Over the last couple of years, cryptocurrency has changed from just being obscure tech into a technology that is highly embraced by innovators from various industries, finance included. These two coins, Ethereum and Bitcoin, have been on the frontline, disrupting all we ever knew about finance. We are talking about smart contracts, DeFi, EFTs, and many more innovations that have been brought forth by crypto.
Bitcoin and Ethereum are the two most popular cryptocurrencies. Currently, Bitcoin is leading in popularity with a market cap of $1.43 trillion. Ethereum then follows with a market cap of $ 316.68 billion. However, compared to Bitcoin, the Ethereum Price is quite manageable for most people since it is still trying to pass the $ 3,000 mark. On the other hand, the price of Bitcoin already hit a high of $73,000. The good thing is that even without the full amount to purchase one whole token, you can buy a portion of the token.
Anyway, the difference in pricing does not change the impact that both coins have had in the finance sector. This article will give some insight into the advancements that both Bitcoin and Ethereum have brought into the finance world.
Financial inclusion for the unbanked
According to the World Bank, more than 1.4 billion adults had no access to financial services in 2022. Well, a good chunk of these people remain unbanked or underbanked because they live in areas where financial services have a problem reaching. Actually, this has kept them away from saving, investing, obtaining credit, managing financial risks, and many more. And here is where cryptocurrencies come in.
Now, with the permissionless and pseudonymous nature of Bitcoin, a good number of the unbanked have been given the opportunity to participate in international forms of finance. The International Telecommunication Union (ITU) reported that by 2023, the global population with mobile phones was 78%. This is just 11 points higher than the people with access to the internet. However, ITU still suggests that that gap is becoming smaller.
Therefore, with only an internet connection, people are able to access financing through Bitcoin. People wouldn't need to provide their financial information or any form of identification in order to transact globally, whether it is receiving or sending money. In fact, there are volumes of trading platforms that allow Bitcoin or Ethereum users to trade using hundreds of payment methods, including cash, online wallets, and even gift cards.
Decentralized Finance
"The Ethereum blockchain has played a crucial role in enabling the development of blockchain-based financial services, particularly within the realm of DeFi. In this ecosystem, traditional financial institutions and banks are not required as intermediaries for providing services to customers. Instead, DeFi operates on a peer-to-peer model, allowing anyone with an internet connection to access a wide range of financial services.
Most of the DeFi projects have been built on the Ethereum platform because of the functionality of smart contracts. The latest project in town is the Azura platform, launched on 22 October 2024 by 21-year-old Jackson Denka. Well, Denka, in an interview with Fortune, said that by using Azura, people can be able to trade anything from anywhere around the world.
Popular DeFi projects under the Ethereum blockchain include Uniswap, Aave, Lido, and EigenLayer. With such applications, financial services such as trading, asset management, lending, and others can be done in a decentralized manner using smart contracts instead of traditional centralized institutions. In fact, Uniswap now allows users to buy crypto using their Venmo balance using MoonPay. Uniswap made this announcement on 31 October 2024 on the X platform. Now, more than 60 million Venmo users can participate in DeFi using the Uniswap Platform.
With DeFi, finance has been made more transparent, accessible, composable, and efficient. The financial space is getting much easier to operate from any corner of the globe.
Financial automation using smart contracts
Smart contracts are likely familiar to players exploring DeFi, raising questions about their functionality. These contracts are programmatic agreements built on blockchain platforms that execute automatically based on predefined conditions. At the heart of Ethereum, smart contracts have made significant advancements in the blockchain realm, enabling a wide range of decentralized applications and transactions.
Smart contracts have opened up a wide range of opportunities and possibilities. DeFi lending protocols use smart contracts as collateral to secure loans. Again, NFT marketplaces have gained efficiency by automating transactions using smart contracts in place of lawyers and accountants. Other applications of smart contracts include:
1. Prediction markets
2. Derivative contracts
3. Transparent supply chains
4. Decentralized insurance
The many applications of smart contracts do not stop them from being immutable, highly composable, and deterministic. In fact, their nature allows financial services operating on the Ethereum blockchain to combine in a way we had never imagined before.
In conclusion
Cryptocurrencies are rapidly and steadily becoming the new norm in the financial world. The uses of Bitcoin and Ethereum, especially, have become a powerful force few could have imagined twenty years ago. It's likely that within the next decade, the financial industry will experience massive transformation thanks to these two cryptocurrencies. However, as with any investment, it's important to approach these opportunities wisely and make informed, responsible decisions.
