the euro, ether is a medium of exchange (MoE) and store of value (SoV) in the Ethereum ecosystem.
As such, ETH is used as a type of money for payments and as a commodity to fund Ethereum transaction activity, like paying for goods or services offered around the network.
Lastly, ETH can also be used as a capital asset, i.e. an asset that can generate value over the long term. This is on account of Eth2 staking, in which Ethereum users are paid in ETH rewards to lock up an ETH stake, with these stakes used to secure the Ethereum network.
In this sense, having stakeable ETH is akin to being a cryptocurrency miner with an ASIC mining device that will never be deprecated.
Ethereum, the Home of DeFi, NFTs, and More
The wide variety of promising apps that have bloomed atop Ethereum have led to the blockchain becoming the most developed and used in the whole world.
For example, according to the cryptofees.info resource, Ethereum notched nearly $9 million USD worth of transaction fees over the last 24 hours -- more than double Bitcoin’s $3.5 million across the same span. In fact, even Ethereum’s third-largest app presently, Uniswap, just bested Bitcoin with $3.8 million in fees on the day.
In being the first-mover smart contract platform where all this activity is surging to, Ethereum’s become the de facto home to the cryptoeconomy’s most popular rising sectors, namely decentralized finance (DeFi) and the non-fungible token (NFT) arena.
Both these spaces are just the start of more to come, but they’re already impressive in the here and now.
For instance, consider DeFi. There’s now $20 billion worth of assets being put to use across dozens of DeFi apps!
Source: DeFi Pulse
And we’ve seen an interesting range of apps in DeFi to date, as well. There are permissionless borrowing and lending protocols, including Maker, Aave, and Compound. There are decentralized trading protocols like Uniswap and Sushiswap. There’s also derivatives platforms like Synthetix, yield aggregators like Yearn and Harvest Finance, and savings games like PoolTogether.
In other words, there’s something for everyone in this alternative, open Wall Street! It’s a meritocratic system, where a high school dropout can enjoy the same level financial playing field as an elite investment fund. And it’s an ecosystem where every project can leverage one another as composable “money legos,” a dynamic that has no analogue in the mainstream.
This brings us next to NFTs, which you can understand as “media legos.” Just like you can tokenize any asset on Ethereum, you can also tokenize any piece of media: art, music, collectibles, gaming assets, and pretty much anything else you can imagine.
As such, NFTs empower creators with novel avenues to monetization, like automated secondary sale royalties. They offer artists and beyond a way to release their work on their own terms, without having to pay outrageous cuts to middlemen, companies, and so forth.
The Future Is Here
Ethereum is the future of finance and the future of culture for the increasingly digital 21st century.
The network still has a ways to go to fully actualize, of course. But Ethereum is on track to do just that. And the teeming ecosystem of third-party builders that are innovating atop Ethereum right now will only boost progress and adoption that much further.
For now, the task at hand is scaling Ethereum so it can easily handle mainstream usage. The good news is that’s happening as we speak since layer-two scaling projects like Optimism, Fuel Labs, and many more are stepping up to the plate and building out the infrastructure necessary to help Ethereum ascend to its complete potential.
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