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What Is Ethereum And Should You Invest In It?

Ethereum was introduced in 2015 as an alternative to Bitcoin. As most digital currencies, Ethereum's software is based on the blockchain technology. Learn what is Ethereum/Ether, how businesses use it and what the differences between it and Bitcoin. Also, we've summarized how and where to buy Ethereum.

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Table Of Content

Have you wondered what is the difference between Ethereum to Bitcoin, for example?

Since the introduction of Bitcoin, the world of payments has changed significantly. More and more people and organizations are developing cryptocurrencies every day in order to make transactions safer, easier and cheaper. Many businesses have started using cryptocurrencies as a payment method. However, their potential is even greater than that.

Let me explain to you what Ethereum is, what Ether is, how businesses use it and what the differences between it and Bitcoin are. Also in this article, you will find useful information on how and where to buy it.

What is Ethereum?

Ethereum was introduced in 2015 as an alternative to Bitcoin. As most digital currencies, Ethereum's software is based on the blockchain technology. Although it differs significantly from the one used in Bitcoin, let's leave that to the experts. What matters to us are the purposes we use them for.

If Bitcoin is primarily a peer-to-peer electronic cash system, Ethereum offers a wider range of possibilities. Many startups and businesses prefer Ethereum as a payment method as well as other uses, such as creation and development of applications.

The market cap of Ethereum is currently approx. $109 billion,  second only to the omnipresent and pioneer in the cryptoworld Bitcoin.

According to Ethereum website, “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.”

How Long Does it Take to Mine 1 Ethereum? 

With a computer fitted with an Innosilicon A10 6GB GPU power-hashing at a rate of 500MH/S, with a current difficulty of 6.25p, it will take you approximately 7.5 days to mine 1 Ethereum. Generally, that is 4x faster than using a computer fitted with NVIDIA RTX 3090 GPU with a hash power of 125MH/S. However, your budget size will determine your mining strength.

For such a fast GPU, it could cost you about $15,100, but with RTX 3090, you will get it at $2759, which is 5x cheaper. If hardware investment is a big issue, you may opt-in for pool mining. In this case, members contribute their hash power and split the spoils fairly, based on the contribution.

What Are Ethers?

The decentralized blockchain of Ethereum is based on a token called Ether. Ethereum represents a decentralized open-source internet that powers a wide array of apps. By open-source, it means that no one, in particular, owns it. Its existence is through the public who offers computing power at a fee which keeps apps in the network running smoothly.

By using tokens, developers can create their own application on the blockchain tehcnology. Not only do people use it to trade the coin (the way other cryptocurrencies are) but also to run their applications. This, on the other hand, can bring them some profit.

Ether is the fee for sustaining the Ethereum network. It is the digital currency fueling all apps on the network, which is the Ethereum cryptocurrency. For example, if you have an app running on the ETH network, you'll need the computing power to sustain it. Ether will act as currency to settle these expenses. And if you are a miner in the ETH network, your compensation for providing computing power is Ether.

Ether is the token on which the platform Ethereum is based, and it makes sure all applications run smoothly and safely. This is the “payment” developers receive for their contribution to the network as well as other people part of the platform.

What's The Number Of Ethers?

Do we know the exact number of Ethers? Let's look at the things we know:

  • Approximately 60 million Ethers were purchased during the presale phase in 2014.
  • 12 million Ethers were dedicated to the Ethereum Foundation– these are the people who work on the underlying technology.
  • Every 15-17 seconds, 5 Ethers are created. They go to the person who has verified the transaction.
  • Around 18 million Ethers are mined every year.
  • Sometimes miners find blocks which are not included in the blockchain and for this, they receive 2-3 tokens.

Differences Between Ethereum and Bitcoin

As I previously mentioned, Bitcoin is strictly a cryptocurrency while Ethereum is a whole platform on which people can create applications. Also, the technology allows people to create digital contracts, which can be authorized and verified automatically.

Why should businesses care?

Well, because Ethereum is based on the blockchain technology, running programs and applications on it can make them much faster. What's more, the whole process will be safer– the technology locates any malicious attempts to attack and disrupt the process. They are faster than the ones happening in Bitcoin. Data protection is one of the most important things for a business in this data-driven world.

Having said that, Ethereum enables companies to create decentralized apps that no third parties have access to.

When it comes to market cap – Bitcoin is the first one and Ethereum is the second one, with 203 billion and 109 billion respectively. Currently, Bitcoin's price is $44,450 and Ethereum's $3,332. Even though Bitcoin's value has soared recently exceeding the cap of $45,000, the Ethereum has greater growth potential. Why?

First of all, currently it's cheaper and much more affordable. Secondly, given the fact companies can use Ethereum for a wider range of activities is also a plus.

Can Ethereum Overtake Bitcoin? 

Ethereum's performance has been outstanding, and it might overtake the rival competitor bitcoin in a few years’ time. This is because it is gaining traction with overwhelming margins.

With the rollout of ETH 2.0, the network is more secure, scalable, and sustainable. It also has real-world applications with the ability to store value. Unlike bitcoin, it represents the future of smart contracts and programmable money. However, ETH is relatively younger, and though it is booming in growth, it is trading only at a relatively lower price than bitcoin.

How to Invest in Ethereum

If you want apples, you have to go the market and buy some. The same principle here. If you want to buy Ethers, you have to go to an exchange and purchase some. Why exchanges? All people who want to indulge in investing in Ethereum should remember that it is a currency

You don't buy shares or securities. Simply said– you give dollars (euros, pounds, etc.) and you get Ethers. There is no interest rate or dividends. The only way you can benefit (besides all the things you can do using the Ethereum platform) is to speculate with the price of the tokens.

Where Should You Keep Your ETH?

There are numerous methods for storing Ethereum, ranging from digital wallets to paper wallets.

Not only are cryptocurrencies a great way to send or receive money or use applications but also a way to invest. Maybe you have read or heard things about Bitcoin and how people invest in it. So, if you want o buy coins and use them, you need to get a wallet.

Whatever you choose, keep in mind that because of their value, they are vulnerable to hackers. Consider purchasing a physical hardware wallet to keep your Ethereum safe. Even if someone takes control of it, they will be unable to authorize any transactions without your physical presence. Above all, make backups in multiple locations with paper wallets, Geth accounts, hardware wallets, digital wallets, and so on.

What Is A Wallet?

Look at it from this perspective: it's like a personal bank account where you can “store” your money. The only difference is that you put cryptocurrency there not money. From there you can send them or receive more in the future.

Keep in mind that wallets are not a place where you can mine coins. This is just the place where you keep them once you have acquired them.

When you consider which wallet to buy, keep the following in mind:

  • Does it have a private key?
  • Easy to use?
  • Is there a strong development community?
  • Your data safe and backed-up?
  • Is the wallet compatible with a different system?

Can You Purchase Ethereum with No Verification?

You have several options for purchasing Ethereum without verification. Using cryptocurrency ATMs that support Ethereum is one of these methods. You will need your Ether wallet address as well as the amount you wish to spend in cash. Keep in mind that the fees are significantly higher.

The other option is to buy cryptocurrencies through security exchanges, which allow you to do so without first verifying your account. However, once you reach their set limit, these exchanges impose a cap that necessitates verification.

The final option is to use a decentralized exchange platform that functions as an open market for trading various cryptocurrencies. The difficulty here is that the prices are frequently higher, and you will be doing all of the heavy lifting to find the right seller.

Purchase Ethereum Using a Bank Account

Most cryptocurrency exchanges allow users to purchase Ethereum using a bank account. This method entails sending a wire transfer to your preferred dealer, such as the Binance or Coinbase platforms. Most dealers will deposit funds into your account within one day or less.

To transfer money, you must generally have a verified account with these dealers. Then, click the buy/sell button and follow the onscreen prompts until you reach the confirmation prompt.

How to Buy Ethereum on Coinbase 

One of the best exchanges is Coinbase. As per their site, the US-based exchange claims that it operates in 32 countries and has 11.5 million users. When you sign up, you actually create a wallet and you can start buying and selling the most popular cryptocurrencies including Ethereum.

To buy your ETH on Coinbase, you must open an account first and verify it. Then, log into the account on the web platform, and on your top right-hand side, click the buy/sell button and select the coin you want to buy, in this case, ETH. Enter the amount in US dollars that you want to spend, preview your purchase, confirm it, and select your payment method.

Buying Ethereum on the Coinbase web app follows the same process, but with a minor difference. The difference here is that you will tap the round blue button with a right and left arrow at the center bottom of your mobile screen and repeat the buying process.

Users prefer Coinbase due to its simplicity and user-friendly interface. There are no codes or difficult to understand features. You have a different account and you can see all the information structured. For example, how many Bitcoins, Etheres, dollar/euro, etc. From there you can actually start sending theifm and making transactions.

Nothing in this world is perfect; neither is Coinbase. Here are some of the drawbacks:

  • You do not own the cryptographic keys compared, for example, to when you mine Ethers yourself
  • The platform charges hefty fees on transactions
  • There aren't options of margin trading or stop-loss orders

How to Purchase Ethereum Using Blockfi

BlockFi enables users to purchase ether via a variety of supported methods. You can use a wire transfer from your bank account to your BlockFi account, swap other cryptos for ether, use stablecoin, or link your credit or debit card to the platform.

You must first log in to a verified account, then click the buy/sell button, enter how much ether you want to spend, choose a payment method, and finish by confirming your payment method.

Alternative Exchanges to Buy Ethereum

Nowadays, there are many exchanges which attract users all over the world. Below you can find the five 4 alternatives to Coinbase.

  • Kraken – According to their website, this exchange is very liquid, affordable and reliable. Compared to Coinbase, it supports a wider range of cryptcurrencies as well as provides more options. Users can use stop-loss orders as well as margin trading.
  • Poloniex  – Based and regulated in the US, this website offers clients a secure trading process. The exchange stores your assets offline in a “cold storage” and guarantees protection.
  • ButfinexThis exchange offers a wide range of currencies: Bitcoin, Ethereum, Litecoin and much more. Some of the options users can choose from are margin trading, margin funding, customizable interface, order types and others.
  • Bittrex – A US-based digital exchange that supports trading with more than 190 currencies, including Ethereum. It also uses algorithmic trading which makes the process really fast and secure.

The Risks You Should Consider

The risks or red flags of purchasing ETH are determined by your role in the ETH ecosystem. Market volatility is an independent investor's worst nightmare. You will be concerned about the performance of your investment, whether it is short-term or long-term.

Another concern is the security of your Ethereum once purchased, as it is highly vulnerable to hacking. Developers running decentralized apps on the Ethereum network, on the other hand, will be most concerned about the ever-increasing cost of gas.

In 2019, one transaction would cost 10 cents, but by 2021, it has been on an upward trend, with prices ranging from $10 to $20. It could rise even higher in the future.

Is it Worthwhile to Purchase Ethereum Right Now?

Your decision to purchase Ethereum is based on the cryptocurrency's historical trend. In general, it has been on the rise in recent years. That is, if the cryptocurrency continues on its upward trend, it could reach and likely surpass the highs of bitcoin.

Furthermore, it has grown in popularity due to the novel concept of decentralization. Despite competitors such as BNB, it has become the de facto market leader, supporting over 80% of all decentralized applications (dApps). And, with the release of ETH 2.0, the enhancements add to the coin's already brisk popularity.

Final words

Cryptocurrencies are definitely worth researching both as a payment method and an investment. Currently, the two major players are Bitcoin and Ethereum. Businesses and individuals alike have started using the Ethereum network as it gives them secure, smooth and fast transactions.

In addition, it enables users to develop and run privately their own applications. Last but not least, Ethereum allows people to invest and trade the underlying token. 

FAQs

To use Apple Pay to purchase Ethereum, you must first have your Apple wallet loaded with your credit or debit card. This option is ideal for anyone who is hesitant to expose their credit card information on a cryptocurrency exchange.

The next step is to use the Apple wallet on a cryptocurrency exchange that supports it, such as Coinbase. After logging in, choose ether as your purchasing cryptocurrency and apple pay/wallet as your payment method. The last step is to confirm your order and save your purchased Ethereum to your ether wallet.

The minimum amount of Ethereum you can purchase is determined by the cryptocurrency dealer of your choice. Most dealers set a minimum of $1.00, while others set a maximum of $2.00 of digital currency denominated in your local currency, in this case, US dollars as $1 and $2. Keep in mind that the amount may change in the future.

However, in order to reap significant returns, you will need to invest more than the minimum amount. For example, 1-ether is currently trading at 3000+ and is expected to close close to $4000. These figures perfectly depict how small a $1 or $2 ether investment is.