Research Study
About Ethereum
Advancing blockchain with smart contracts and decentralized applications
by Chris Kuiper and Jack Neureuter
May 31, 2022 • 30 min read
In the years following the invention and launch of bitcoin in 2009, digital assets largely represented a single value proposition. Most non-bitcoin tokens launched in the years after offered what many industry analysts have characterized as an inferior and undifferentiated version of bitcoin’s value proposition. That perception in the marketplace changed in 2015 with the release of the Ethereum protocol. A digital asset exhibiting alternative value propositions to bitcoin and a wide array of potential use cases emerged. This launch spawned a new era in digital assets featuring increased innovation, competition, and tradeoffs as well as new potential use cases.
This paper will introduce the Ethereum ecosystem and is intended as a primer for those interested in learning about the basics of Ethereum and its potential investment thesis. Specifically, this paper will cover what Ethereum is, some of its history, its value proposition, and risks. We believe it would be very beneficial for readers to have an understanding of Bitcoin as a foundation before exploring Ethereum in detail, so we provide background on some of Bitcoin’s key features as a point of comparison throughout the paper to help explain what we believe Ethereum is and isn’t. The points below highlight some of our main takeaways:
- Ethereum is a digital asset network whose main value proposition is derived from its programmability. Ethereum features an open-ended architecture in hopes of attracting developers able to build useful applications and drive demand for use of the Ethereum network and its native token, ether.
- Fidelity Digital Assets does not consider the Ethereum and Bitcoin networks to exist within the same category. We believe the Bitcoin network is best understood as fulfilling a monetary use case, while the Ethereum network has made tradeoffs to compete for other potential use cases.
- The Ethereum roadmap is ambitious, with plans this year and next to move to a new consensus mechanism as well as plans to improve scaling. This may bring about large improvements and open the ecosystem to new opportunities as well as large risks.
The information herein was prepared by Fidelity Digital Asset Services, LLC (“FDAS LLC”) and Fidelity Digital Assets, Ltd (“FDA LTD”). It is for informational purposes only and is not intended to constitute a recommendation, investment advice of any kind, or an offer to buy or sell any asset. Perform your own research and consult a qualified advisor to see if digital assets are an appropriate investment option.
Digital assets are speculative and highly volatile, can become illiquid at any time, and are for investors with a high-risk tolerance. Investors in digital assets could lose the entire value of their investment.
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