The cryptocurrency industry significantly impacted the rest of the world, whether it’s about financial transactions or network environments. Since the beginning of Bitcoin in 2009, the way people see money has altered because it doesn’t necessarily have to be physical to be valuable. The digital asset showed that it’s reliable in time, as it’s a store of value, but more diverse cryptocurrencies were developed to act as an extension to what Bitcoin lacks.
One of these assets is Ethereum, which was heavily based on Bitcoin’s white paper. In some aspects, they’re similar; for example, they’re both decentralized platforms. However, Ethereum defines itself more as a tool for the future since its environment leveraged the development of smart contracts, dApps and DAOs, some of the best features of the blockchain that brought the ETH price to what it is today: a consensus mechanism that allows developers to use a multitude of instruments for creativity and technology development purposes.
Let’s explore what features Ethereum has that make it acclaimed in the crypto industry.
Smart contracts revolutionize settlements
The technology behind smart contracts is quite simple to understand: the contract terms are created, and when all parties do their side of the agreement, the protocol automatically executes, and the transaction is complete. While it seems like users don’t have control over their decisions, the truth is that this contract form reduces the number of fraud losses since each participant has a specific time and specifications to respect before deciding.
At the same time, smart contracts don’t require the involvement of any third parties, which lowers costs and the time spent on ending the contract. Moreover, there’s no risk of human error during this process because it’s all done by a computer that respects predetermined rules.
While smart contracts are heavily used within the crypto industry, they have several benefits in the real world, too, where they can improve the following sectors:
- Real estate. Smart contracts can be used in transactions, tokenization and streamlining rental agreements for credit or mortgages.
- Machine learning and AI. The complex blockchain environment can be improved by creating AI-powered smart contracts.
- Law. Smart contracts may be helpful in cases where lawyers are required, allowing people to lower their costs by using this technology in legal agreements.
- Finance. The sector of DeFi is already entirely developed and used for plenty of financial services that are more functional compared to traditional solutions.
- Gaming. NFTs and similar trends are based on smart contracts that make gaming more enjoyable and engaging.
dApps run on more network computers
Regular applications have indeed changed the internet, providing users with faster access to their preferred content and activities. But as they’ve been found flawed numerous times, the beginning of dApps on Ethereum has genuinely made a significant change in the online environment.
These decentralized apps run on blockchains or peer-to-peer networks. They’re free of a single authority control and are open-source. Hence, a dApp works in a way that the content published on the web cannot be deleted or altered.
Among the many use cases of dApps, some of the following are currently approved:
- Finance. dApps are great options for making financial transactions more efficient;
- Supply chain management. Through dApps, goods can be better tracked and monitored;
- Healthcare. dApps are great tools for storing patient data safely;
- Social media. dApps would be better for socializing since they don’t include third parties;
Compared to traditional applications, dApps are safer for any user because they don’t require people to submit necessary information within the app to allow account creation. At the same time, they’re censorship-resistant, making them the perfect platforms for social interactions.
Finally, Ethereum provides all kinds of opportunities for dApps to be improved and developed in ways to appeal to specific audiences. Some of the most well-known dApps include Axie Infinity, Uniswap and OpenSea, famous for their friendly user interface.
DAOs unite people in a similar direction through decentralization
Online organizations have always been paramount to business and finance, which is why DAOs (decentralized autonomous organizations) are the perfect system for bringing users and investors together with the same missions and goals. Not only does no head of the team interfere with votes and decisions, but access to funds is governed transparently.
DAOs on Ethereum work quite simple:
- The decentralized manner of the organization ensures all members the right to vote in order for improvements to be made;
- Funds and other things that need to be distributed will be based on decentralization and will be completed automatically;
- Every organization’s activity is public on the blockchain, enhancing transparency and trust;
On the other hand, regular structures are usually led by a single point of authority, which might influence decisions based on personal connections and ideologies. That’s why voting is prone to manipulation, and since human handling is required, mistakes can appear at any time.
A DAO use case enters the following situations:
- When a charity wants to do a crowdfunding advertisement, they can create a DAO that allows them to receive money from all over the world with minimum effort;
- In case you’re part of a group that practices collective ownership, these decentralized structures help you purchase assets and decide, along with the other members, how to use them;
- For the development of ventures and grants, members of DAOs can benefit from repaid money from the pool’s investment capital;
DAOs work great on Ethereum because its consensus mechanism makes it easy for organizations to be trustworthy, especially since smart contracts back them. These codes can’t be altered or deleted, leveraging full transparency. Moreover, the community on Ethereum is constantly supporting innovation and development, which helps in the creation of technologies and tools.
Bottom line
Ethereum started as a cryptocurrency, too, but Vitalik Buterin envisioned an environment where developers, users and validators could be free to put their creativity to work and use the tools provided, such as smart contracts, dApps and DAOs. As these networks emerged on the blockchain, they’re also becoming helpful in the real world, aiding industries like finance, healthcare and gaming.
