Top 6 Ethereum Use Cases
Ethereum is a second generation blockchain platform that supports smart contracts. Currently, it’s the second largest cryptocurrency with a market cap of $17 billion according to coinmarketcap.com. Launched in 2014 by Vitalik Buterin, the platform added functionality to the Bitcoin blockchain by enabling it to support smart contracts thereby extending the number of things that can be done on the blockchain.
The platform has proved revolutionary and paved the way for more invention within the space as upcoming platforms try to build on what it made possible. Its immutability and transparency have made it ideal for building products and applications that need to run on an open network.
Ether is the currency of the platform, and it’s used to pay miners for verifying transactions. Even though scalability has been a significant issue for the platform, currently it’s still by far the most popular place for dapps.
This is despite the arrival of more scalable platforms like Tron and EOS that have managed to take a portion of its market share. But when it comes to real-world use cases, none of those platforms comes near Ethereum.
The list of applications that can be built on Ethereum seems to be endless, and in this piece, we are going to explore some of the top use cases for the smart contract platform that range from health applications to politics. Without further ado, let’s get started.
- Initial Coin Offerings (ICOs)
- Putting Real World Assets on The Blockchain
- Storage of Data
- Banking and Financial Services Contracts
- Prediction Markets
- Digital Identity
Initial Coin Offerings (ICOs)
Initial coin offerings better known as ICOs are the crypto industry’s equivalent to an initial public offering (IPO) in the mainstream investment world. They offer a quick way for companies that need to raise cash for their projects.
Through its ERC20 and ERC721 platforms, Ethereum is designed to help projects launch their tokens on its blockchain, and there is no limit to what can be built on them. Also, these tokens are universal, meaning every exchange or wallet service out there that supports ether can easily integrate any of the tokens.
Startups generate tokens and sell them in exchange for Ether, the native currency of Ethereum. These tokens have utility in the application the startup builds, and individuals can purchase them and use them in the platform or even for speculative purpose.
One of the most successful ICOs to be held on the Ethereum platform was Bancor which managed to raise $153 million within three hours.
Putting Real World Assets on The Blockchain
The security token market is shaping up in 2019, and many expect the industry to be a multi-trillion opportunity. Ethereum is one of the platforms that will enable this shift. Security tokens are representations of real-world assets like precious metals, stocks, real estate, etc.
By tokenizing these assets, issuers can transfer and transact in them much easier as compared to when they have contractual representation on paper.
PolyMath is one blockchain startup that is working hard to make this a reality. After the company managed to raise $59 million through an ICO, it’s now building one of the first fully compliant platforms that will help tokenize real-world assets on the Ethereum blockchain.
Storage of Data
When it comes to storing data, several companies offer these services. The likes of Microsoft and Dropbox can store large amounts of data on the so-called data farms. However, the problem with these farms is that they are centralized and this presents a real problem in case a hack, a natural disaster or a terrorist attack is to occur.
The solution lies in decentralized storage facilities. This means information isn’t stored on a single or a couple of server farms but many data centers around the world. Up until decentralized platforms came along, this wasn’t possible as building a network that could connect all those servers safely and also enabled the fast transfer of data had proved to be a stumbling block.
However, Ethereum has the potential to solve this problem as its blockchain can be used to encrypt and quickly transfer the stored data between millions of servers.
Banking and Financial Services Contracts
Ethereum’s smart contracts have many use cases for the banking and finance sector. So far, these contracts can be applied in areas such as national bonds, mortgages, insurance claims, payments, and settlements, etc.
For example, imagine a government bond that is nearing maturity- if it’s written and maintained by a smart contract it just disburses the funds to the bearer upon maturity.
Also, imagine a scenario where an individual fails to pay for a certain number of EMIs consecutively without any notice to the bank. In such a case, instead of a foreclosure, a smart contract can be written that can enforce the rules and the conditions.
There are other use cases for Ethereum within finance like smart contract powered loans, decentralized exchanges and even minting of stable coins. One project that is putting Ethereum’s smart contracts into good use is MakerDAO which has created a stablecoin dubbed DAI that is backed by ether, and it’s always worth $1.
This is another area where there are plenty of use cases for Ethereum smart contracts. So far, we have platforms like Augur and Gnosis that are using the Ethereum blockchain to run prediction platforms.
The idea of prediction markets can be applied in places where one needs to know the future outcome of a given event like a football match, the price discovery point of an auction, the result of an election campaign, etc.
In these kinds of setups, the participating individuals are incentivized to participate in predictions and for those that manage to make accurate predictions they are rewarded through trustless smart contracts that are hosted on the Ethereum blockchain.
These predictions can be used in gambling, betting and even to make decisions where a given company wants to know if it should launch a specific product or not.
How we identify ourselves hasn’t changed over the past few decades. We still need to carry around our ID cards and passports whenever we go. Part of the problem why the shift to digital identity has been slow has been because its hard for governments to confirm the authenticity of an online document, but this is about to change.
Thanks to Ethereum, it’s now possible to manage digital identities through smart contracts thereby eliminating the issue of identity theft and also data monopoly. Smart contract platforms like uPort have come up to help with identity management.
The platform allows users to register their own identities on the Ethereum blockchain, send and request credentials, sign transactions and securely manage keys.