Ethereum set out on a bold vision to create a decentralised version of the Internet known as “Web3.” We explain why the project is integral to the token story and how it could shape the future world we live in.
✨ Ethereum is a smart contract blockchain that hosts decentralised applications. It sits at the core of an ecosystem known as Web3.
✨ The network laid the foundations for DeFi projects and other token use cases to emerge.
✨ Ethereum’s grand vision is to support a decentralised version of the Internet where no central company has control and people can shape the world around them with tokens.
Ethereum is the second-biggest project in the token universe. But it differs from its better-known predecessor. It changed the token space by creating a platform for applications. When it launched, Ethereum set out to create an open equivalent of the Internet that anyone could build on. This enabled all kinds of new use cases and possibilities. In creating this new token-based ecosystem, it’s hoping to make the world a fairer place. We go deep on the mission here.
Ethereum is a smart contract blockchain network. It launched in 2015 and was hailed as the token space’s biggest breakthrough since Bitcoin.
Ethereum has its own built-in programming language called Solidity. This allows it to host smart contract-based applications. Smart contracts are automated programs that live on a blockchain. They are powerful because they can run in perpetuity without any human involvement.
Token tips: Smart contracts are self-executing programs that live on the blockchain. They are like regular contracts in that they execute agreements according to established rules. But they run automatically with no third party involved 💡
The Ethereum network is sometimes described as a decentralised world computer. ETH is its native cryptocurrency token, and it powers all network activities.
Ethereum creator Vitalik Buterin, who pioneered the concept of using blockchains to support smart contract applications and tokens (Photo: Lionel Ng/Bloomberg)
Ethereum and the advent of smart contracts radically changed the token ecosystem, setting the stage for many different kinds of applications to emerge.
While still in its early stages, the project is regarded as a success. Consequently, many competitors have emerged, using smart contract technology to host applications. But Ethereum remains the biggest and most used smart contract network by some distance.
While Ethereum hosts many types of applications, its biggest use case today is decentralised finance.
“DeFi,” as token fans call it, is a disruptive technology that replicates aspects of the traditional finance system on blockchains. DeFi projects use tokens to let people make trades, take out loans, earn yield, and other activities.
Token tips: Yield is the return that someone can earn on a token or other asset over a period of time. It’s usually referred to as “interest” and expressed as an annual percentage (APY) 💡
DeFi has huge potential because it could democratise access to financial services. In the traditional world, finance is a gated industry. Banks control the finance system. They impose limits on how regular people can use their money. Moreover, the traditional finance system closes most people out from accessing certain opportunities.
DeFi could change this as it’s an open space. Indeed, it offers everyone equal access to services and products. Ethereum’s biggest supporters hope that it could create more equality. If DeFi succeeds, it could give unbanked people access to finance and level the playing field around the world.
DeFi has shown early promise. However, it’s currently worth only a fraction of the value of finance globally. If DeFi succeeds, it could take market share from a pie worth trillions of dollars.
Although DeFi was Ethereum’s first notable use case to gain traction, it offers just a hint into how the tokenized future could look.
As Ethereum hosts applications, it can support many kinds of use cases beyond DeFi alone. This forms the core of Ethereum’s vision: to create a vast ecosystem of applications that improves on the Internet itself.
Ethereum fans hope that this space will empower people to take ownership of their assets and digital identities. They imagine a free online space where no central authority such as Facebook or Google dominates. Token fans frequently refer to this space as “Web3.”
While DeFi is currently the biggest use case for Ethereum and other similar networks, Web3 could extend to all aspects of the world around us.
Trickery Contagion by Botto, minted to Ethereum in November 2021. In recent years, many leading digital artists have released their works on Ethereum (Source: Botto)
In its early years, Web3 has become a hub for NFTs and digital art, emerging Metaverse worlds, and gaming platforms. Web3 shows how tokens can encompass everything from finance to art, entertainment, and culture. As tokens can extend to so many different fields and niches, the scope for the future is huge.
While Ethereum is helping the space evolve, it faces difficult challenges.
One of the network’s biggest issues today concerns scalability. Although Ethereum hopes to onboard millions of token adopters, it is not yet ready for mass adoption. This is because blockchains are difficult to scale. Ethereum’s strategy for welcoming millions of users involves using Layer 2 networks built on top of the blockchain.
Similarly, Ethereum and other networks have big user experience issues. In their current form, blockchains are difficult to interact with. As a result, regular people have trouble using them.
But if Ethereum can solve these problems, it will be in a strong position to support the future of the Internet and tokenization.
Tokens will change the way we interact with financial services, express our interests, and think about value forever. Ethereum is the leading blockchain supporting the Web3 vision. At token.com, we believe it will play an important role in the tokenized future. We look forward to accelerating its plans by making tokens accessible to everyone. Head to the app and check out our The Ethereum Ecosystem and Welcome to Web3 Collections to explore this new universe for yourself now.
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