Will Ethereum dominate the new financial system?
Through the smart contract platform, users can build decentralized applications - a concept that is widely used today. However, Ethereum is still a trailblazer, even more so than Bitcoin.
Bitcoin is more about security and ownership, in fact, Bitcoin has been described as a potential digital safe-haven asset. Ethereum is more inclined to build a decentralized ecosystem, or even build a DeFi world.
Bitcoin has continued to trade sideways in a relatively narrow price range, while the price of Ethereum has been rising. As a stable and reliable digital asset and an industry benchmark, Ethereum enjoys a good reputation and has a complete product roadmap. But the rise in prices has nothing to do with it.
If anything, it’s the pivotal role Ethereum plays in building decentralized financial infrastructure. The infrastructure enables digital currency participants to borrow, lend, deposit, transfer, make payments, trade, pledge and insure through "programmable money" and self-executing smart contracts without relying on third-party oversight or custody.
This possibility should not be underestimated. In a recent newsletter to investors, BitWise noted that although many new fintech companies and banking applications have entered the financial space over the past few years, these services still largely rely on outdated programming language (COBOL), which dates back to 1959 (when programmers were still using punched cards).
Of course, using Ethereum as an example does not mean that other digital currencies are inferior. The same speculative trading culture exists in all digital currency markets. Once a deeper understanding of the various digital currencies can quickly reveal their differences in goals and means. The debate over choosing a dApp protocol is not the same as competing innovations around privacy, or alternative online revenue models.
DeFi is still in its infancy, but is gaining traction. We can see this in the work around stablecoins (tether and USDC in particular), including other projects such as MakerDAO. These fiat-pegged tokens are extremely important to traders as they act as settlement currencies and allow traders to mitigate risk during wild market volatility.
Lending is another important area of rapid development. Compound Finance, based on Ethereum, is an algorithm-driven autonomous interest rate protocol built for developers to unlock a range of open financial applications. Compound has functions comparable to banks: depositors can deposit digital assets and earn interest, while borrowers can obtain loans by pledging assets through the platform.
Digital currencies that are worthy of attention in the DeFi field and are crucial to the development of the industry include Cardano (ADA), Chainlink (LINK), Synthetix (SNX) and Aave (LEND).
While Ethereum doesn’t have all the glory to itself, we’re sure this classic digital asset deserves some attention. We encourage the community to develop Ethereum trading contracts based on their views on the market.
