Bitcoin’s rival Ethereum reached an all-time high in January, shooting up in value by 82% in less than three weeks. The price of the cryptocurrency increased to AUD 1,855 on the strength of increased investor interest.
As investors channel their portfolios into diversified cryptocurrency holdings, Ethereum brings a special advantage that even Bitcoin cannot duplicate. Unlike Bitcoin, Ethereum can form the backbone of decentralised applications in a way that allows for the utilisation of smart contracts.
Smart contracts work via computer programmes that automatically run when the required terms are met in the Ethereum blockchain. These contracts specify the terms and conditions of an agreement that cannot be changed once applied through the system.
This function lets individuals create desired agreements and applications, which can then be submitted anonymously into decentralised exchanges. As developers create decentralised applications to support Ethereum’s smart contracts, users can receive or distribute loans into those contracts without the need for local banks.
Smart contracts can be used in fields such as currency exchange, insurance, credit enforcement, retail, online voting systems, retail, property law, and many others. This versatility has led to several corporate giants starting to take advantage of this type of blockchain technology – including Amazon, Citigroup, British Petroleum, MetLife, Siemens, and Samsung.
The increasing popularity of decentralised applications, together with the pandemic-influenced trend towards online transactions, has contributed to some analysts’ predictions of a bullish future for Ethereum. Still, the world of cryptocurrencies remains young, and additional periods of volatility are all but guaranteed as the underlying technology reveals its promise as well as its limitations.