If you’re reading this, and you’re new to the crypto space, and you want to know what Ethereum is…
Explain Ethereum to me like a human
Ethereum is built to be some sort of Swiss Army Knife that allows for various applications to be built on top of its blockchain.
With Bitcoin, you get a very safe and secure protocol that’s immutable & censorship-resistant. What you have from that is an iron-clad monetary policy. (Read the Bitcoin Standard)
Ethereum gives you the exact opposite, and allows any developer to write code and build something on top. There’s always an understandable trade-off between security and flexibility of features.
Here’s an analogy:
Facebook, Twitter, Instagram, even Google in some sense is built on top of the TCP/IP protocol. What you call the internet today for most people.
Ethereum is, in some sense similar to the TCP/IP protocol. But this time, the Ethereum protocol incentives its participants with Ether.
So while the inventor of the internet’s TCP/IP protocol gets $0 dollars today, trillions of dollars are going into the pockets of Amazon, Facebook, Google, etc…
Which is why people are calling this Web 3.0.
Only this time, most of the $$$ will be accrued at the protocol layer in the form of tokens called Ether (ETH).
That’s why, if I were a betting man, I’d buy some ETH now and hodl for the next 5 to 10 years. Not a lot of money, if I were to lose it all but on the flip-side, I’d make quite a bit.
Ethereum uses smart contracts that can do just about anything: from facilitating the exchange of money, property, voting, identity, contracts and agreements of most kind, intellectual property, etc.
What’s Ethers Property?
Ether is described on Ethereum’s official website as “The Crypto-Fuel for the Ethereum Network.”
This level was crossed about 4 months ago. As of now, there is still no fixed cap being implemented.
Ethers supply is not fixed and has been inflating at a rate of 10 percent a year.
How are Ethers created?
A group of Ethereum Developers decided on the total supply of ether and its rate of issuance based on the donations raised in 2014 during the presale. The results were roughly:
- 60 million ether created to contributors of the presale
- 12 Million (20% of the above) were created to the development fund, most of it going to early contributors and developers and the remaining to the Ethereum Foundation
- 5 ethers are created every block (roughly 15 seconds) to the miner of the block
- 2-3 ethers are sometimes sent to another miner if they were also able to find a solution but his block wasn’t included (called uncle/aunt reward)
Why will the Price of Ether Increase?
Ether is needed by developers who want to build their applications on the Ethereum blockchain. Any participants who wants to access or interact with the programmable smart contracts on the Ethereum blockchain will also need to buy Ether first.
Plenty of exchanges like Binance also acts as a on and off-ramp for retail investors and speculators to trade & invest in it.
You may want to check out what kinds of wallets are available for your Ethereum needs, most mobile wallets are very user-friendly, others are more complex for non-technical people.
What’s the Difference: Ethereum (ETH) vs. Ethereum Classic (ETC)
At the very beginning, there was only one Ethereum blockchain.
Then a complex smart contract called DAO, short for Decentralized Autonomous Organization, sold DAO tokens for a fixed amount of Ethers.
DAO was going to revolutionize Ethereum for good by funding all future Decentralized Apps in the ecosystem.
In just 28 days, they raised over $150 million worth of Ether (consists of 14% of all Ether at that time)
Then in June 2016, a hack occurred within DAO.
One-third of all the money raised was lost to hackers ($50 million). How?
A straightforward loophole allowed the hacker to transfer out more Ether for a fixed amount of DAO tokens. The fault was within the DAO smart contract itself and nothing to do with Ethereum.
Gavid Wood, the co-founder of Ethereum states,”blaming Ethereum for the DAO hack is like saying the internet is broken everything a website goes down.”
A classical battle between ethics and ideology erupted within the community.
One side argued that “code was law” and that nobody should do anything. After all, Ethereum was supposed to be immutable (something fixed and cannot be changed at all).
The other side, the obvious majority weren’t too happy about it. And that is why they proceeded with a hard fork.
In the end, developers who opposed the hard fork continued sticking to the original blockchain and called it Ethereum Classic (ETC). The rest of the simple majority, including Vitalik Buterin, the co-founder of Ethereum; moved on to a new chain and remained Ethereum (ETH)
Today, the Ethereum community seem to have taken sides with ETH, where the majority of consensus, development and discussions are taking place. But this also proves that the Ethereum blockchain is subjected to the whims of its chief developers.
Ready to Buy Some Ethereum? (A Quick 3-Step Guide)
Step 1: Get an Ethereum Wallet
COMMON MISTAKE: Buying Ether before getting an Ethereum wallet.
There are 2 main types of Ethereum wallets. .
Ethereum Hardware wallets
I would suggest getting hardware wallets if you have more than $1000 invested.
Free Software and Mobile Ethereum wallets
Suitable if you’re just playing around with Ethereum and you don’t have a whole lot of Ether to risk or lose.
These wallets may be free of charge but are considered hot wallets (constantly connected to the Internet), therefore susceptible to all kinds of malwares, hacks or phishing attacks.
- Read a More Detailed Account: 11 of the Best Ethereum Wallets to Thwart Hackers (2018 Edition).
Step 2: Buy Ethereum
A) Easiest: Buy Ethereum with Credit Card.
Changelly is one of my first exchange sites I used. Its extremely popular (2 million registered customer), easy to use and facilitates exchange to over 100 different coins aside from Ether.
With 15,000 daily transactions and a turnover of ~60,000 BTC, you can rest assure that Changelly is a reliable exchange platform.
Most wallets partner with Changelly in order to offer them access to purchasing Cryptocurrencies. Examples include, Coinomi, MyCelium and even Binance, the #1 Crypto-to-crypto exchange.
It took me about 15-30 minutes to receive my Ether. (pick a wallet before you purchase Ether)
You’ll be paying fees of around 7-10% for the convenience of using your credit/debit card. But it saves you the hassle of identity verification and various delays on alternative platforms.
If you plan to hodl long term, say 5 years, these fees will turn out insignificant.
Daily limits are up to $20,000, and $50,000 a month.
Tip: $1000 USD to exchange to Ether, ( $1000/1.05 = $952 ) – 5% fee
Coinmama allows you to purchase up to 150 USD/EUR with your MasterCard/VISA Credit or Debit card without needing to provide any ID verification. You still need to fill up your basic details.
If you want to increase your purchase limit, you will need to verify your ID. (pick a wallet before you purchase Ether)
B) Convenient: Check out your local Ether ATM machine using this interactive map: buying through ATMs
C) Cheaper: Bank Transfer
Coinbase supports only 32 countries, but is one of the most established exchange sites backed by institutional investors. (How to Buy with Coinbase)
If you’re buying through Coinbase, you do not need to get a wallet, but it’s still comes highly recommended considering the fact that many big exchanges eventually gets hacked. Having your own wallet means having your own keys, not your keys, not your wallet.
Coinbase fees: ~1.49%-3.99%
You could avoid paying coinbase fees, if you sign up for a pro.coinbase account (formerly known as GDAX). When depositing funds, just connect your Coinbase account.
Coinbase also allows you to buy with your Credit Card, but if your country is not part of the 32 supported countries, you can’t.
You need to complete a photo ID verification before you can buy Ether on Coinbase.
CEX is a solid Crypto exchange that allows you to buy/sell Ethereum using a Credit Card or Bank Transfer Worldwide.
It is much more complicated than Coinbase & for the average buyer.
You can Deposit money via Bank Transfer, CEX charges zero fees for this but when you buy there is a Trading fee. If you use a credit card on this platform, it charges you a much higher fee.
- Maker: 0-0.16%
- Taker: 0-0.25%
- Instant buy: 7%
Try not to buy Ethereum instantly on CEX, bid at a price lower than the asking price until someone is willing to meet yours.
D) Mining Ethereum/ Earning Ethereum
While you do not have to buy Ether, you could try mining Ethereum on your own Computer. It’s inefficient and you’d probably have to run it 24/7.
If you have a dedicated GPU, that will help you earn more Ether faster.
However, Ethereum will soon switch from Proof-of-Work to Proof-of-stake via Casper. As such mining Ethereum will no longer be as profitable as it once was.
Proof-of-stake would reduce energy costs to run the Ethereum Network, but it will also render miners obselete.
That being the case, Ethereum mining is still profitable as long as they haven’t completely made the switch.
Even so, mining for Ethereum still depends of three very important factors:
- Hash rate
- electrical costs
You can calculate how much it would cost to mine for Ethereum:
E) Crypto to Crypto Exchange
You will first need to Buy Bitcoin:
- How to Buy Bitcoin In Different Countries [+International Infographic Guide]
- Buy Bitcoin With Paypal Instantly on these sites (Explained Step-by-step)
- CoinMama Walkthrough Guide for Beginners: Buying BTC and ETH with USD/EUR Cards
After you’ve bought your BTC, send it to your Binance account:
- First Register a Binance account
- Go to your BTC receive address > Copy
- Go to the site/wallet where your BTC is
- Paste the BTC address as the destination
- Proceed to make the transfer
After your BTC is inside your Binance account. You can go Click on the “BTC/ETH” Trading pair to start exchanging your BTC for ETH.
Choose the price you’re willing to pay for your BTC, and voila, you should instantly receive your ETH within your Binance Ethereum wallet. (Check out: How do I Trade Cryptocurrencies on Binance?)
You should then proceed to transfer it out to any of your Ethereym wallets.
F) Mobile App/Software Wallets via integrated exchanges
Some of these wallets integrate exchange processors within the app itself. You can easily buy Ethereum inside these wallets without the hassle of transferring your ETH to another wallet.
Do remember not to store massive amounts of your investments on these mobile wallets. They’re considered Hot Wallets which are constantly accessed to the internet. Only keep enough for day to day spending.
Also take note that buying Ether here might incur higher fees. \
G) Peer-to-peer marketplace (Cash, Bank Transfer, PayPal, Wire, Western Union, Skrill, MoneyGram, etc…)
This site is similar to LocalBitcoins, only this is an Ethereum marketplace where you can buy Ether from other individual sellers.
You should always do a thorough research on the trustworthiness & credibility of the sellers you find on the site and remember not do conduct huge transactions here.
This site uses an Ethereum smart contract to escrow your funds. Which means, the owners of these platforms do not hold custody over your ETH. Upon your verification, the smart contract executes and releases your funds to the seller.
The benefits of an Ethereum peer-to-peer marketplace is privacy and decentralization.
Step 3: Transfer Ethereum into your Wallet (Conclusion)
Now its time to send your ETH to your Ethereum wallet.
This address is easily obtainable from the receiving end of your wallet. Just tap on receive ETH on any of the wallets your have, copy and then paste that into the “Ethereum destination address”.
Exchange sites like Coinbase remain susceptible to all kinds of risks internally or externally. No matter how big they’re, always learn to take responsibility for your own money.
Cryptocurrencies like Ethereum is set to change how we communicate value over the internet. Banks and centralize third party corporations made billions offering us a way to trade over the internet. But they’re highly insecure and rely on tons of B.S. to keep us using them.
With cryptos like Ethereum, you now have the freedom to choose one currency over another. At some point in the near future, you may be forced to choose between the bankers and politicians that brought you the Great Depression or the Geeks and Scientist who brought you the internet – I hope you will make the right choice.