October 24

What Is Ethereum & How Can You Safely Invest In Ether?

Bitcoin is the king of cryptocurrency by market capitalization. Guess who the prince is? 

You’re right. It’s Ethereum.

There’re a number of cryptocurrency analysts who believe that Ethereum will overtake Bitcoin’s market capitalization to become the ultimate king of cryptocurrency. Will this happen? Only time will tell. 

So why are these analysts so optimistic about Ethereum and Ether (the cryptocurrency of Ethereum)? 

#1 What Is Ethereum?

Ethereum is a decentralized blockchain which has many uses, including:

a) Smart contracts can be developed and executed
b) Decentralized applications can be built
c) Payment and more

The use cases mentioned above are powerful and you’ll discover why in Point 3.

Ethereum is a permission-less blockchain. This means that its code is available to anyone and everyone to view and suggest improvements. All transactions are also viewable and can be participated by the public. 

Being a permission-less blockchain, the speed of transaction is slow at around 15 to 45 transactions per second (TPS). However, this is much faster than Bitcoin’s current TPS of 5 to 7. 
Curious about Bitcoin? You can read about Bitcoin here

#2 History Of Ethereum

Ethereum is a decentralized blockchain launched in 2014 and founded by a group of 8 individuals. They are Vitalik Buterin, Gavid Wood, Charles Hoskinson, Mihai Alisie, Anthony Di Iorio, Amir Chetrit, Jeffrey Wilcke, and Joseph Lubin. 

Do you see any notable names? Do the names Gavid Wood and Charles Hoskinson ring a bell? 

Gavid Wood left Ethereum to found Polkadot while Charles Hoskinson left Ethereum to found Cardano.  

Only Vitalik Buterin remains working on Ethereum. 

Ethereum has undergone a couple of upgrades to lower gas (transaction) fees and to prepare for it to scale. Scaling Ethereum is important for it to continue be grow and compete against other smart contract blockchains which are faster and have a higher TPS. 

The most anticipated upgrade in Ethereum will be rolling out sometime in 2022. It is dubbed Ethereum 2.0 where its TPS will increase to an astonishing 100,000 (up from its 7 to 45 TPS currently)! 

This upgrade will also bring gas fees down. I’ve paid more than $30 in gas fees and I’m sure that others have paid a lot more in gas fee for a single transaction. 

Ethereum 2.0 will also introduce proof-of-stake, phasing out its current proof-of-work mechanism. This means that mining for Ether will cease upon this upgrade.

#3 What Makes Ethereum and Ether So Valuable?

Ethereum has these major uses:

a) Smart contracts can be developed and executed
b) Decentralized applications can be built
c) Payment ecosystem

a) Smart Contracts

Smart contracts (in the form of computer code) enable agreements to be executed without the need for an intermediary. You can think of a ticketing machine as an example. You select the ticket you’d like to purchase and pay. If your payment is accepted, your ticket is printed out and dispensed to you. 

The ticketing machine has been coded to know the price of each ticket, and to read the amount that’s paid. If the payment amount matches the ticket selected, then the ticket is printed and dispensed. 

If the payment amount is more than the ticket selected, the ticket is also printed and dispensed. There’s an additional step though – change is given. 

But in the event the payment amount is insufficient, the ticket will not be printed and dispensed. Instead, the buyer could be prompted to add more money or face cancellation of the deal in a given period of time. 

Throughout the whole process, no other party is required. Instead of having to purchase your ticket at a ticketing counter manned by a person during its operating hours, you can simply use the ticketing machine at any time of the day, any day.  

The removal of intermediaries also means there’s one less organization/person you’ll need to trust. 

b) Decentralized Applications

Decentralized applications are known as dApps. They can be built on blockchains, and Ethereum is one such blockchain. 

DApps can function like the apps we have in our mobile phones – music, games, banking and finance, investments, marketplaces, and more! Therefore, the larger the ecosystem of Ethereum, the better! And Ethereum is strong in this aspect. 

In this manner, Ethereum is like the operating system powering all the dApps that are built on Ethereum. 

As dApps grow and mature, new products and services are added. This led to the formation of decentralized finance (DeFi), decentralized exchanges, non-fungible tokens (NFTs) and more. 

c) Payment Ecosystem

All activities performed in the Ethereum ecosystem incur a transaction fee. Guess which cryptocurrency these transactions are paid in? 

Ether, of course! 

Now, this won’t be a concern if Ethereum’s ecosystem is small or unused. There’re thousands (if not, tens of thousands) of dApps built on Ethereum. Many of the top dApps are built on Ethereum. 

These highlighted factors are significant to the value of Ethereum and Ether. Ethereum is one of the blockchains that you will want to pay attention to. 

#4 2 Safe Ways To Invest In Ether

I can sense your excitement. You want to invest in Ether. How can you invest in Ether (or ETH) safely?

a) Buy Ether From A Cryptocurrency Exchange

You can buy from reputable cryptocurrency exchanges such as Binance International, Huobi Global, Kraken, and a couple more. You can compare them in this article
Please note that the availability of the mentioned cryptocurrency exchanges vary between countries and jurisdiction.

The method to purchase ETH differs slightly for each exchange, so please check out their tutorials beforehand.

b) Buy Shares Of Companies In The Cryptocurrency Space

As blockchain technology becomes more widely adopted and accepted, there’s a growing number of listed companies in the blockchain and/or cryptocurrency scene. Therefore, you may even consider buying shares of these companies instead of owning ETH – Grayscale Ethereum Trust (ETHE), Coinbase Global (COIN), Mogo (MOGO), and more.

You’ll need to setup a brokerage account to trade stocks. You can find a comparison on 7 popular stock brokers in Singapore here.

#5 Storing Your Ether In A Safe Place

The next question that comes to mind after buying your ETH is where you should be storing them. You’ll want them to be stored in a safe place as they are expensive assets which could rise in value over time.

There are 2 main categories of wallets to store your ETH in – custodial and non-custodial.

A custodial wallet is one where you don’t own the keys to the wallet. By this, I mean that you don’t own the key to your ETH.

Placing your ETH in a custodial wallet is akin to passing money to the bank for safekeeping. Banks do get robbed, hacked, catch fire, and more.

Custodial wallets are usually hot wallets which are provided by the various cryptocurrency exchanges. Binance International and its local exchanges, Kraken, Huobi Global, Gemini, Tokenize Xchange provide wallets for you to keep your ETH.

On the other hand, non-custodial wallets are those that you own. You’ll hold onto the keys of a non-custodial wallet. Such a wallet can come in the form of hot and cold wallets. Let’s begin with the hot wallet.

Non-custodial hot wallets include mobile and software wallets. An example of a non-custodial mobile wallet is Trust Wallet. Metamask is an example of a non-custodial software wallet.

Non-custodial cold wallets include paper and hardware wallets. Hardware wallets include Ledger and Trezor.

Here are 2 security tips:

a) Set up your wallet in a safe place without CCTV and don’t tap onto public WiFi networks.

b) Write the mnemonic/seed phrase of your wallets on a piece of paper and never disclose it to anyone. You may even want to make copies as the you’ll need the seed phrase as a proof of ownership over your ETH.

7 Things You Must Remember

#1 Ethereum is a decentralized blockchain with many powerful uses

#2 Ethereum upgrades are regular, with the biggest being Ethereum 2.0 coming in 2022

#3 Ethereum has a huge and strong ecosystem

#4 Transaction fees in Ethereum’s ecosystem are made in ETH

#5 You can invest in ETH safely in 2 ways

#6 There are different types of wallets to help you store your ETH safely

#7 You can get exposure to ETH by investing in listed companies which hold ETH

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Invest safely!

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