Ethereum has the largest ecosystem in the cryptocurrency market. There are thousands of tokens on Ethereum’s blockchain, most of which are ERC-20 tokens. ERC-20 is the most popular token standard on Ethereum with billions of dollars, prestigious venture capital firms and revenue generating protocols backing certain Ethereum tokens.
However, anyone can make a cryptocurrency on Ethereum in a matter of minutes. Most projects will inevitably fail, so it’s important to distinguish between a good long-term investment and a quick cash grab.
What is Ethereum?
While Bitcoin is generally regarded as a store of value blockchain, Ethereum is a general-purpose blockchain. The network is extremely flexible, allowing for a plethora of use cases to be developed on its blockchain. This is all done through the use of smart contracts that developers add to Ethereum’s network.
Ethereum is the leading smart contract blockchain. The network has millions of users, and thousands of decentralized applications (DApps) that allow users to permisionlessly, anonymously, and trustlessly interact with financial services such as exchanging, lending and borrowing cryptocurrency.
Smart contracts are code that’s uploaded to the blockchain. This way, programs can benefit from the security and decentralization of the network in a similar way to how cryptocurrencies benefit from blockchain technology.
The Ethereum Network was founded by 8 co-founders, and Vitalik Buterin seems to be the face of the Ethereum Foundation. Ether is Ethereum’s native cryptocurrency asset. Some popular ways Ether is used is for paying transaction (gas) fees on the network, staking on Eth2, purchasing NFTs and providing liquidity to decentralized trading platforms.
Types of Tokens on Ethereum
The 2 most prominent token standards on Ethereum are ERC-20 tokens and ERC-721 tokens. ERC-20 tokens are fungible, while ERC-721 tokens are non fungible (NFTs). While both of these token standards are extremely important in their own respect, we will focus solely on ERC-20 tokens that you can invest in on popular cryptocurrency exchanges.
The best investments on Ethereum’s network come from applications that provide real world value. Some of the tokens on this list are native cryptocurrencies to decentralized exchanges (DEXs), while others have real utility in the growing blockchain ecosystem.
Best Tokens on Ethereum
Here’s a list of some of the best tokens on Ethereum’s network. You can invest in these tokens on exchanges like Coinbase, eToro and Gemini. We evaluated the tokens based on adoption, utility, use case, and future growth potential.
- Uniswap is the leading decentralized exchange on Ethereum. Anyone with an Ethereum wallet can use Uniswap to trade cryptocurrencies. Decentralized exchanges provide many benefits over centralized exchanges, such as anonymity, custody over your cryptocurrency and high liquidity. Plus, anyone can stake their crypto on Uniswap to earn trading fees from users who use the platform to trade. Those who stake their crypto on Uniswap can earn over 20% annual interest in the form of trading fees.
- Aave has the most cryptocurrency staked on its platform out of all the DApps on Ethereum’s network with over $20 billion of cryptocurrency managed on the platform. It’s primarily a lending platform, letting users earn interest on their cryptocurrency through collateralized loans. Anyone on Aave can take out a loan, but you’ll need to stake collateral to ensure the loan is paid back.
- Chainlink aims to integrate real-world data to the blockchain through oracles. These oracles come to consensus in a similar way to how nodes on a blockchain come to consensus, but instead of validating blockchain transactions, they validate real world events. Chainlink recently secured a partnership with Accuweather, allowing them to integrate weather data with blockchain technology.
- SUSHI is another decentralized exchange, and it actually started as a pure copy of Uniswap’s code. However, since its inception SUSHI has developed many services that Uniswap doesn’t have. Instead of focusing solely on being a DEX, SUSHI aims to be the one-top-shop for decentralized financial services. The protocol has implemented a lending platform, token incubator and even pays dividends to token holders.
- Wrapped Bitcoin (WBTC) is Bitcoin on Ethereum’s network. WBTC is pegged to the price of Bitcoin through holding 1 bitcoin in reserves for each WBTC minted. This token is a great way for investors to use decentralized apps on Ethereum while still being exposed to Bitcoin. Since WBTC is on Ethereum, you can use it with smart contracts to trade, earn interest or take out loans in terms of Bitcoin. You can buy Wrapped Bitcoin directly from Coinbase, or use a protocol like Uniswap.
Store Your Crypto Safely
To take advantage of the services available on Ethereum’s network, you’ll need an Ethereum wallet. Instead of signing into an account to use these platforms, you sign in with your wallet’s public key. Your funds are stored on your wallet when using these DApps, adding a level of security centralized exchanges can’t provide.
The best software wallet to use with Ethereum is Metamask. Metamask is a browser wallet that is a Google Chrome extension, making it easy to interact with protocols like Aave, Uniswap and SUSHI.
A software wallet is best for when you want to manage your cryptocurrency portfolio, but there’s actually a better way to store cryptocurrency. Hardware wallets are the safest way to hold crypto, as it stores your funds on a separate, offline device. This way, it’s impossible for hackers to steal your funds via the internet. If you’re in the market for a hardware wallet, Ledger makes some of the best wallets at affordable prices.
Cryptocurrency Price Movements
Earlier in 2021 we saw the cryptocurrency markets reach new all-time highs, with Bitcoin surpassing $64,000 and Ethereum reaching over $4,000 per token. Since then, we’ve seen a significant dip in cryptocurrency prices, but it seems like we may be on our way up again. With cryptocurrencies rising but still below their all-time high prices, it may be a good time to start gaining exposure.
ERC-20 Tokens vs. Other Altcoins
There are many benefits of a cryptocurrency using Ethereum’s network, such as added security, access to a robust ecosystem of DApps and ease of use. This being said, many tokens on Ethereum follow the price of Ether closely. Due to this, you may want to consider diversifying into other blockchain projects to mitigate some of your risk. As always, make sure to do your own research to decide whether tokens on Ethereum are better than other altcoins for yourself.
Frequently Asked Questions
Questions & Answers
The ERC-20 token standard allows for the capability of smart contracts on the Ethereum blockchain.
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