Ethereum is a decentralized blockchain network capable of executing smart contracts. Lately, it has been at the center of discussions on crypto forums and news because of its price surge. As of today, Ethereum’s market cap is $238.98 billion, second only to Bitcoin.
Even though it has several things in common with Bitcoin, Ethereum is significantly more powerful. It enables businesses to use blockchain technology for improving transactional efficiency. Not just that, Ethereum allows the involved parties to create a smart contract that can store the rules and execution process for the transaction as well.
What Makes Ethereum Powerful?
Before businesses go ahead and start to buy Ethereum, they should educate themselves about what makes Ethereum powerful. One of the most appealing features of the Ethereum blockchain for businesses is its ability to execute smart contracts.
Smart contracts are decentralized applications (dApps) with distinct rules of ownership and transaction formats. Once the smart contract executes all transactions and agreements, it subsequently starts a compliance check based on the rules that the creators have encoded into the smart contract.
Imagine being able to execute contracts for literally anything that two parties have agreed upon, regardless of the location of the parties. It’s fairly safe to assume that every business would find this convenient.
This is what makes Ethereum a powerful tool for businesses. Businesses can use Ethereum to build a wide range of decentralized applications. Major sectors such as banking, public and private institutions, and governments have been keen on developing blockchain technology, though some governments are slightly more skeptical than others.
Why Businesses and Enterprises May Need Ethereum
Investors chase gains. However, enterprises and businesses have a very different set of objectives when buying cryptocurrencies. Rather than focusing on gains, businesses need to focus on stability, accountability, and security. Businesses are answerable to customers as well as regulators so unless they’re 100% confident about it, they can’t take the plunge.
A business’s requirements may be categorized as follows:
The data contained in the smart contract and the associated transaction(s) such as the rate, quantity, product ID, and other information must be accessible only to authorized participants. For instance, the transport company doesn’t need to know the price of the contents, but only the contents of the package.
The larger the business, the more diverse their transactions. These diverse transactions could be in large volumes, too. Therefore, businesses need a technological infrastructure that has adequate capacity to process hundreds of transactions each second and power through sudden spikes in the transaction load.
Businesses may need to transfer a large sum of money for each transaction. Naturally, they’d be uncomfortable making the transfer unless they have complete certainty regarding the transaction’s outcome.
Rationale for Considering Ethereum
Businesses are becoming more reliant on technology each day, and the trend will likely continue for the foreseeable future. Some businesses are also turning to digital currencies. A cryptocurrency that businesses are particularly attracted to is Ether. This is mostly because of the potential of the Ethereum blockchain.
Ethereum was birthed as a result of a valid skepticism of centralized control. Vitalik Buterin, Ethereum’s creator, noticed that Bitcoin’s blockchain design and protocol were two things that made it potent. While Ethereum draws on Bitcoin’s appeal as a digital currency, it goes much beyond.
Ethereum offers various benefits, especially for businesses, that can simplify their transactions while providing better security. What’s more, Ethereum-based smart contracts offer ample utility for businesses. Businesses have already started to incorporate these technologies into their operations, and more are joining the club every day.
It won’t be long before the use of blockchain technology becomes non-negotiable for businesses. It offers benefits not just to the businesses, but to their customers as well. If a customer has to choose between a business that accepts Ethereum versus one that doesn’t – guess who the customer will buy from?
Benefits of Ethereum for Businesses
Following are the benefits that Ethereum offers businesses in 2021.
1. Smart Contracts save time and money
Smart contracts are undeniably the biggest benefit that businesses get out of using the Ethereum blockchain. Sending paper contracts to involved parties can often take a few days depending on their location. If a party to the contract is overseas, the business may need to send an executive, even though there is a possibility that the party may not even accept the contract.
This costs the business plenty of time and money. These valuable resources can be saved if businesses use Ethereum-based smart contracts. Smart contracts can automate the agreements and save resources that can be used in other productive areas of the business.
In addition to automating agreements and transactions, smart contracts also make them efficient and secure. The parties may agree to automate the execution of the contract as they choose, i.e., at an agreed-upon time or after the happening of an event.
2. Quicker and cheaper transactions
Businesses go to great extents to minimize their costs, and justifiably so. After all, money makes the world go round. Since profit is a business’s primary goal, it makes sense to seek avenues that can reduce costs for the business.
Enter ETH. Ether, the Ethereum blockchain’s native coin, helps businesses reduce their transaction costs. Conventional methods such as bank transfers and PayPal can take a significant chunk out of the business’s revenues if payments are largely received through these channels. However, ETH charges considerably lower fees on transactions, which could translate to significant savings.
What’s more, businesses often hold large amounts of cash if they have managed to negotiate lenient credit terms with their suppliers. This cash could be critical for their net working capital position or maintaining enough liquidity depending on which industry they operate in. Especially during times when cash is tight, even 3 days’ worth of revenue could certainly come in handy.
However, bank transfers and PayPal transactions may take 2–3 days to complete, which means businesses couldn’t hold that cash during those 3 days. Fortunately, ETH transactions are quick and can be processed within minutes, earning businesses significant money.
3. Eliminates foreign currency risk
Businesses often worry about exchange rate fluctuations when selling products or services overseas for a fairly large amount. To add to the risk of fluctuation, banks also charge a foreign currency conversion fee. If only there was a better option.
Well, ETH certainly offers a good deal here as well. Businesses have gone digital and are now capable, more than ever before, of doing business worldwide. Businesses that are open to receiving payments in ETH can stop worrying about hefty conversion fees and the nightmarish currency fluctuations in the forex market.
Moreover, the customer’s bank may charge them a fee as well. If customers can find a business that accepts ETH and saves them money, they may be encouraged to purchase from that business rather than anywhere else.
Businesses can use Ethereum’s plug-and-play feature for building private or permissioned blockchain networks. Subsequently, the private blockchain solution may be plugged into the public Ethereum mainnet.
The public blockchain is giant and active, which means such integration will provide ample benefits. In essence, the business’s blockchain can stay constantly updated, thanks to Ethereum’s interoperability. This gives businesses various capabilities such as dApps, constant upgrades and developments, worldwide expansion, and a massive user network.
5. Programmable blockchain
Ethereum, the world’s first programmable blockchain, is armed with Turing-complete language. A Turing-complete system is a system within which the executed programs will, in theory, always solve a computation problem. This makes the execution of smart contracts smooth and frees up valuable resources, particularly time, for the business.
Over the past decade, hundreds of cryptocurrencies emerged and withered. This is inherent to their nature. However, this can be tackled with a clear course of action, which Ethereum has. Ethereum’s strong history adds plenty of credibility to the blockchain network.
Vitalik released a whitepaper in 2013 when Ethereum didn’t even exist, and another whitepaper in 2015. These collaterals defined a laser-focused vision and the guidelines to achieve Ethereum’s objectives such as scalability and optimization of the blockchain to ensure its relevance as the blockchain of the future.
7. Massive and supportive community
Ethereum blockchain proudly brags one of the biggest developer communities that contributes significantly to the blockchain’s growth by developing the blockchain protocol. The project is backed by both small and large-sized companies. What’s more, Hyperledger and Ethereum Enterprise Alliance extend their full support for monitoring and contributing to the blockchain’s development.
The Way Forward for Ethereum
In addition to Ethereum’s highly secure and decentralized blockchain, it is also used for developing dApps. DApps can be extremely wide in their scope and offer utility to almost any industry we know today. Plus, they allow businesses to experiment on the platform by themselves. Industries across the globe are starting to recognize these benefits.
Governments and the private sector alike are heavily investing in blockchain technology, too. In the future, Ethereum will make transactions more secure for both businesses and customers, and offer a much wider range of benefits than any traditional technology. Therefore, businesses that want to use blockchain technology should certainly consider Ethereum.
Danis Woods in Businessman, investment banker and stock exchange traders. On the same time he loves writing financial blogs to shed lights on different aspects that new and existing businessman are not aware of.