Buy and Sell Ethereum (ETH)
What is Ethereum – A virtual currency or more?
Ethereum is a programmable, open source blockchain launched on July 30, 2015 with its own native crypto-currency: the Ether (ETH). It is a decentralized digital currency. Like Bitcoin, Ether is not controlled by any organization or government and can be used to store value, make payments and provide collateral. When people typically refer to Ethereum, they are actually talking about Ether (ETH). The Ethereum blockchain has indeed become synonymous with its own token.
Launched in mid-2015 by a Russian-Canadian coder named Vitalik Buterin, Ether (ETH) has become the second most popular crypto-currency in terms of market capitalization in just two years and still holds the spot at the time of writing. Ethereum’s blockchain is much more powerful because of its built-in programmability, which means developers can use the platform to create decentralized applications (dApps).
Why was Ethereum invented?
Currently, most of our digital data, including financial information and personally identifiable data, such as passwords, is stored on third-party servers owned by large conglomerates and companies such as Google, Microsoft, Amazon and Facebook. This unprecedented centralization of data storage gives organizations and governments extraordinary power over citizens.
The main goals are to replace online banking with a decentralized currency like Ether, as well as third-party service providers with privately owned servers using blockchain technology. This is basically the basis for a new type of Internet where everything from data storage and payments to financial systems and service applications are integrated. Currently, thousands of developers are creating applications and digital assets using Ethereum.
Among the most popular are:
- Financial apps that allow you to invest, lend or borrow your digital assets and currencies
- Decentralized markets where you can trade digital assets
- Games where all the assets in the game are in your possession and can even earn you real money
- Crypto-currency wallets that allow you to make instant and affordable payments with Ether or other currencies
How does Ethereum work and what is the underlying technology?
Ethereum is inspired by the Bitcoin blockchain, but it provides additional capability for developers to create agreements and dApps with a different ownership criterion, additional steps, new transaction formats or numerous state transfer procedures. It uses the Turing-complete programming language that allows developers to create applications in which transactions made on the blockchain can dictate and automate certain outcomes. This is why these applications are often called “Smart Contracts”.
Like the Bitcoin blockchain, it is also a shared database that is a complete history of transactions, with each node connected to the network having a copy. In addition to these transactions, the nodes also store the current status of each smart contract. The network keeps track of the status of each smart contract or Ethereum application, including the balance available to each user. When a transaction is made on the Ethereum blockchain, the platform follows the model of bank accounts. They appear in one wallet and can easily be transferred to another.
Ethereum’s crypto-currency, Ether (ETH), is based on a token called ERC-20 which is one of the most widely used in the entire crypto-currency sphere. The token is currently mined using the same proof-of-work protocol used by Bitcoin. However, due to the drawbacks of the protocol, such as excessive power consumption, the Ethereum blockchain will soon upgrade to ETH 2.0 which will move the ETH transaction validation protocol to a proof of stake based consensus.
Is Ethereum real money?
There is no absolute answer to this question, it presents itself as an ideal candidate for decentralized finance. As an individual, it is much more than an alternative digital currency. Not only does it aim to replace conventional online banking and third-party payment gateways, but it also strives to democratize the Internet through collective ownership of digital services and data storage. That said, there are more than 100 merchants that accept Ether as a payment method, including CryptoPet, Peddler.com, eGifter, FlokiNET, Overstock, PizzaForCoins, and many others.
A fundamental difference between Bitcoin and Ethereum is that the former is intended to be a digital alternative to traditional currencies. Ether, however, is a token that exists to power integrated network services that include dApps, smart contracts, transactions, and decentralized autonomous organizations (DAOs). Thus, within the ERC-20 blockchain ecosystem, Ether is the most popular currency. It is also most often used in initial token offerings (ICOs). But in the most conventional sense, Ether is currently less accepted as a currency than other crypto-currencies like Bitcoin.
Fees and charges
At the time of writing, the average transaction fee for Ethereum is $0.4492 per transaction, an increase of nearly 150% from last year (2019), when the fee hovered around $0.17 per transaction. The average fee is calculated in USD when a miner processes and confirms a transaction. These fees are directly affected by network congestion or a high during a high demand for proof of work. In mid-2018, when crypto-currencies were booming, the average ETH transaction rate reached its highest level and the fees reached $3.
Apart from that, the expenses and fees charged by different crypto-currency services, including trading platforms, vary in terms of percentage and structure. Most often, standard buying and selling via bank transfer will cost you between 0.5% and 2% of the amount, while instant buying via debit card can cost you between 3% and 7%. Similarly, there may be a flat fee depending on whether you deposit or withdraw your funds via bank transfers. The fee structures are not only very complex, but they vary considerably depending on many factors such as the method of payment adopted and your geographical location.
What are the advantages of Ethereum?
Ethereum offers all of the benefits of a traditional blockchain, as well as some unique advantages of its own:
Immutability – Every transaction that takes place on the Ethereum blockchain is immutable, which means that once data is processed, confirmed, and written to the blockchain, it cannot be changed. This makes its network virtually unbreakable.
Decentralized – Ethereum currently uses a consensus mechanism to verify transactions, making it unnecessary to use a central authority or intermediary. Smart contracts based on Ethereum’s blockchain can even execute themselves automatically.
Fast transactions – Rather than going through manual checks and verification procedures, the blockchain uses automated processes to ensure the validity of a transaction. This not only makes transactions much faster, but also more affordable.
High reliability – ETH has been around for over 5 years now and new applications are created and run on the blockchain without having to deal with obstacles such as fraud, third party interference, censorship and downtime.
Programmable – One of the main advantages of the Ethereum network is that it is programmable and developers can use it to create decentralized applications. These can be financial services, games, smart contracts, etc.
Can Ethereum be used anonymously?
This is a tricky question, as what is often mentioned on the internet as one of the main benefits of the blockchain is user anonymity. While there is some truth to this, it has become increasingly difficult to maintain complete anonymity using Ethereum or any other crypto-currency that is not focused on the privacy of its users like Monero or Zcash. The majority of reliable and well-established crypto-trading platforms require you to go through an intensive process of verifying your personal identity to reduce money laundering and other illegal activities.
On the other hand, despite all the anonymity protocols in place, you can still be tracked through the digital footprint you leave behind, especially because it is impossible to change or replace the data that has been written on the blockchain. Even if you haven’t shared your name or other personal data, the metadata and other contextual information can lead to your personal identity. This is why cash remains the most anonymous method of payment, even today.
How secure is Ethereum?
Very. Every transaction that takes place on the Ethereum blockchain is secured by encryption, and Ethereum has three times as many nodes verifying each of its transactions as the Bitcoin network, for example. Most hacking attempts and cyber-attacks associated with Ethereum target poorly created smart contracts by developers, rather than the blockchain itself. Now that the platform is moving to the proof-of-stake protocol, the blockchain will become even more secure.
Who is working on the development ?
Currently, the biggest project of the Ethereum blockchain is ETH 2.0, which is led by Raul Jordan. It will make fundamental changes to the blockchain itself, including the shift from the Proof of Work (PoW) protocol to the Proof of Stake (PoS) protocol. Including Raul’s team, there are a total of 8 teams working on different projects around the world to improve the blockchain.
Led by Faisal Khan, the main goal of this team is to get businesses to use the Ethereum blockchain by developing powerful and compelling software that is more affordable, easier, and more practical to adapt for different types of businesses.
ChainSafe is a Toronto-based research and development company that provides consulting services for ETH-based projects such as Polymath, Aion, Shyft and Bunz. It is headed by Mikerah Quintyne-Collins.
This is a blockchain infrastructure company that aims to keep the second most popular client, Parity Ethereum, on the blockchain. It is considered by many to be one of the most advanced and fastest ETH clients.
This team was funded by the Ethereum Foundation to create the full specification for the Ethereum 2.0 update. The team operates under the General Public License (GPL) to ensure that all implementations of the code remain free.
Using the Go programming language, this team created the first variant of Ethereum 2.0 and is currently providing the necessary support for the blockchain to achieve sustainable scalability. The team is led by Raul Jordan.
This is the current Python-based Ethereum client, which includes six developers under contract with the Ethereum Foundation. The team is also working on providing support for the Ethereum 2.0 specifications.
This is another team that is funded by the Ethereum Foundation to develop a mobile browser and messaging platform to increase user engagement. The main goal is to ensure mass adoption by optimizing performance on less resource-intensive devices.
Funded by the Ethereum Foundation, Sigma Prime is a technology and information security consulting firm that has been tasked with developing an Ethereum 2.0 client called Lighthouse.
Which financial institutions are using Ethereum?
Many financial institutions have joined Ethereum. A few years ago, the Enterprise Ethereum Alliance was formed and included many tech giants and financial companies such as ING, MasterCard, Credit Suisse, JP Morgan and many others. Recently, Natixis Investment Managers, Clearstream, Credit Suisse and the Luxembourg Stock Exchange announced that they would be funding a Series A round for an Ethereum-based startup, FundsDLT.
The Ethereum mining process is quite similar to that of Bitcoin. There are blocks of transactions that require computing power to find the right solution. In technical terms, the unique metadata of the block is mined by miners using a hash function that returns a fixed-length scrambled string that appears random. When a miner finds a hash that matches the target, it receives the Ether token and each node validates the transaction and updates the database. Once a miner finds the right hash, all other miners start mining more blocks and so on.
An Ethereum wallet is a piece of software that is used to store Ether tokens. You can choose several depending on your needs:
- MetaMask – Browser and mobile based wallet
- TrustWallet – Mobile wallet
- MyCrypto – Online wallet
- Argent – Mobile Wallet
- MyEtherWallet – Client-side wallet
- Gnosis Safe – Multi-signature Security Wallet
- Coinbase Wallet – Mobile wallet
If you’re looking for hardware wallets, the Ledger Nano S, KeepKey and Trezor are good options.
Is it worth investing in Ethereum?
Crypto-currencies in general, including Ethereum, are subject to high volatility, making them high-risk, high-reward investments. Prices can rise and fall by 20-50% in a matter of hours, which can be both an opportunity and a risk.
For this reason, if you want to invest in Ethereum, it is recommended that you do your due diligence and only invest what you can afford to lose. Given the amount of work that went into creating Ethereum, it’s safe to say that this network (and its crypto-currency) are here to stay. In fact, many experts now believe that compared to Bitcoin, It is highly undervalued and has tremendous growth potential. However, when it comes to investing, there are never any guarantees.