On Tuesday, spot ether exchange traded funds (ETFs) are scheduled to begin trading, opening up new investment opportunities for crypto enthusiasts and potentially expanding the investor base for Ethereum. Many argue that Ethereum, a blockchain technology, has a far wider range of applications compared to bitcoin.

Unlike previous ether ETFs that track futures contracts, these new ETFs will invest directly in spot ether, the cryptocurrency used in the Ethereum network. The applications for spot ether ETFs include Grayscale Ethereum Mini Trust (ETH), Grayscale Ethereum Trust (ETHE), Bitwise Ethereum (ETHW), VanEck Ethereum (ETHV), 21Shares Core Ethereum (CETH), Invesco Galaxy Ethereum (QETH), Fidelity Ethereum (FETH), Franklin Ethereum (EZET), and iShares Ethereum Trust (ETHA).

To attract investors, most of these spot ether ETFs are waiving fees initially, some even for up to a year. The recent success of spot bitcoin ETFs, which have accumulated over $17 billion in net flows since their launch in January, has raised hopes for the performance of spot ether ETFs. However, it is worth noting that bitcoin, with a total asset value of $1.3 trillion, still holds three times the value of ether, which currently stands at approximately $414 billion.

While bitcoin prices appreciated leading up to the launch of spot bitcoin ETFs, the performance of ether has been more uneven. It has experienced a 50% increase in 2024, but the majority of this gain occurred in the first quarter of the year. Nonetheless, for Ethereum enthusiasts, the primary value of spot ether ETFs lies in their ability to educate the public about the extensive use cases for Ethereum, which surpass those of bitcoin.

According to Ben Johnson, Morningstar's head of client solutions and an experienced ETF researcher, bitcoin is often seen as digital gold, while Ethereum is more like "picks and shovels." The finite nature of bitcoin implies its potential as a store of value, whereas Ethereum, with its broader purpose, is being utilized to build real-world applications.

Ethereum stands apart from bitcoin due to its use of blockchain technology. Both cryptocurrencies utilize decentralized, immutable ledgers to record transaction histories, but their purposes diverge significantly. While bitcoin functions primarily as a digital currency, Ethereum operates as a platform for creating smart contracts, which are self-executing programs that enforce predefined agreements. Smart contracts have a wide range of applications, with decentralized finance (DeFi) being one of the most common. DeFi allows users to perform a variety of banking services, such as sending, lending, borrowing money, saving, trading stocks, derivatives, other cryptocurrencies, and even potentially facilitating real estate transactions.

Beyond financial services, Ethereum can be employed in gaming, supply chain tracking for corporations, and even as a clearing platform for settling stock trades. Additionally, Ethereum plays a crucial role in the stablecoin market, where the value of cryptocurrencies is pegged to other assets, typically the US dollar. Stablecoins are used in lending, borrowing, and trading within the DeFi ecosystem.

The launch of spot ether ETFs raises questions about the potential for more crypto ETFs and the stance of the U.S. Securities and Exchange Commission (SEC) in regulating them. Applicants for crypto ETFs must demonstrate that the underlying market is not subject to manipulation, a pivotal prerequisite for ETF approval. However, the political climate could influence the SEC's decision-making process. In the past, the SEC has required regulated futures markets to trade alongside assets, and currently, such markets only exist for bitcoin and ether. Developing futures markets for other crypto products would take time.

In conclusion, the introduction of spot ether ETFs presents an exciting opportunity for investors to participate in the Ethereum ecosystem. Ethereum enthusiasts believe that the platform's technology-centric nature and vast array of applications differentiate it from bitcoin and position it as a technology investment. While the appeal of spot ether ETFs may initially be limited due to the comparative value of bitcoin and ether, their introduction is expected to facilitate education and awareness about the immense potential of Ethereum.

Note: Jan van Eck, CEO of VanEck; Morningstar's Ben Johnson; and David Mann, ETF product and capital markets at Franklin Templeton will discuss the topic on ETF Edge on Tuesday, July 23 at 1:10 p.m., Eastern. For more information, visit ETFEdge.cnbc.com.