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Key takeaways

  1. Ethereum expanded upon Bitcoin’s design to create a versatile platform for decentralized applications, enabling a comprehensive decentralized economy.
  2. The introduction of the Ethereum Virtual Machine and smart contracts has revolutionized app development, making Ethereum the foundation for a diverse array of decentralized applications across various sectors.
  3. Ethereum’s extensive developer community and its leading role in sectors like decentralized finance (DeFi), non-fungible tokens (NFTs), and gaming, highlight its significant impact on the decentralized digital economy and its position at the forefront of Web3 innovation.

Read the full paper to explore:

  • Improving on the Bitcoin model
  • Building on top of Ethereum
  • Ethereum’s explosive growth
  • A vibrant, diversified protocol economy

Ethereum has profoundly reshaped the decentralized economy by expanding on the Bitcoin model and offering a versatile platform for decentralized applications. Its unique combination of a native peer-to-peer payment network, a common developer toolkit, and a virtual machine for executing smart contracts has set a new standard for blockchain technology. Ethereum’s ability to attract a robust developer community and support a diverse array of dApps across sectors like DeFi, NFTs, and gaming underscores its role as the leading blockchain network. Despite challenges such as scalability, Ethereum’s innovative solutions and continued evolution position it at the forefront of Web3, driving significant economic activity and technological advancement in the decentralized digital landscape.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.

Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology, (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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