The currency’s volatility is one of the Bitcoin’s issues. Ethereum use a smart contract that hedges against currency fluctuations, that can solve this problem.
For example, each of two users might submit $1,000 worth of ether to a smart contract. After a month, the smart contract would look up the current exchange rate, and pay one user $1,000 at the new exchange rate and send the rest to the second user.
As you can see, it is the same as a conventional hedging contract, but the contract is enforced by Ethereum network computer program instead of by the courts. This program cannot be modified by either user after submission, so they has to trust each other.
But the main question remains if why people will use such complicated technique for making an ordinary financial contract. After all, modern financial markets make it cheap and easy to hedge against a wide variety of price fluctuations, but custumers prefere to use an internet-based alternative to these products.
Some of the early uses of Ethereum can involved illegal activity. You can use ordinary financial networks to hedge against changes in the price. But if you want to hedge against changes in the street drugs or weapon price, a smart contract might be your only option.
Ethereum could become a platform for online betting. Smart contracts could be used for creation of complex and fair online games. Ethereum could also allow making bet on events, like elections, in different countries where such gaming is restricted by law. In addition, Ethereum could be prabably useful in countries with dysfunctional legal systems. Also, the opportunity of making and enforcing the contracts online could be useful for countries where the courts are corrupt or incompetent.
Because of the Ethereum’s decentralized structure that hard for government’s control, you can imagine a huge number of illegal applications. But on the other hand, its decentralized structure allows users build completely new classes of applications which impossible to build on top of traditional financial infrastructure. So all in all, people are just getting started exploring Ethereum’s capabilities.