The second-largest cryptocurrency after Bitcoin is Ethereum, which is more than simply a virtual currency. By creating a worldwide network of decentralized apps (DApps), smart contacts, NFTs, and more, Ethereum has expanded on the use cases of Bitcoin. Keep reading to learn more about how Ethereum functions and the top 10 projects powering the Ethereum ecosystem.
- 1 What is Ethereum?
- 2 Decentralized Finance
- 3 7 Most Important Tokens in the Ethereum Ecosystem
- 4 Conclusion
What is Ethereum?
Launched in 2015, Ethereum is a decentralized open-source blockchain network fuelled by its native coin, ETH. With the help of a group of co-founders, a computer science student Vitalik Buterin created the Ethereum blockchain after recognizing that open-source Bitcoin technology could be used for more than just making electronic payments. Ethereum expands on the primary goal of Bitcoin by creating a blockchain that can execute autonomous smart contracts and allowing decentralized application (DApp) developers to develop on top of it.
DeFi (decentralized finance), NFTs, GameFi, and the Metaverse are just a few unique crypto development initiatives made possible by the blockchain’s cutting-edge design. Ethereum has grown to be the second-largest cryptocurrency by market value because of the enormous variety of uses it provides the sector.
Let’s examine one of the essential financial use cases for Ethereum, DeFi.
Over the past several years, the decentralized finance (DeFi) market has expanded. By using peer-to-peer (directly from one party to another) blockchain technology, DeFi undermines the existing financial industry often with much better rates and conditions than their traditional counterparts. Users may access DeFi products such as lending, borrowing, investing options, interest-earning APY offerings, insurance, and payment services primarily on the Ethereum blockchain via DeFi DApps. Outside parties provide these services without charge, enabling an open, democratic, and permission-free financial system.
Anyone may create and list tokens using the ERC-20 standard, trade tokens, and add tokens to liquidity pools. Users can benefit from benefits while facilitating peer-to-peer trading by contributing tokens to the liquidity pools. The Aave and Uniswap DeFi platforms are well-known.
7 Most Important Tokens in the Ethereum Ecosystem
Uniswap, a decentralized cryptocurrency exchange built on Ethereum, uses UNI as its native governance token. On Uniswap, users may exchange Ethereum tokens without depending on a third party to retain their money. The trading model used by the platform is a novel one known as an automated liquidity protocol.
An Ethereum-based peer-to-peer company called MakerDAO enables cryptocurrency lending and borrowing. By putting Ethereum-based tokens like UNI, YFI, or BTC into the protocol, users may borrow money by establishing a collateralized debt position for the amount they want. Regarding return, the loan amount must be in DAI stablecoins, and any interest must be paid in the governance and utility token MKR. MakerDAO processes loans in DAI stablecoins.
DAI maintains its value by over-collateralization using the MakerDAO system, unlike stablecoins linked to the US dollar. For instance, the value of Ethereum-based assets held as collateral is always more significant than the value borrowers get in DAI tokens. As a result, it is still possible to retain DAI at a token value of $1. Reserves have enough worth to sustain the stablecoin weight even in a severe market downturn.
On the Ethereum blockchain, there is an open-source lending protocol called Ave. Lenders may receive incentives by adding different Ethereum-based assets to liquidity pools. At the same time, borrowers can use approved assets as collateral for loans.
Additionally, interest rates on the Aave platform depend on how much the relevant liquidity pool is being used. Further, without working with a third party, lenders can get relatively low-risk passive income from interest on loans. The Aave ecosystem’s native governance token, AAVE, lets token holders decide how the protocol will develop.
The 1INCH native token is used on the 1INCH decentralized exchange (DEX). By combining the best cryptocurrency exchange rates from all DEXs, the Ethereum-based DEX protocol seeks to provide its consumers with the best prices. Like other DEXs, 1inch enables direct token exchange between users.
A DEX and automated market maker (AMM) platform called Curve Finance provides a quick and easy way to swap tokens while retaining minimal fees and slippage. In contrast to DEXs, Curve Finance is explicitly made for trading stablecoins.
Users may use the network’s native CRV token as a governance token to participate in network decision-making.
The native coin and the primary means of trade in The Sandbox ecosystem is SAND. Users may utilize SAND to monetize their gaming experiences by buying property, building in-game objects, or listing them on The Sandbox Marketplace. Additionally, SAND owners can stake SAND tokens to get in-game incentives and participate in governance choices.
Decentraland is a virtual reality real estate platform that lets players create and monetize virtual structures and experiences. Creators can use the platform’s native token MANA to buy digital assets such as LAND NFTs and avatars on the Decentraland marketplace.
The Ethereum network plays an essential role in the rise of innovative technology in the blockchain space, especially in ecosystems where DApps are prominent. As more projects and users enter the industry, the Ethereum ecosystem will continue to grow.
As always, remember to thoroughly DYOR before suggesting people to purchase cryptocurrency on exchange.