Ethereum is currently the number two cryptocurrency by market cap. It has also seen meteoric gains.
If you are just learning about crypto, you’ve most definitely heard about Bitcoin and maybe Dogecoin. You’ve probably looked at the top cryptocurrencies and saw Ethereum and wondered what it is and if you should buy it. Well, this article should help you decide.
1. Ethereum is a World Computer
Ethereum is the number two cryptocurrency by market cap for a reason. That reason is smart contracts.
A smart contract is a contract that self-executes the terms of the contract between the involved parties written directly in code. The code and the agreements coded in it live in a decentralized blockchain network.
That’s a lot of talk, what does that mean to me? For example, let’s take an asset like a piece of art. The smart contracts written on the Ethereum network can secure the ownership of that piece of art. That means that investors no longer need to deal with the bureaucracy of foreign countries to own a piece of art in a different country. They can just use an Ethereum smart contract, and when it comes time to pay for the piece of art they can just pay in Ethereum as well.
The world currently is connected because of the internet. Ethereum is providing new and improved ways for businesses and individuals around the world to interact and connect. Ethereum is everywhere! There is even a game similar to Minecraft that runs on Ethereum.
Ethereum is also always getting better. The Ethereum Foundation is out there tirelessly working on improvements to the Ethereum network. Just like an operating system warrants updates, so does the Ethereum network.
2. Ethereum is Part of a New Asset Class
The term asset class is usually used to refer to real estate, stocks, bonds, cash, gold, etc. Now, cryptocurrencies are a new emerging asset class.
There are huge corporations that have invested in different cryptocurrencies, like Tesla’s recent purchase of $1.5 Billion worth of Bitcoin. Square and MicroStrategy have also accumulated their fair share of cryptocurrency. Ethereum is the number two cryptocurrency in market cap, so it is right there with Bitcoin as an option for investors.
Many financial advisors out there recommend holding 5-10% of your net worth in cryptocurrency.
3. Ethereum Provides Tokenization
The World Economic Forum (WEF), has projected that “up to 10% of the global Gross Domestic Product (GDP) will be stored and transacted with the help of blockchain technology by 2025–27.”
That means that they are projecting that by the year 2027, every country in the world will be using blockchain technologies for up to 10% of their gross domestic product. If that isn’t a mind-blowing figure, I don’t know what is.
This is so important because Ethereum provides tokenization, and the Ethereum network has and will continue to be a key player in helping countries tokenize their economies. The term tokenization refers to the process of converting physical (and sometimes non-physical) assets to digital tokens on a blockchain.
4. Ethereum Provides Diversification in Cryptocurrency
Almost everyone has heard of Bitcoin by now, and the term cryptocurrency can be heard in most workplaces and homes across the globe. Not everyone has heard about Ethereum though.
The technology and purpose behind Ethereum are very different from that of Bitcoin.
Bitcoin was and always has been meant to be a cryptocurrency, I don’t know if you noticed but cryptocurrency contains the word “currency”. Ethereum from its inception has been different. It is a network or platform for the usage of smart contracts.
If you own Bitcoin, you can have a store of value and pay for things. If you have Ethereum you can do the same and tokenize your assets, program smart contacts, etc.
5. Ethereum is More Than a Currency
I like to compare Bitcoin to an old-timey tractor. It was revolutionary at the time and increased efficiency across the board. It was amazing at the time, and no one could dream of anything better.
Then along came the Model T. It was made for the average human to be able to drive and was a revolution all over again. I like to compare Ethereum to the Model T. It is an even better invention that has even more use cases than Bitcoin.
Some people even compare Ethereum to a utility company. The more the demand for electricity or natural gas, the more the company will be worth. Ethereum is much the same way. Kevin Rooke, a well-known cryptocurrency researcher stated, “94 out of 100 top blockchain projects were launched on the Ethereum Network”. Which only increases the value of the underlying network which in this case is Ethereum.
Should you buy Ethereum? That’s up to you. However, now you know a little bit more about Ethereum and can invest a little more wisely.
About the Author:
Zach L. is the CEO of the personal finance site Pineapple Money. He enjoys writing about personal finance and spending time with his family.