Developing technology often brings with it speculation whether the emerging technology is practical. Blockchain technology is revolutionizing the world on a massive scale. A few years ago, many had never heard of Bitcoin. Today, everyone is claiming to be a crypto guru. You have probably seen ads on social media sites advertising cryptocurrency-related services, with stories of people becoming crypto-millionaires trading Ethereum and other currencies. With thousands of cryptocurrencies out there, how do you know which one to invest in?
Ethereum, as you may or may not know, is disrupting many industries that act as a third-party entity. Many banks, government agencies, and everyday businesses are learning how to incorporate blockchain technology into their businesses. What makes Ethereum so special is that it provides a platform that is decentralizing our world around us.
It is worth mentioning that Ethereum itself is a free and open-source software that uses blockchain technology as its platform to allow decentralized apps to be developed and utilized. You have probably heard of cryptocurrencies in recent months such as Bitcoin, Ripple, and Litecoin. These “cryptos” have become almost synonymous with the blockchain technology itself. This is a common mistake. Blockchain technology is to cryptocurrencies as the internet is to email. Blockchain technology is a platform on which another service can be used, but it is not the only utilization, Ethereum being the platform itself.
Blockchain technology decentralizes power that third parties have on information and distributes this power across its network. This allows the network to verify transactions while keeping your information secure.
Many decentralized applications, called dapps, use the blockchain technology to run. Many dapps are limited in their function because they only use the blockchain for one purpose. Dapps were facing issues of having to rewrite their whole programs to add a new function, but this took away from the sole purpose of the blockchain: which is to be decentralized. Ethereum solved this problem by using the same blockchain technology, but allowing many other dapps to be run on its network regardless of how they were coded.
The Ethereum platform utilizes a digital cryptocurrency called Ether. This crypto is different from Bitcoin as Bitcoin uses “miners” to generate Bitcoin for the network to use. Ethereum miners work to earn ether, which powers the network. Ether is not only a tradable cryptocurrency, but also a currency used to pay for goods and services on the Ethereum network.
Pros and Cons of Ethereum
So what is the big deal over decentralization? Many people have fears of their information being in the wrong hands. With many recent hacking attacks on banks, stores, and the government, people are not so trusting of third parties having access to their personal data. Ethereum seeks to reinvigorate trust between humans without human control. Here are some pros and cons outlined below to give you a firmer understanding as you learn about how to buy Ethereum.
Ethereum is immutable, meaning that third parties cannot manipulate data to any degree. This allows two parties to set up smart contracts that once agreed upon, get added to the blockchain’s ledger. The ledger is what records all transactions on the blockchain and gets updated through consensus throughout the network.
Decentralized Autonomous Organizations, or DAOs, are a feature offered by the Ethereum network. DAOs are fully autonomous, decentralized organizations that are self-regulated by their coding. This feature of the Ethereum network removes the rules and structure of traditional organizations and allows smart contracts developed by the network to run in their place. This eliminates the need for centralized control.
Corruption and Tamper-Proof
Since the network is decentralized, every computer on the network must vote to verify that the transaction presented is legitimate using its own copy of the blockchain’s ledger. If it is, a consensus has been met. If a consensus has not been met, the other computers on the network will not accept that transaction and it will not be added. This makes the Ethereum network virtually corruption and tamper-proof.
The Ethereum network uses thousands of volunteers known as “nodes”. These nodes are virtually any active device connected to the internet. These nodes can be a computer, a cell phone, or even a printer. It is the job of these nodes to keep a copy of the ledger at all times and sometimes conduct transactions. The Ethereum network being decentralized, there is no central point of failure therefore making apps well-protected against hacking.
You can also become a miner! Even though Ethereum uses the same proof-of-work protocol as Bitcoin, it does not require you to have to buy expensive parts for your rig. If you have a GPU installed, then you could see some nice returns, but just using your computer, however, will only get you small returns.
Smart contracts are written by humans making them susceptible to error. If a line of code has a mistake and gets exploited, there are no efficient ways to stop an attack unless you rewrite the underlying code, which goes against the premise that the network is “immutable”. This is when forks become an issue.
Forks are radical changes in the blockchain protocol that make all pre-existing invalid blocks valid and vice versa.
Etheruem uses a proof-of-work protocol which unfortunately slows down transaction speeds on the network. In order for a transaction to get added to the ledger, miners have to solve algorithms. These algorithms continue to get more complex over time, thus slowing down transaction speeds. Many critics have stated that the blockchain at this rate is unsustainable. Some speculate that Bitcoin alone may grow to use up all of the world’s energy by 2020.
How to Buy Ethereum
Despite its criticism, investors want to know how to buy Ethereum. Here are few ways to get started today:
Step One – Buy Ethereum Wallet
Crypto hardware wallets are the most secure way to hold your funds. Hard wallets are physical devices that store your Ether and other compatible cryptocurrencies. This allows your funds to be held offline and away from hackers. Hardware wallets that support how to buy Ethereum include: Trezor, Ledger, and KeepKey.
Software wallets are also an option. Software wallets are great if you are just starting out and/or don’t have a lot of Ethereum. Software wallets are connected to the internet and are therefore vulnerable to hackers. The best software wallets for Ethereum are MyEtherWallet, Exodus,and Jaxx.
Step Two – Buy Ethereum
Now that you have your wallet, you are ready to learn how to buy Ethereum. Ethereum is traded under the code (ETH). You can buy Ethereum on many crypto exchanges such as Coinbase, Bitpanda, and Coinmama. Simply visit their webpage to set up an account. Some exchanges such as eToro only allow you to speculate on the price of Ethereum. If you chose this method, disregard step one.
Remember that term “fork” from earlier? Back in 2016, a developer launched an ICO on the Ethereum network which resulted in a hacker stealing $60 million worth of ether. This led to disagreements on whether those on the network wanted to refund those stolen funds or continue forward. This hard fork resulted in two versions of Ethereum: Ethereum and Ethereum Classic.
Those that were for the updated code stayed with Ethereum (ETH) and those that stuck by the old code became Ethereum Classic (ETC). These splits became competing and led to two different cryptos with two different exchange rates. Many refer to ETH as the “true” Ethereum.
Additionally, if you are interested in how to buy Ethereum for your retirement account, you can. Most 401k accounts will not allow you to buy cryptocurrencies directly. You will have to covert your existing 401k into an IRA. Talk with a legal financial advisor for more details.
Step Three – Deposit Ethereum
Once you have your ether, you can withdraw it from the exchange. From here, you simply use your Ethereum address to send funds to your wallet.
There is no question that cryptocurrencies will be the future. This technology is nothing less than revolutionary as it has been over 5000 years since the way we view money changed. We have established money in the past, but it has always been prone to human manipulations resulting in financial calamities. Cryptocurrencies are on the verge of making a breakthrough in trust with Ethereum laying the foundation for the next generation of technology to come.
As this technology continues to grow, so will its efficiency. Speculators will speculate, but it is truly up to the investor to gather all known facts and make sound investing decisions based on those facts. Use sound investing decisions when considering potential financial products. We hope this article shined some light on how to buy Ethereum. We wish you good fortune in your investing endeavors.