A new DeFi era – how Ethereum will transform crypto investing

Recently, Ethereum concluded the Shanghai upgrade. ETH is the most profitable altcoin in the DeFi ecosystem. Ether is frequently portrayed as the adversary of conventional finance in a Manichean struggle for decentralization. In actuality, there is no conflict whatsoever. Ethereum is improving the conventional financial sector as opposed to subverting it. The two systems will soon become inextricably intertwined. 

Ethereum’s fundamental value propositions — self-custody, transparency, and disintermediation — are highly relevant to financial institutions and can be implemented within existing regulatory frameworks. ETH has already taken the initial steps toward institutional adoption, and its unparalleled network decentralization has facilitated this.

Ethereum sets up crypto investors for a new trading era

Ethereum is a blockchain-based platform that allows developers to build and deploy decentralized applications (Dapps) and smart contracts. Since its launch in 2015, Ether has gained popularity as the second-largest cryptocurrency by market capitalization, next to Bitcoin. 

1. Decentralized Finance (DeFi)

Decentralized finance, also known as DeFi, is an emerging trend that utilizes blockchain technology to create a decentralized financial system. DeFi platforms built on Ethereum’s blockchain allow users to access financial services without the need for intermediaries such as banks, brokers, or other financial institutions. 

This means that users can borrow, lend, and trade cryptocurrencies and other assets directly with other users in a peer-to-peer network without needing an intermediary.

DeFi applications built on Ethereum’s blockchain offer a wide range of financial services, including stablecoins, decentralized exchanges (DEX), lending platforms, yield farming, and more. These platforms are transforming investing by providing users with more control over their assets, lower fees, faster transactions, and greater transparency.

2. Tokenization of Assets

Ethereum’s blockchain technology allows for the tokenization of assets, meaning that traditional assets such as real estate, stocks, and bonds can be represented as digital tokens on the blockchain. This allows for fractional ownership of assets, making it possible for anyone to invest in high-value assets previously inaccessible to the average investor.

Tokenization of assets also makes it easier to trade assets globally and provides greater liquidity to asset owners. Tokenized assets can be traded on decentralized exchanges, allowing for instant settlement and lower fees compared to traditional exchanges.

3. Smart Contracts

Smart contracts eliminate the need for intermediaries and automate the execution of contracts, making them faster, cheaper, and more efficient. This technology has the potential to transform investing by allowing for the creation of new investment vehicles and reducing the need for legal and administrative costs associated with traditional investment vehicles.

4. Decentralized Autonomous Organizations (DAOs)

DAOs are organizations run by smart contracts and operate without a centralized authority. DAOs allow for collective decision-making, and members can vote on proposals using tokens.

DAOs have the potential to transform investing by creating new investment models and providing greater transparency and accountability to investors. DAOs can be used for a wide range of applications, including venture capital, investment funds, and more.

5. Trading neutrality

ETH’s purpose is not to provide a stateless alternative currency or an anonymized shadow economy. It offers simplicity: neutrality. The financial system must urgently maintain dependable road standards in a multipolar world.

The system Ether uses to settle transactions and store data is essentially incorruptible. This is primarily due to the unparalleled decentralization of its consensus layer, which consists of over 500,000 validators distributed across over 10,000 physical nodes in dozens of countries. Ethereum is trending toward increased decentralization over time, despite concerns to the contrary.

6. Solving bad actors in the crypto industry

After the failures of FTX and Celsius, there is a need for increased oversight, but Ethereum provides more fundamental solutions. Certain facets of the principal-agent problem can be eliminated entirely by using trustless smart contracts and distributed ledgers.

In the near future, Ethereum and its scaling networks will permeate conventional banking and asset management. From savings accounts to retirement portfolios, almost all investors will self-custody their assets in trustless smart contracts, and carefully regulated on-ramps will make the tokenization of fiat currencies nearly frictionless.

7. ETH vs. Regulations

In the meantime, investors and eventually regulators will require asset managers to report fund performance using on-chain oracles that cannot be trusted. In these areas, Ethereum will not violate regulations; rather, it will strengthen them. Authorities will eventually pay as much attention to the technical specifications of smart contracts as they do to required liquidity reserves.

Ethereum can potentially reduce private financial malfeasance significantly, but its influence on state censorship will be limited.