Ethereum: Disruptor and Investment
Ether is getting an upgrade, and that presents an interesting investment opportunity. While Ether, the cryptocurrency that runs on the Ethereum blockchain, continues to increase in value, there is more than just a cryptocurrency here because of the Ethereum platform and its capabilities.
A greater number of potential transactions and, more importantly, a broad range of digital assets can be created and transacted on the Ethereum platform. It will be a potent player, and most likely the dominant blockchain development tool for current and future digital assets.
The Ethereum blockchain can process many more payments and transactions per second than Bitcoin technology. Ethereum is faster and more productive.
More importantly, Ethereum supports the creation of applications. Ethereum is known for its blockchain-based smart contracts, a disruptive technology on which decentralized digital assets and applications can be built. The two most important examples are:
1. Decentralized Finance (DeFi): This enables all of the processes currently performed at banks and centralized lenders to be performed directly between parties. DeFi is potentially one of the most disruptive forces to occur in finance because assets can now be funded, financed, and exchanged outside of a central banking system. This enables much more efficient access to lending, finance, or access to banking services than would otherwise be available. The potential disruption cannot be understated.
2. Nonfungible Tokens (NFTs): These represent the creation of digital assets — and any asset from a work of art to a tweet can be converted to a digital asset — enabling the exchange of unique creations ranging from art and music to written documents and collectibles. While the market will certainly have frothy and bubble-like valuations to certain components, overall it is an irreversible trend that Ethereum enables.
Ethereum represents much more than a store of value or a speculative asset. It is a development platform creating new assets and applications. That has a very different valuation perspective than other digital coins, including Bitcoin. The impact of Ethereum is only beginning to be understood. The recent upgrade, Ethereum 2.0, enables more and faster transactions and better security, fortifying the Ethereum platform.
However, the platform is still in a developmental stage and there is uncertainty about its ability to scale and how robust security and transactional speed actually will be. Also, there is always the risk of new technologies developing a better decentralized blockchain platform that could potentially outperform Ethereum.
While it is always possible that a better alternative will be developed, it seems unlikely. Ethereum has an enviable competitive position and momentum. This platform will remain disruptive, and it presents unique investment and finance opportunities.