Cathie Wood, the president and CEO of investment management firm Ark Invest, has a long history of making bold forecasts. In 2018, she predicted that Tesla would reach a market capitalization of $672 billion. Of course, since then, Tesla’s value has grown dramatically — but it was only worth $56 billion at the time.

Wood is a well-known bitcoin bull. In fact, according to a recent study from Ark Invest, Ethereum (ETH 2.60%) may hit a valuation above $20 trillion in the next ten years. This implies an upside of 5,400 percent from its current price. Given Wood’s enthusiasm for cryptocurrencies, let’s have another look at this cryptocurrency.

Here’s what you should know.

The first programmable blockchain

The Ethereum blockchain has pushed the envelope of blockchain technology. The Ethereum blockchain, rather than simply protecting transaction data, enables developers to develop self-executing computer programs known as smart contracts. That usefulness has revolutionized the market, spawning a flourishing ecosystem of decentralized finance offerings, decentralized applications, and non-fungible tokens (NFTs).

Due to its innovative smart contracts and decentralized applications, Ethereum has been targeted by numerous competitors in recent years. Many rival blockchain systems are faster and less expensive, yet Ethereum still remains the most popular decentralized software and service ecosystem. In reality, it runs virtually 75% of all dApps on any blockchain. Even better, last year saw Ethereum accounting for 78 percent of all NFT sales and making up 78 percent of all DeFi investment on the platform.

The disruptive impact of decentralized finance

Without the use of banks or other financial institutions, decentralized finance solutions allow investors to lend, borrow, invest, and get interest on their cash. To that end, DeFi improves financial services inefficiency and accessibility. Take a look at the example of Compound’s borrowing and lending platform. The typical savings account in the United States currently pays 0.06 percent annually, however your return could be orders of magnitude greater in a DeFi protocol. For example, Compound currently pays 2.3% APY on USD Coin deposits using Compound is a hybrid cryptocurrency that combines Bitcoin’s peer-to-peer payment system with Litecoin’s block chain technology to enable faster transactions as well as an improved level of privacy when compared to Bitcoin or Ethereum.

In the long run, Ark Invest sees Ethereum’s lead in DeFi services as a key growth driver. That’s true for two reasons. First, whenever an investor uses a DeFi service, the transaction fees are paid in the native currency. In this case, that means the ETH coin, commonly known as ether. Second, the ETH coin is the preferred collateral in DeFi. Rising adoption of DeFi will result in demand for ether, pushing its price higher as a result.

The disruptive impact of non-fungible tokens

Digital certificates of ownership are referred to as NFTs. While the term “NFT” is most often applied to JPEG art like CryptoPunks, any asset could be tokenized on a programmable blockchain. Healthcare records might be converted into NFTs to better protect patient privacy, and education transcripts may be turned into NFTs to improve the college admissions process. Physical assets such as tickets, automobiles, property, and collectibles could all be tokenized to make transactions easier and for proof of ownership verification .

Given the potential, Ark considers Ethereum’s leadership in NFTs to be a major benefit. It costs money to mint and buy NFTs, and when those transactions are recorded on Ethereum, ETH is used as payment. To put it another way, as the NFT market expands, demand for ETH should push its price up.

One of the most interesting things to consider is that many investors are already familiar with OpenSea, the world’s most popular NFT exchange. It shouldn’t come as a surprise that both OpenSea and the recently launched Coinbase NFT marketplace are based on Ethereum (and other blockchains). Given its position as the largest US cryptocurrency exchange, Coinbase’s new Coinbase NFT marketplace might serve to strengthen Ethereum’s competitive position in the years ahead.

Author: Blake Ambrose

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