Ethereum is an open-source blockchain with ether (ETH) as its native cryptocurrency. People often mistakingly use the terms "Ether" and "Ethereum" interchangeably, but ether is the official token on the Ethereum blockchain. Investors cannot directly invest in Ethereum, but they can do so indirectly by purchasing ether.
Ethereum originated in 2015 with the efforts of programmer Vitalik Buterin. The Ethereum blockchain consists of a decentralized digital ledger to which all users have access. This ledger records and validates all the transactions that take place on the blockchain.
Ethereum's blockchain technology allows users to create, utilize, and publish decentralized applications and smart contracts without the involvement of an external party. It has recently gained popularity because of its role in developing NFTs. Moreover, Ethereum has established itself as a marketplace for games, apps, and financial services. These features and services can be paid for by the platform's native currency, ether.
Ethereum has rapidly become a leader in the industry, second only to Bitcoin by market cap.
You cannot purchase cryptocurrency through a centralized institution like a bank or a brokerage. Instead, you will have to utilize the services of a trading platform, of which there are many, to obtain crypto assets.
A few examples of popular cryptocurrency exchanges include Gemini, eToro, and Coinbase. Because Ethereum has increased in recognition worldwide, most cryptocurrency exchanges will allow the purchase of ether.
Mainstream financial platforms, like Paypal, have even started to accommodate cryptocurrency in their functions. Trading platforms will vary in their security measures and fees. Therefore, it is a topic worth researching before jumping into a crypto investment.
The first step to buying ether is thus to do your research regarding which cryptocurrency exchange satisfies your requirements best.
Creating an account on a given crypto exchange will likely require you to provide verification of your identity and some personal information.
After your account has been activated, you will have to connect your credit card or bank account. When funding your account, you will come across fees which will differ depending on the payment method of your choice.
Funding your account does not entail possessing ether, as this requires some additional procedures. At this stage, you will have to purchase ether.
Once your account is officially funded, you will be able to trade your fiat currency for ether. In exchanging fiat money for cryptocurrency, you will most likely buy shares of an Ethereum coin. This, of course, depends on the amount you are willing to spend and the current price of Ethereum. The value of your purchase will be displayed as a percentage portion of a coin.
It would be most convenient to leave and store your crypto investment in your exchange account, given you purchased a relatively small amount of ether.
However, if you purchase a large amount of ether, you will benefit from the security measures that the Ethereum blockchain has to offer. Various available digital wallets entail different security extents.
After you have purchased ether, there are a few options for your next step. Depending on your ultimate goals, you can:
Cryptocurrency investments are known for being extremely volatile. Although the rewards are typically worth it, it is essential to have an adequate risk tolerance to avoid being discouraged when the market doesn't move in your favor.
The golden rule of gambling is equally applicable to crypto investments: Don't risk money you can't afford to lose.
Ensure that you keep your invested assets lower than 5% of your total portfolio and never prioritize crypto investments over your other financial obligations, such as paying off your debt.
As cryptocurrencies go, Ethereum has demonstrated tremendous potential for growth in terms of its development of NFTs and acting as a host network for various innovative dApps.
Furthermore, Ethereum has undergone an immense increase in value since its creation.
Many experts have agreed that the price of Ethereum may soon become even more unpredictable than that of Bitcoin. That being said, new developments in the energy intensity of Ethereum may elevate its status and price in the near future.
A more energy-efficient version termed Ethereum 2.0 will soon hit the market, appealing to investors and traders worldwide.
According to Mike McGlone of Bloomberg Intelligence, Ethereum prices will range between $4000 and $5000 by the end of 2022. In contrast, Coinpedia predicts the price to reach $7000 within the same timeframe, given the crypto market follows the same trends as in 2021. However, this value will more than likely not be reached as the market experienced a downturn in recent months.
Coinpedia additionally predicts that if Ethereum 2.0 is as big of a success as it is expected to be, the price may reach an astonishing $12,962.33.
Ethereum was the first to implement smart contracts, codes containing instructions, into their blockchain technology. This feature allows for transactions to be executed fast and securely.
Other open-source blockchain alternatives have followed in Ethereum's footsteps and acted as viable competitors in beneficial and unfavorable ways.
Below are variables that influence the price of Ethereum.
The inception of smart contracts expanded the versatility of the Ethereum blockchain substantially. Non-fungible tokens can now be assigned to rare items, authenticating their ownership and value. This innovation served as both a blessing and a curse. Although traffic has increased significantly, it has become progressively more expensive to carry out transactions on Ethereum.
Developers have responded by upgrading the network's infrastructure to accommodate more users. However, this is a work in progress. While developments are taking place, many companies have implemented add-on solutions that function on the Ethereum blockchain. These add-ons are known as "Layer 2s."
Furthermore, many new blockchain networks have been established as alternatives to Ethereum, which evidently demotivates traffic to Ethereum. Competition can increase the popularity of a product or dampen it.
An excess of competitors could impede the value of Ethereum over time, simultaneously having detrimental effects on Ethereum investments.
Regardless of the rise in competitors, many experts suggest that Ethereum will remain a frontrunner in the industry because of its first-mover advantage.
Despite the development of more environmentally friendly technologies, users consider their loyalty and commitment to the blockchain of high importance.
Other blockchain technologies, such as Cardano and Solana, offer very similar features and functions to Ethereum. Yet, Ethereum remains well-positioned to achieve success and growth by satisfying the changing demand in the coming years.
Ethereum undoubtedly possesses the capacity to expand dramatically, and users recognize this potential.
Three chief types are fees are typically involved:
It is essential to consider the rates of the above activities as they will vary between trading platforms.
If you feel indecisive, open a few accounts and test the waters before depositing money.
With the prevalence of cyber attacks and theft, you will greatly benefit from exploring the security measures of trading platforms. It is usually a promising sign if a platform is transparent and offers valid insight into its security measures.
Most trading platforms have the authority to disclose quite a lot of information about their system without violating any confidentiality regulations.
Many platforms provide bonuses for simply creating an account with them. Various options also offer bonuses for trades or deposits made. Although these rewards may be enticing, don't allow them to cloud your judgment of the platform. Just because they offer a bonus does not make them the best and most trustworthy option.
Depending on your experience with cryptocurrency investments, you may seek an easy-to-use platform that provides a variety of resources for your convenience. When looking for a suitable exchange, consider its inclusion of the following features:
With the development of the new sustainable and scalable version of Ethereum, Ethereum 2.0, the network will shift from a proof-of-work to a proof-of-stake model.
This improvement will allow users to stake their crypto assets to earn rewards, providing promising long-term opportunities for investors to generate a passive income.
Another possibility to earn passively is lending your ETH to other users and earning interest. If this is a feature you are interested in, look for a platform that offers this feature.