Also in 2022, more than 13 years later Bitcoin Cryptocurrencies, first launched in January 2009, are still largely characterized by speculation, with market participants attempting to time price fluctuations in hopes of reaping a quick profit. But true believers and supporters of the asset class believe that cryptocurrencies and blockchain technology can fundamentally disrupt certain industries.
One of the most promising Use cases for cryptocurrencies refers to their potential to upend traditional financial services, an industry plagued by excessive risk-taking, misaligned incentives and fee-based intermediaries. Going in the same direction are three top cryptos to check out ether (ETH -4.84%), Solana (SOL -3.04%)and Spirit (GHOST -3.41%).
ether
RJ Fulton (Ether): lending platforms like Aave, Manufacturer, connectionand Curve have become viable options for those who need traditional financial products such as credit or credit, but would rather take advantage of crypto offerings such as anonymity, security, and decentralization. These protocols have minor differences, but they all share the same goal – to provide a blockchain-based alternative to traditional finance, better known as decentralized finance (DeFi). Another important common feature is that they are all built on the Ethereum blockchain.
Ethereum’s rise to become the second most valuable cryptocurrency is largely due to the fact that it was the first blockchain to introduce programmable smart contracts. Using smart contracts, developers can then build things like stablecoins, decentralized exchanges, and especially lending protocols.
It might be helpful to think of Ethereum as the underlying software that these DeFi applications are built on. Smart contracts are used to automate almost every task that would normally have to be done by a person at a traditional financial institution.
Because smart contracts can be customized and programmed to perform specific tasks, they can be built to do things such as ensure there is always sufficient funds to maintain liquidity, pay users when needed, or even put terms on things like interest rates and set loan terms.
Since the creation of Ethereum, the number of blockchains based on smart contracts has increased significantly. New smart contract enabled blockchains like Solana, Cardanoand avalanche are all vying for their place in the DeFi economy. Despite valid efforts, these competitors failed to dethrone Ethereum as the blockchain of choice for DeFi.
The stranglehold Ethereum has on DeFi is no small thing. We can look at a statistic called Total Value Locked (TVL) to compare the collective value of a blockchain’s DeFi ecosystem. If you need to equate traditional financial terms, think of it as a company’s market capitalization. Of the $68 billion in all of DeFi, almost $39 billion is on the Ethereum blockchain. Of that $39 billion, the Aave, Maker, Compound, and Curve lending protocols account for a total of just under $23 billion.
Simply put, without Ethereum there is no DeFi. For this reason, investors looking for the cryptocurrency that could most disrupt current traditional financial institutions need not over-complicate their research. Investors should look no further than the cryptocurrency responsible for enabling the creation of DeFi in the first place.
Solana
Neil Patel (Solana): Solana operates a Proof of Stake Consensus mechanism, which means token holders can lock their holdings, generate income and help validate transactions on the network. However, Solana also includes what is known as a proof-of-history, which allows computers to agree on a point in time without having to communicate with each other about it, freeing up block storage and speeding up transaction throughput. Because of this innovation, Solana has the capacity to process 50,000 transactions per second, far exceeding Ethereum’s 13.
Of course, the incredible theoretical speed of the Solana network makes it a potential threat to a very important industry, not only in the financial services sector but also in the broader economy, and that is the payments space. companies like Visas, MasterCard, PayPaland blockwith combined market capitalization Of $960 billion as of this writing, I immediately think of players dominating payments. But Solana’s new product launch should keep these big incumbents on their toes.
In February, Solana Labs launched, the organization spearheading the advancement and development of blockchain Solana payment. Solana Pay essentially enables a direct transaction link between merchant and consumer using SOL or a stablecoin USD coin, with a QR code and without intermediaries. Not only does it create near-fee transactions, which low-margin retailers would really appreciate, but also instant billing and the introduction of feature-rich loyalty programs. Because transactions take place on the blockchain, Solana Pay merchants could integrate non-fungible tokens into the sale of goods, allowing them to generate deeper engagement and excitement with consumers.
Less than two months after launch, Solana Pay has been accepted by more than 600 merchants. Investors should definitely keep an eye on the progress.
Spirit
Michael Byrne (Aave): While companies like Solana and Ethereum are well-positioned to disrupt peer-to-peer payments and a variety of other industries, Aave, a $1.5 billion cryptocurrency based on Ethereum, is specifically focused on disruption the credit industry. Aave is a decentralized lending protocol that allows users to borrow and lend crypto without the need for a central intermediary. Aave users can borrow or borrow major cryptocurrencies like Ethereum or top stablecoins like tether and USD coin.
Rather than having to find a counterparty to match up with for a loan, Aave simplifies this process by creating pools of capital (called liquidity pools) that users can deposit into or withdraw from. Aave users who lend their cryptos to the platform earn a return while the borrowers post collateral and pay interest on the borrowed assets. A key benefit for depositors is that they can earn passive income from their assets well in excess of what they would get if they put money into a traditional savings account or certificates of deposit, while also having the ability to receive instant liquidity without spending a lot Going through bureaucracy and paperwork is attractive to borrowers.
Additionally, someone who, for example, owns a lot of Ethereum and needs access to capital for unexpected expenses, but doesn’t want to sell their Ethereum, can put it up as collateral and borrow against it without having to close their position. Aave was initially limited to Ethereum and ERC-20 tokens but now has marketplaces for other prominent cryptos such as Avalanche and phantom. Currently, Aave has $12 billion of capital tied up in these liquidity pools, making it a robust marketplace.
Perhaps most interestingly, users can even lend or borrow tokenized versions of real-world assets like real estate, consumer loans from emerging markets, and even freight and trucking bills. We’re still a long way from Aave actually taking over traditional banks, but it certainly has what it takes to become a competitive competitor one day.
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