The 60-40 Portfolio: What Went Wrong

For decades called the ‘balanced’ portfolio, the 60-40 portfolio allocation of 60% to stocks and 40% to bonds served as the quintessential go-to for stable growth, income, diversification, and inflation protection. It worked wonders in the decades leading to the dot-com bubble, known as one of the worst financial events for now-seasoned investors. 

Yet the 60-40 portfolio persists even after the Global Financial Crisis despite a 2022 negative return of -18%, reminiscent of the -22% crash of 1937. What’s next for 2023? 

This article delves into the pitfalls of the hallmark 60-40 portfolio, what went wrong, and what we can do moving forward into the post-pandemic era of high rates and high inflation. 

What Is a 60-40 Portfolio? 

Again, the 60-40 portfolio is an industry-standard investment strategy that allocates 60% of the portfolio to stocks and 40% to bonds. This asset allocation is based on the idea that stocks have the potential to generate higher returns over time but also carry higher risk and volatility relative to bonds. 

Stocks, in general, remain closely tied to the overall health of the economy. Periods of low rates elevated consumer sentiments, and increasing supply orders in a smoothly functioning supply chain–suggesting expected demand–tend to bode well for stocks. 

Stocks, therefore, represent the ‘growth’ we want in a portfolio and can perform well if timed well with an increasing trend or theme. For example, electric vehicles and climate change represent two persistent investment themes despite the Covid-19 pandemic.

Bonds represent the base ‘income’ necessary for a more conservative investor, such as an individual saving for retirement or for a child’s college plan. In theory, it all works well on paper so long as the two asset classes are uncorrelated. 

Why Correlation Matters

Should their correlation turn positive, which was the case for 2022, then bonds present an inordinate amount of risk for an insufficient amount of return. In other words, the risk-reward ratio initially used to create your portfolio is now out of balance. 

Bonds follow the negative trajectory of equities typically when rates are rising on the back of high inflation, supply chain disruptions, or an exogenous event, such as a global pandemic. The usual ‘flight’ to bonds that would, in theory, alleviate the damage done by a 60% allocation to stocks does not occur as institutional investors quickly foresee the incoming damage owing to duration. 

How Duration Is Harmful

Bond duration showcases any one bond’s sensitivity to changes in interest rates, often the Fed’s policy rate. In technical terms, it represents the weighted average time until the bond’s cash flows (inclusive of coupon payments and principal) are received by the investor. 

When interest rates rise, the value of a bond falls. The opposite remains true. Think of it this way: If we can receive a better deal from a more recent bond, then surely the old bond is worth less–and so it is. Bond duration demonstrates this price change. 

For example, a bond duration of 10 years means that this bond’s price will change by 10% for every 1% change in interest rates. If rates rise by 1%, then we can expect to see a 10% price fall. The effect dampens the higher the bond’s yield, but it’s an established rule of thumb we cannot ignore. 

How Active Monetary Policy Ruins ‘60-40’

January 1980 began with a Fed funds rate of 14%. You read that correctly. In order to combat inflation of also 14%, the Federal Reserve manufactured a recession on its own accord. It threw an ice bucket of water onto an overheating economy. 

This set the precedence for constant market manipulation for the following decades to come up to today. It’s the belief in a ‘soft landing’ towards recession or a ‘quick recovery’ following a disaster that keeps central banks worldwide motivated. 

And they have reason to believe–it does work to some extent. For example, many financial executives cite 1994’s soft landing by Alan Greenspan. However, there is the valid argument that it all came down to luck. 

What central bank activity certainly does is inject volatility into an asset class chosen to buffer against the very same thing–volatility–by creating expected cash flows. Again, the concept works fine in theory as long as the sources of volatility are uncorrelated between stocks and bonds. 

When they derive from the same source, such as a central bank, then asset classes themselves become correlated–leading to a type of 100% either-way portfolio. 

Return to Supply and Demand

The global pandemic introduced rampant inflation in 2022 as supply chains buckled under the weight of austere government policies, afraid of what it might be like to repeat 1918’s Spanish flu in a hyperconnected world. Dry bulk shipping prices skyrocketed as the white collar world came to add a new word to our growing dictionary, ‘hybrid working’. 

In late 2021, the lag between event and aftermath led to the transitory inflation debacle in which the economic severity of a global pandemic was woefully under-expected and under-stated. 

When inflation hit due to rising supply costs passed onto consumers, the Fed following 1994’s example, decided to raise rates as rumblings of recession began in late 2022. Consumer spending fell as duration ensured a dark path ahead for bonds. 

If the demand for the products of large companies remained robust, then the 60-40 portfolio would have fared better. However, that demand fell in 2022, such as with Apple’s annual iPhone release. 

Long-term investors then, knowing that a 60-40 portfolio depends on a healthy ‘bull market’, look to a source of healthy demand despite rising inflation and rising rates. 

Alternative Portfolios

Yale’s endowment fund serves as a great model for investing in alternative assets and bucking the 60-40 portfolio. In its year ending June 2022, it earned a return of 1%, well exceeding S&P 500’s -16% loss. In the year ending June 2021, it earned a return of 40%. 

Yale publicly documents its gradual veering away from traditional asset classes and how it favours the alternative. Leveraged buyouts, venture capital investments, and absolute return strategies form its three greatest allocations. Domestic equity, on the other hand, remains minuscule. 

And Yale is not alone. Kansas State and the University of Michigan also represent top performers in one of the worst years for retail investors. It boils down to how endowment portfolios think differently to the standard 60-40. 

They operate truly in the long term and seek to diversify through alternative strategies, such as commodities, hedge funds, and private real estate, often approaching a portfolio like a long-term legacy plan.

Wealth Planning 

As opposed to wealth management, wealth planning pays specific attention to long-term goals, incorporating a holistic view of an investor’s entire estate and how they might be able to invest through alternative methods. 

2023 marks the year of wealth planning. Inflation and correlated volatility highlight the weaknesses of the 60-40 portfolio. Endowment funds and a true long-term perspective showcase the inflation-stopping and jaw-dropping power of what it means to diversify amongst different sources of demand growth. 

Disclaimer: The author of this text, Paul Winder, has a career that spans over 30 years in the financial services sector with emphasis on creating products and services in the international tax treaty and estate planning arena. Paul is Head of Fiduciary Products & Markets at Deltec Bank & Trust and CEO of Deltec Fund Services,

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2011. Mr. Scott is a Writer for Deltec International Group,

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 

The Financial Planning Process

Financial planning or wealth planning is the process of creating an achievable roadmap for your life’s goals. The financial planning process involves several intensive steps, such as: 

  1. Defining your financial goals
  2. Assessing your current financial situation
  3. Developing a realisable plan of action
  4. Implementing that plan
  5. Monitoring and adjusting 

Whether saving for retirement, paying off debt, or planning for a major purchase or life event, tailored financial planning means the difference between success and failure. The financial planning process itself must be well-structured, thorough, and comprehensive. 

After painting a complete picture of your finances, the capable advisor defines the primary realisable goals relevant to you and how to achieve them. Of course, the ultimate goal remains long-term financial stability and success through the well-ordered mind. 

This article explores the five essential steps that are the foundation for a well-ordered financial planning process. In the greater scope of wealth management, financial planning continues to be a complex speciality requiring both experience and compassion. 

Source: finexplained

Defining Your Financial Goals 

As the critical first step of the financial planning process, it helps you clarify what you want, what’s achievable, and what you want to achieve in the long term. Further, it provides a path forward. There are five considerations to keep in mind. 

Short- vs long-term. We must identify whether your goals are short-term (less than one year), medium-term (one to five years), or long-term (more than five years). This aids goal prioritisation and the relevance level of available strategies. 

Measurable. After time durations are determined, we examine the specific numbers to which we must hold ourselves accountable. This lets us see where we could have met specific objectives. 

Realistic. Ambitious goals come with high risk, while realisable goals enable us to moderate that risk, especially over longer durations. Considering the current income stream, we can identify any weak points and define strategies for remedying them. 

Prioritised. An essential question inside any financial planning process: what can we do without, and what is imperative? Pre-paying school fees for possible tax benefits is a high-priority item, while an additional car is not. 

Value-aligned. Your values and priorities dictate how you spend your disposable wealth. Otherwise, why hire a financial planner? Your passions and beliefs should enter many of your financial and life goals.

Assessing Your Current Financial Situation

The second step of the financial planning process, it provides an essential baseline for evaluating your forward progress and the necessary plan of action. 

Income. We must evaluate the varied sources of income and their levels of consistency. For example, salary payments versus sporadic rental income. Then we factor in taxes, deductions, and all matters relevant to your legal jurisdictions. 

Assets. We then need to review the total value of your assets, including savings accounts, retirement accounts, investment portfolios, private funds, real estate, and other sources. Not only does accurately understanding your net worth open up new doors, but it guides the timeline for realising more significant goals. 

Liabilities. In short, we must ensure that all unnecessary liabilities are handled with the utmost care and urgency. While more time may be needed for property or loan balances, removing minor matters immediately improves your financial momentum and well-being. 

Cash flow. In the final but essential portion, we need to determine the current cash flow picture and how it can be adjusted to meet your financial goals. This is one area where experience and financial acumen becomes critical. 

Developing a Realisable Plan of Action

The third step of the financial planning process, developing a realisable action plan, entails producing a concrete strategy for achieving your financial goals. 

Set targets. After setting your financial goals through to bequests and the next generations of your family, set your smaller, achievable targets. The overall goal is to know how one achievement feeds into the next. 

Identify obstacles. We’re all familiar with the timeless maxim: life happens. So what are the expected and possibly unexpected obstacles you might face in your journey? Your advisor must account for these and structure finances accordingly. 

Choose the right strategies. Yes, easier said than done, but this is the substance of any worthwhile financial plan. What are the vital commitments? What are the appropriate structures? How many generations are in the family? Dozens of questions comprise this point. 

Monitor your progress. Some ideas feel good in the mind or work until the market or the Fed takes a turn for the worse. Your advisor must always be reachable in the event changes are needed. 

Implementing Your Financial Plan

The final step of the initial financial planning process, implementing your plan, must be done carefully and guided by experience. Just as timing investments significantly impacts returns, time also impacts long-term financial plans. 

Automate your savings. As an essential “Rich Dad Poor Dad” technique, define your monthly portfolio contribution before spending your regular income. This not only brings mental well-being and confidence, but ensures that your financial plan keeps to your desired goals. 

Stay disciplined. By defining your significant purchases for the next five years with a financial advisor, you can avoid unnecessary expenditures or liabilities while limiting debt exposure. In addition, a worthy financial planner gently reminds you of your long-term ambitions whenever appropriate. 

Remain ready to re-evaluate. This can be negative or positive. If the real estate or cryptocurrency markets take an upswing, then the immediate cash boon should be included if favourable. If events turn unfavourable, then it’s best to prioritise and move forward.

Closing Thoughts

Define, assess, develop, implement, and then monitor. These five steps comprise a great financial planning process. We say: don’t settle for anything less. This is the baseboard, the bare minimum you should expect. 

Financial planning differs from private banking or traditional wealth management because it focuses more on the individual and the long term. It is far more idiosyncratic, considering hopes, fears, desires, and flaws. As personal dreams make the best north star, compassion and an experienced ear make the best financial plan. 

Disclaimer: The author of this text, Paul Winder, has a career that spans over 30 years in the financial services sector with emphasis on creating products and services in the international tax treaty and estate planning arena. Paul is Head of Fiduciary Products & Markets at Deltec Bank & Trust and CEO of Deltec Fund Services,

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2011. Mr. Scott is a Writer for Deltec International Group,

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 

Banking Meets Blockchain

Initially, the banking industry ignored the world of blockchain. Blockchain’s origins were in direct opposition to the banking system and the control that banking has over our lives. 

As the blockchain industry gained momentum and investors earned their profits, the banking industry noticed. And when Ethereum and other crypto assets added smart contract functionality, the innovative vanguard of the industry saw massive potential.

It’s unwise to bet against the banks. Banks operate through their incentives to invest and adapt, and fight tooth-and-nail to keep their customers. While a minority of investors believe that blockchain could lead to a revolution displacing the power of large financial institutions, this is unlikely.

Prior to Covid in 2018, Deloitte conducted its Global Blockchain Survey and spoke with 1,000 banks. The survey demonstrated how much interest the financial world already had in blockchain technology. More than 95% of respondents confirmed they were investing or planned to invest in distributed ledger or blockchain technology.

Graph Courtesy of the 2018 Deloitte Global Blockchain Survey

As we move forward into mid-2022, and after wrestling with the pandemic, the initial curiosity seen in Deloitte’s study has manifested into realized projects.

A Need for Change

Many banking services are costly and slow, while other sectors are moving ahead quickly. They are replacing antiquated products and services with new versions.

Phones, cars, computers, and even lightbulbs are being reimagined–becoming more functional and efficient. Much of the too big to fail banking system is in no hurry to evolve, mainly due to fees.

As they are for-profit organizations, they want to optimize returns. Banks earn spreads on their deposit interests paid versus the interests collected from loans. Depositors receive low-interest rates (fractions of a percent), but banks lend at higher rates:

  • Today’s 30-year Lending Interest Rate = 4.921%*
  • Student Lending Interest Rate = 4.5–7.3%*
  • Average Credit Card Lending Interest Rate 19.53%*

Rates at this time of writing*

Banks easily found customers because there were limited choices. Debtors rarely complained, accepting their situations. With blockchain, debtors access lower rates from more competitive lenders.

Retail Banks Circumventing Competition

As blockchain evolved, more users learned that distributed ledger technology enables real-time transfers; no middlemen and no fixed costs.  

Consumer finance players now realize that blockchain projects pose significant threats to their similar services. They understand that they will lose their customers if they fail to evolve.   

How do banks fight back? They create blockchain-based solutions at prices low enough to prevent consumer switching.   

In Deloitte’s most recent Global Blockchain Survey, they found that many organizations were investing in projects across the board. 

Data courtesy of 2021 Deloitte Global Blockchain Survey

Representing only a portion of the industry, financial institutions understand the need to connect with non-financial blockchain projects growing in parallel to them. Defining these necessary projects or solutions and integrating them effectively is crucial.  

The Central Bank Movement Has Started

Globally, even slow-moving governments and central banks are beginning to create or overhaul their digital infrastructures.

The Biden administration made its first public announcement through an executive order recognizing the popularity of cryptos and their potential to destabilize traditional finance. This same order directed the federal government to create a crypto regulation plan, including the creation of a digital dollar.   

Data courtesy of 2021 Deloitte Global Blockchain Survey

Other nations’ central banks are adopting blockchain-based innovations and are overhauling their digital infrastructures to address complex operational challenges. Some central banks have already incorporated these technologies into their daily operations. 

In 2019, the Bank of England undertook a proof-of-concept test determining how real-time gross settlement (RTGS) could evolve with blockchain. RTGS is a funds transfer system allowing for the instantaneous transfer of money and/or securities.

In 2017, they synchronized the movement of two different currencies across two different real-time gross settlement systems using Ripple. Great Britain has actively researched digitizing its economy’s governance and investigated a blockchain-linked pound sterling.

The BoE’s report says that a number of opportunities for achieving their financial and monetary stability objectives are possible with digital currency. 

Returning Power to Central Banks

With national digital currencies, central banks can counter the dominance of Visa, Mastercard, and others over private networks by lowering transaction costs for users and small businesses. A “Digital Dollar,” “Britcoin,” or the “CDBC” (digital yuan) will each accelerate the creation and adoption of other national digital currencies. 

Beyond Cost Savings

Banks look to blockchains for more than cost savings or improvements to their network efficiencies.  They see blockchains as foundations to RTGS revolutions worldwide.

Through blockchain’s benefits, banks can increase the security of digital transactions and prevent errors, double counting, confusion, and fraud. Bookkeeping and auditing are examples of industries overdue for disruption by blockchain.   

Distributed ledgers also address the world’s new realities. Global populations, particularly in Asia and Africa, were already reducing their use of cash before the worldwide pandemic. Still, reductions have quickened, and the use digital payments reached $5.4 trillion, growing by 16% year-over-year from 2020.

Much of the growth was seen in Europe and the United States, but they are far from catching up to China, which was almost $3 trillion (over half of all digital transactions) in 2020 and may become cashless soon

The Digital Yuan

China is aggressively pushing the use of its “digital yuan” (the CDBC). It has gifted millions of the digital currency to its citizens in order to evaluate the feasibility of going cashless. While the initiative is not a true blockchain innovation as the CDBC is controlled by the central government and not decentralized, it demonstrates an increased use of digital infrastructure within the global financial system.

China’s mission is to ensure that any commercialization inherent to a blockchain-driven digital world matches its political makeup. Through the CDBC, China is playing a bit of a shell game: giving digital currency to users while maintain tight, centralized control. This is not the idea underpinning a decentralized, distributed ledger technology.

However, democracies want transaction transparency, and more of them are demanding that the costs of transactions be reduced. An open blockchain achieves both objectives as it has the five following traits:

  • Open
  • Permissionless
  • Transparent
  • Provides both finality and immutability of transactions
  • Maximizes on-chain liquidity

These features create more intelligent, compelling solutions.

Continuing Evolution

More businesses will utilize blockchain as it continues to evolve. However, not all blockchain projects are the same. Successful winners must meet the demands of excessive data and transaction use.  

Bitcoin presents many solutions. It reduces cost, increases trust, bypasses third-parties, and prevents sources of inflation inherent to centralized, fiat currencies.

Tall orders, yes, but Bitcoin successfully delivers, albeit with some limits. It suffers from a seven transactions per second limitation. Layer-2 solutions (like its lightning network) add additional throughput and functionality. Other layer-1 solutions however, solve this too.

Any successful blockchain project must be cost-efficient, stable, and scalable (what layer-1 Bitcoin lacks).  In October 2020, the Italian Banking Association introduced its “Sputna nodes network,” intending it to be cost-efficient, quick, stable, and scalable.

Sputna integrates most of the country’s banks, quickly processing transactions. This interbank cooperation creates a transparent landscape and standardizes Italian banking sector activities.

Moving Forward

The current state of blockchain and crypto feels akin to the mid-90’s internet boom. Blockchain is still not fully understood, and there will be a mix of successful (i.e., RTGS) and unsuccessful projects (i.e.,

However, consumer banking must evolve to keep its customer base given the alternatives already presented by blockchain-based solutions. Central banks will have a similar task of creating digital systems balancing governmental desires with those of their citizens.

Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group,

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group,

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade.

What Is Ethereum?

This is usually the next question asked after: “what is Bitcoin?” or “what is Blockchain?” Ethereum (ETH) represents an ambitious blockchain project moving cryptocurrency into uncharted territory by decentralizing a wide range of products and services. 

If we think of Bitcoin as digital gold, storing value, then Ethereum clearly takes a different approach. It creates wrappers in which users place custom assets and add rules governing their operations and transfers.

Investors consider Bitcoin a precise tool for a specific job, while Ethereum is more like a Swiss army knife. It enables users to interact with it in novel ways and create new products. In this article, we will go further into the specifics of Ethereum and how it has become the second-largest crypto according to current market capitalization.   

Ethereum Basics

Ethereum performs two tasks. It:

  1. Tracks changes on its blockchain (confirming transactions like Bitcoin)
  2. Tracks potential changes called “State” (Bitcoin does not do this)

Ethereum contains multi-step functions called “smart contracts.” For example, “A” must do X first, and then “B” will automatically happen, like any basic logic function. State tracks if “A” has completed the relevant task.

Smart contracts are often linked together and stacked into larger structures which are called decentralized applications or Dapps.

Current Dapps are primitive, but Ethereum proponents believe that Dapps will eventually facilitate the creation of software replicating the services offered by the world’s largest tech companies and financial institutions, such as Amazon.

Let’s think of the Amazon Marketplace as a “state” service connecting buyers with sellers through an easy-to-use graphical interface providing a massive selection of constantly updated inventory. Amazon is just a middleman, a steward of the technology. It takes a (hefty) portion of the sale price for this role.   Ethereum is an early attempt of using blockchain to create a marketplace, circumventing these monopolistic services. 

To execute these ever-complex Dapps, the Ethereum team created a scripting language native to its own virtual machine, itself funded through the sale of “Ether” coin.

Ethereum’s Origin Story

The idea for Ethereum came from a 20-year-old Russian-Canadian named Vitalik Buterin. Buterin realized that it’s possible to more broadly apply Bitcoin’s design, to, according to Buterin, mitigate the “horrors centralized services can bring.”

Buterin’s famous example refers to the life-changing slight he suffered from a centralized service while playing the online game World of Warcraft. He discovered that the game’s developers could make arbitrary changes at any time, drastically affecting gameplay.

A Theil Fellowship was awarded to Buterin, allowing him to work on Ethereum full time and create a non-profit entity, The Ethereum Foundation. Its sole goal: launch the Ethereum project. In 2014, this project generated $18 million through an online crowd sale of 72 million ETH (roughly worth $255 billion USD in October, 2021).

Ethereum expanded to attract a passionate community of developers and users, who continue to forge its development today. Some of the most notable are:

  • Jeff Wilke: creator of Ethereum’s first software implementation
  • Gavin Wood: author of Ethereum’s yellow paper defining its virtual machine
  • Joseph Lubin: Consensys Founder and Ethereum investment incubator

The Inner Workings of Ethereum

Two Ethereum networks always exist in tandem: the network being used at present and the new network which its developers are building.

Its team maintains an ongoing roadmap since Ethereum’s launch in 2015. Its mandate is to continue growing. This partly explain Ethereum’s many accomplishments since 2015, though several proposed features are still pending.

The Current Ethereum

The Ethereum blockchain from 2015 until today uses a proof-of-work (PoW) consensus mechanism in which “miners” (computers) verify orders and add them to the ongoing blockchain. Through PoW, miners use energy to compete in solving puzzles (find the correct string of numbers called a has) and earn the role of a creator of a new block.

The winning miners receive modest amounts of ETH as their prize. This process repeats every twelve seconds.

Smart contract developers use one of two programming languages: Solidity or Vyper. Being proprietary to Ethereum, they deploy code onto its blockchain. All nodes (the miners running Ethereum software) maintain respective copies of Ethereum’s Virtual Machine (EVM). The EVM is a compiler translating smart contracts written in Solidity or Vyper, and executes them upon the blockchain.

A group of miners who had rejected a proposed Ethereum code update chose to continue running the older code, and this resulted in a new cryptocurrency in 2016 called Ethereum Classic. The two should not be confused. 

ETH 2.0, Proof of Stake, and Shards

The original PoW structure of Ethereum is similar to Bitcoin’s blockchain. However, Ethereum is shifting its core operating system with Ethereum 2.0.

The consensus mechanism will change to “Proof-of-Stake” (PoS), swapping traditional miners for “stakers.” Users who have 32 ETH or more can lock their “stakes” and earn rewards for maintaining the blockchain, using less intensive software and hardware than the increasingly power-hungry miners of PoW.

The single (active) Ethereum blockchain will be divided into a group of separate sections called shards, ultimately linked by an overarching “beacon chain” dedicated to improving the entire system’s throughput.

ETH 2.0 upgrades will improve electricity usage and throughput speed, making the chain safer, and should be completed by mid-2022.

Why Does Ethereum Have Value?

The cryptocurrency behind Ethereum is called Ether. New coins of it are minted with every new block miners create. Ether has no supply limit.

Currently, two Ether are created every twelve seconds, though some coins do get burned, thereby limiting the supply.

Developers propose monetary policy changes, which must be agreed upon by nodes. Miners (or after ETH 2.0, stakers) receive fees for their processing work. These are referred to as “gas.” The more complex the smart contact, the more gas used. One of Ethereum’s goals is to constantly increase the utility of Ether and its platform, attracting more stakers despite the implicit ceiling on gas rates.

Why Choose Ethereum?

Ethereum aims to be more than a cryptocurrency, unlike many of the altcoins available, and has created several pillars for increasing demand.   

Private Blockchains

Major banks embraced Ethereum by taking advantage of its opensource code, creating proof of concept/R&D initiatives in 2015-16. These projects contained either copies of Ethereum’s code or were Ethereum-inspired, like R3’s Corda and Linux Foundation’s Hyperledger. They used the architecture but did not create a new cryptocurrency.

In 2017, these banking projects led to the Enterprise Ethereum Alliance, a non-profit backing Ethereum and bridging the gap between it and private blockchains.

The ICO Craze

Also in 2017, several entrepreneurial projects used Ethereum as a platform for fundraising. They created new cryptocurrencies and sold them to investors through initial coin offerings (ICOs). Through its ERC20 token standard, Ethereum holds the ability to facilitate new crypto assets without requiring additional, coin-specific blockchains. Chainlink, LiquidiFy, and VeChain are all Ethereum ERC20-based projects.

Decentralized Finance (DeFi)

Ethereum’s most recent innovations are in decentralized finance (DeFi), where Ethereum replicates legacy financial services. For example, MakerDao decentralized USD-pegged cryptocurrency management. Other DeFi projects automate lending and borrowing and represent the most recent use cases for Ethereum’s blockchain.

Security Tokens

The most exciting development for Ethereum is in the security token space, where financial assets are converted into digital equivalents. These security tokens are to be traded on decentralized markets, all on the Ethereum network and without expensive middlemen.

The essential requirement of security tokens is legal compliance. Are they complying to all relevant laws and regulations applying to where they are traded? Fortunately, several projects are building compliant tokens.


A Bitcoin, a dollar, or an Ether, is “fungible.” One dollar is like any other and has the same value. Art, however, is nonfungible. There may be several copies of the Mona Lisa, but only one is the original. 

Nonfungible tokens or NFTs are one-of-a-kind digital assets. These new forms of digital value have become popular over the past year as we see headlines of people buying them for millions of dollars

Ethereum is well-suited to creating NFTs. The tokens and their respective proofs of ownership can be transferred with ease, while the transfer itself follows pre-defined rules with Ethereum’s smart contracts.

Always Upgrading

Ethereum’s rapid rise in market capitalization proves it to be the ideal choice for blockchain development. It has shifted over the years, though each update adds more functionality to its smart contract abilities. These increases give developers more tools to further expand Ethereum’s capabilities.


In a handful of years, Ethereum has changed the world of cryptocurrency. It continues to change this world each day. Smart contract functionality, coupled with decentralized management, represents a genius invention carrying ramifications yet to be felt. The future for Ethereum is nothing but bright.   

Disclaimer:  The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group,

The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group,

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade.

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