This article is the fourth part of【BP In-Depth Analysis-Ethereum and ETH】, which introduces the $ETH Application Scenarios. The Application Scenarios range from finance apps to health and politics. Want to know more? Follow us and read the article below.
Table of main contents：
Scenario 1- Decentralized finance (DeFi)
Scenario 2- Digital Identity
Scenario 3- Tokenizing Real-World Assets
Scenario 4- Health Applications
Scenario 5- Politics
Scenario 6- Storing Data
Other Parts of 【BP In-Depth Analysis-Ethereum and ETH】
Part 1 The Development History of Ethereum
Part 2 Powerful Ethereum Ecosystems
Ethereum is a blockchain platform that enables anyone to run decentralized and open applications on it. This platform is fueled by “Ether($ETH)” , the currency used to pay miners for verifying transactions on the blockchain.
Ethereum’s immutability and transparency make it an ideal platform for products and applications that need to run on an open network — The Application Scenarios range from finance apps to health and politics.
Scenario 1- Decentralized Finance (DeFi)
One of the most promising real-world use cases for Ethereum is decentralized finance applications, also often abbreviated as “DeFi”. This includes smart contract-powered loans, minting of stablecoins, and decentralized exchanges.
Smart Contract-Powered Loans
Crypto loans are the loans that a borrower avails by collateralizing their crypto assets. It provides the crypto lenders with interest payments known as the ‘crypto dividends’ in exchange for the crypto loans that they lend in the form of fiat currency. The person taking the crypto loan gets fiat loans from the lender in exchange for crypto assets or currencies like ETH. These crypto-assets and currencies then act as securities if the borrower is unable to pay them back.
Crypto loans also accentuate the value of borrowers’ crypto assets while holding them without any plans to sell them further. The crypto assets offered as collateral are not available for trading during the stipulated loan tenure. The exchange process of the crypto loans occurs between the lender and the borrower at a specific interest rate on the loan. Like traditional loans, the crypto loan amount is given to the borrower in his account, and the borrower is supposed to pay the EMIs to the person who is lending the crypto loan. Once the borrower is completely done with paying the amount, the lender then releases the borrower’s crypto assets, collateralized as loan security.
Minting of Stablecoins
As with any emerging asset class, cryptocurrencies are susceptible to market forces. Accordingly, many crypto projects are actively exploring ways to reduce risk and bolster participation in the broader crypto ecosystem. Current solutions go well beyond the buy, sell, and stop orders of conventional markets. Instead, price stability is being built directly into the assets themselves. The result is an entirely new subset of the cryptocurrency market known as stablecoins. These tokens are meant to function the way their name suggests — with stability.
Stablecoins offer a way to bridge the gap between fiat currencies like the U.S. dollar and cryptocurrencies like $ETH. Because they are price-stable digital assets that behave somewhat like fiat but maintain the mobility and utility of cryptocurrency, stablecoins are a novel solution to crypto volatility: price stability is built directly into the assets themselves. There are four primary stablecoin types, identifiable by their underlying collateral structure: fiat-backed, crypto-backed, commodity-backed, and algorithmic.
Stablecoins are digital currencies minted on the blockchain that are typically identifiable by one of four underlying collateral structures: fiat-backed, crypto-backed, commodity-backed, or algorithmic. While underlying collateral structures can vary, stablecoins always aim for the same goal: stability.
Decentralized Exchanges
Decentralized exchanges, also known as DEXs, are peer-to-peer marketplaces where cryptocurrency traders make transactions directly without handing over management of their funds to an intermediary or custodian. These transactions are facilitated through the use of self-executing agreements written in code called smart contracts.
DEXs were created to remove the requirement for any authority to oversee and authorize trades performed within a specific exchange. Decentralized exchanges allow for peer-to-peer (P2P) trading of cryptocurrencies. Peer-to-peer refers to a marketplace that links buyers and sellers of cryptocurrencies. They are usually non-custodial, which means users keep control of their wallet’s private keys. A private key is a type of advanced encryption that enables users to access their cryptocurrencies. Users can immediately access their crypto balances after logging into the DEX with their private key. They will not be required to submit any personal information like names and addresses, which is great for individuals who cherish their privacy.
Innovations that solved liquidity-related problems such as automated market makers helped attract users to the decentralized finance (DeFi) space and largely contributed to its growth. DEX aggregators and wallet extensions fueled the growth of decentralized platforms by optimizing token prices, swap fees and slippage, all while offering a better rate for users. The most popular DEXs are built on the Ethereum blockchain.
Scenario 2- Digital Identity
The way people identify themselves has barely changed in the past 5 decades. People still use passports, passports are still made of paper, people still need to carry around everywhere. One of the main reasons why people have not shifted to a digital system yet is that it’s hard for Governments to check the authenticity of an online document even until now.
Ethereum enables the verification of data in an open and transparent way, which means that it could also be used to pioneer the creation of a digital identification system. Companies like Civic have realized this potential early on and are already working on making this happen.
Civic Pass — identity management tools for Web3: Civic Pass enables dApps to allow vetted users to participate in their offerings without having to store PII. Verify liveness, perform identity verification, and more. Integrate Civic Pass into the platform and create an identity layer that allows for a permissioned dApp platform, be it an NFT mint or marketplace, a metaverse, or any other projects might come up with.
Scenario 3- Tokenizing Real-World Assets
Many expect the security token market to be a multi-trillion opportunity, and Ethereum could prove to be one of the platforms enabling this shift. In essence, security tokens are a blockchain-based representation of real-world assets like stocks, precious metals, real estate, and more. By tokenizing these assets on a blockchain, issuers can transfer and transact in them much easier than if they only had a contractual representation on paper.
One of the projects turning asset tokenization into a powerful use case of Ethereum is the blockchain start-up PolyMath, which after raising $59 Million in an ICO is now building one of the first compliant platforms to tokenize real-world assets on the Ethereum blockchain.
Polymath makes smart digital investments easy — all in one platform: Traditional investment banking processes can be made much more efficient by leveraging modern technology like blockchain, but it needs to be optimized for the financial industry in order to comply with regulatory requirements. Polymesh is unique as a blockchain optimized for regulated markets and assets, and its technology and infrastructure have immense potential to improve the efficiency of traditional investment banking processes.
Scenario 4- Health Applications
Ethereum will completely revolutionize the healthcare system. All hospitals around the world can store, access, and share their patient’s records. This is a key factor in developing new vaccines for viral outbreaks, or even preventing them firsthand. People can go to a doctor in Thailand for a checkup when they are on holiday and to a hospital in New York when they are back home again, and both will have the same information about them.
But that’s not all. Remember the whole wearables craze a couple of years ago? Well, like it or not, those devices are here to stay. Now imagine that the data people’s smartwatch records every day is automatically shared with every hospital in the world. This way, patterns could be found in medical conditions like heart attacks or strokes, and people could be warned even before it happens. Ethereum will make this possible, and possibly save life one day.
Actually, many companies are now coming into this domain that are now harnessing the power of ETH and the blockchain in the healthcare sector. We currently find healthcare billing to be massive when it comes to managing healthcare or medical data. The billing has 95 percent of medical data. In comparison, the prescription and other details of the patients comprise 99 percent of the same that can be easily managed with the help of digital mechanisms using this technology.
Examples of Ethereum Blockchain Use in Healthcare:
Safe monitoring of Electronic Health Records ( EHRs)
Impact on patient consent management
Traceability of drugs
Clinical trials
Incentivization and micropayments
Scenario 5- Politics
Some people will register their vote for the political party they think should lead their country every couple of years. The fact is, although people are told that they live in a democracy, it wouldn’t be the first time that the results of the polls are altered.
However, changing voting results would be physically impossible with the implementation of ethereum since nobody has complete control over the network and every change is logged and publicly visible. Therefore, ethereum will ensure a more transparent and fair democracy.
Politics are transitioning from an age of geopolitics to one of techno-politics.
Scenario 6- Storing Data
Companies like Dropbox or Microsoft store huge amounts of data in so-called server farms. A server farm is basically a building where hundreds of servers are used to store information. The problem with server farms is that the company concentrates a large fraction of its storage capacity on a single location. Therefore, the company can suffer substantial losses if it is destroyed by a natural disaster or a terrorist attack.
The solution is a decentralized storage facility. In that case, information is not stored in a couple of server farms in the US, but in hundreds (or even thousands!) of data centers all around the world. Until now this has not been possible because it is a big technological challenge to build a network that connects all those servers safely and enables a fast data transfer. However, Ethereum is very likely to be the solution to this problem because its blockchain technology can be used to encrypt and quickly transfer data between millions of servers.
Excellent Example: Using Ethereum blockchain to store and query pharmacogenomics data via smart contracts
Epilogue
Although Ethereum is often criticized for its scalability limitations, at the time of writing it is still by far the most popular platform for decentralized applications, and has the most amount of real-world use cases.
The next article will be the final chapter of the BP Ethereum Analysis Series. We will look at whether Ethereum is still worth concerning? and Is ETH still worth investing in? If you don’t want to miss the wonderful analysis, remember to follow us.
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