How Ethereum is bringing blockchain to mainstream finance

Ethereum-powered markets are driving mainstream acceptance and adoption for blockchain technology

By Vanessa Malone

Bitcoin and Ether continue to hold their places as the top two cryptocurrencies by market cap.

Hovering around $684 billion and $306 billion, respectively, these digital currencies are ushering in a new way to transfer money outside the control of a centralized entity.

This is a major feat in itself, yet even more recently, their underlying blockchain technologies are showing application beyond digital currencies.

Whereas Bitcoin acts as a store of value primarily, like digital gold, the Ethereum blockchain acts as an infrastructure for all types of decentralized applications to be built on top of.

Ethereum’s versatility is why it has been described as a type of decentralized internet, offering developers the flexibility to build out a rapidly growing ecosystem for decentralized finance “DeFi”, NFTs, stablecoins, and other use cases revolutionizing traditional finance.

Here are some of the Ethereum-powered markets driving mainstream acceptance and adoption for blockchain technology:

Source: DeFi Pulse 6.3.21

DeFi refers to digital assets, financial smart contracts, protocols, and applications (dApps) built on decentralized blockchains.

The goal of these dApps are to flip traditional finance applications on their heads and “defy” the current infrastructure by developing their decentralized counterparts. Right now the bulk of DeFi’s market value is focused on lending applications.

Ethereum powers the majority of the DeFi world. Why? Because Ethereum offers proven and trusted infrastructure capable of transforming services offered by the financial industry into programmable transactions. Using smart contracts, agreements can be fulfilled in a tamper-proof, transparent, and streamlined environment once certain conditions are met.

In 2020, the total amount of collateral locked in DeFi was more than $14 billion. Now only halfway through 2021, there is over $68 billion¹ in DeFi projects on the Ethereum blockchain. The term DeFi is no longer a term deep in the weeds of blockchain terminology.

The majority of the NFT market leverages the Ethereum blockchain. NFTs are digital tokens that represent ownership of a unique digital item. Think of NFTs like the digital counterparts of one-of-a-kind trading cards. NFTs can be tied to any digital asset including music, artwork, virtual land, sports highlight videos, or even physical objects like Nike’s CryptoKicks.

Each NFT is unique and can’t be duplicated, which is what the term ‘non-fungible’ defines. When you buy an NFT, you gain ownership for that virtual or physical asset on the blockchain which you can choose to hold or trade.

NFTs peaked in May with $170 million in sales. Although declining from the peak, $19.4 million in NFT sales went through this past week.² There are arguments on whether NFTs are here to stay or not, but we believe the attention the multi-million-dollar deals are generating from the general public will leave a lasting impact and increase understanding for the innovative use cases blockchain technology offers.

Popular NFTs making headlines

  • Christie’s sold an NFT by digital artist Beeple for $69 million (£50m)³
  • Twitter founder Jack Dorsey sold his first tweet as an NFT for $2.9 million
  • NBA’s Top Shot blockchain trading card platform has generated over $230 million in gross sales for its NFTs, including $200,000 for just one LeBron James highlight⁵
  • An animated Gif of a meme called Nyan Cat sold for $620,220.0

A stablecoin is a digital token backed by real-world assets. Digital tokens like USDC have a 1:1 value with the US dollar which helps mitigate the volatility inherent in traditional digital currencies like Bitcoin, Ether, etc.

Ethereum is the blockchain behind most stablecoins as well, making up nearly 70 percent of the sector as of January 2021.⁷

Stablecoins offer traditional finance a familiar bridge to the many benefits of blockchain-powered markets without having to stomach the intense highs and lows of digital currencies.

For transactions like borrowing, lending, and derivatives; more people are comfortable relying on a stable source of value. We believe that offering investors the choice to use stablecoins along with traditional fiat will enhance accessibility and convenience for all parties.

Ethereum is at the forefront of FinTech, powering what we believe to be the next paradigm shift in finance: an ecosystem that meets the demand for accessibility, transparency, and security while returning financial ownership to the individual. As a fintech company that builds applications using the Ethereum blockchain, we are seeing the demand rise firsthand.

We are also excited to contribute to Ethereum’s adoption through our upcoming exchange and trading app for digital securities, Upstream. Using the Ethereum blockchain, Upstream features a public orderbook with best bids and offers on the blockchain, shares controlled directly on your smartphone, T+0 settlement, and more. Investors from around the world will be able to trade IPOs, digital SPACs, crowdfunded securities, athlete/celebrity ventures and other unique securities from their smartphones. We hope to usher in the next generation of trading as Ethereum continues to build a stronger mainstream presence.

Horizon is a fintech company that builds and powers global securities exchanges with an integrated suite of software for compliant issuance, management, and secondary trading of securities. Our in-house solutions combine Wall Street and Silicon Valley to power the next generation of securities offerings and trading in the U.S. and globally: https://www.horizonfintex.com/.

Sources:

1 DeFi Pulse| 2 Protos|3 BBC|4 CNN|5 CNBC|6 Nyan Cat Foundation| 7 The Block Crypto Research

Horizon licenses and operates global securities exchanges.

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