Bitwise: Ethereum can flip the banking system on its head
From the outside, there’s just one cryptocurrency worth any mention, Bitcoin. The king coin holding over 62 percent of the market capitalization of the entire coin market will take some beating, and according to its opposers, the coin that has the best shot at dethroning the king is Ethereum.
The second-largest cryptocurrency in the market, Ethereum has a market capitalization of $26.7 billion, a sixth of Bitcoin’s holding, but is gaining momentum. Formed as a decentralized internet to Bitcoin’s decentralized currency, Ether, the crypto of the Ethereum network has fared better in 2020. A recent quarterly report from CoinGecko pointed out that in Q2 2020 Ethereum increased its market dominance by 1.6 percent, while Bitcoin only saw a gain of 0.3 percent, and ETH saw the highest quarterly price increase among the top coins.
Price-performance aside, while Bitcoin could be the currency for the world, replacing fiat money as we know it, Ethereum could do the same to the banking system. According to the recent monthly investor report by cryptocurrency investment firm Bitwise Asset Management, Ethereum has value far beyond payment, its networks is one of “programmability,” could be “one of the most exciting applications of blockchain technology.” The report read,
“Ethereum’s core value proposition today is to ask the question: What if we could apply the “programmable transactions” capability to rethink virtually every type of service offered by the financial industry”
One of the “exciting applications” of Ethereum’s ethos is, according to Bitwise, decentralized finance [DeFi]. Two particular “multibillion-dollar use cases” of DEFI are – stablecoins and the decentralized lending market. While these facets have had success in 2020, contributing to the price of Ether, the report suggests this can go far beyond Ethereum, and even beyond cryptocurrency itself.
While acknowledging the benefits of decentralized finance, and indeed with Ethereum or Bitcoin, there also exits a certain risk. The report highlighted the “limited track record” and “difficulty of use,” of the two, and the information asymmetry of these tech products in the larger financial world.
Despite this gap, Bitwise contends that “exposure” to this asset-class is an “opportunity,” reasoning that “a good investment isn’t about finding that there is no risk, but risks that have commensurate return potential.” While still nascent, in the cryptocurrency world, and in the world of global finance, Ethereum is the foundation of all that’s coming.
“If Ethereum becomes the base layer for a new and alternative financial services system, the upside is tremendous.”
Instead of a calm evolutionary approach into the technological age with everyday “applications” and “back office machines” a revolutionary model of “flipping the model on its head” is what is required. Such a system would be devoid of a middleman, have reduced fees, and high transparency. When, rather than if, such a “disruptive change” happens, Ethereum will be at the forefront.