The Beginner’s Guide to Ethereum
What is Ethereum?
Ethereum is a blockchain platform with a smart contract functionality and a cryptocurrency. It was invented by Vitalik Buterin in 2013 and is a decentralized platform created for app developers to build on.
Ethereum can be utilized to decentralize, codify, secure and trade almost anything: voting, financial exchanges, domain names, crowd funding, company governance, agreements, contracts, as well as intellectual property.
What is Ether?
Ether is the legal tender of the Ethereum platform. Anyone wanting to use or to build upon the Ethereum platform will require Ether. Many people use the term Ethereum for referring to the currency instead of Ether, which can cause some confusion. Similar to Bitcoin, Ether can be traded and mined and can be bought at any of the brokers found on the above chart.
Ethereum Vs. Bitcoin
Although Ether and Bitcoin are both Cryptocurrencies built on blockchain technology, they are distinct in a number of ways. Most of these differences are related to the refinement of the protocol. Thanks to the way that it is mined, transactions can occur much faster. For instance, the standard “block” time for Ethereum is 12 seconds compared to the 10 minutes needed for Bitcoin.
With Ethereum you can pay and clear transactions much quicker than with Bitcoin. As well, it does not have the automatic restrictions placed on supply growth that Bitcoin does. The limitation is due to the Bitcoin block rewards which are halved every four years whereas the amount of Ether stays the same and is always available each year.
Additionally, regarding supply, Ethereum was crowd funded whereas Bitcoin was released. Because of this, the early Bitcoin miners gathered the primary supply and currently own most of the Coins in circulation. Ultimately, Bitcoin uses a different algorithm to that of Ethereum, mitigating against the use of application specific singular circuits. Ethereum supports a decentralized mining operation for people using their GPUs.
How to Buy Ethereum
The simplest way to buy Ethereum (or Ether) is through any of the well-known Bitcoin exchanges or trading platforms. You can find our top choices above.
The Benefits to Using Ethereum’s Decentralized Platform
Decentralized applications use the blockchain to run, which they, therefore, benefit from the blockchain’s properties.
Without any central point of failure and secured by using cryptography, the applications strongly protected against hacking attacks and fraudulent activities.
Third parties can’t make any adjustments to the decentralized platform’s data.
Corruption and tamper proof
Based on a network that is established around the consensus principle, these apps make censorship impossible.
The apps cannot be switched off and can never go down.
The Downside to Decentralized Applications
Regardless of its number of advantages, decentralized applications are not without faults. As a result of smart contract code that humans write, the smart contracts will only be as good as those writing them. Oversights or code bugs can also lead to unintentional unfavourable actions being taken. For example, if there is a mistake or problem in the actual code that gets exploited, there’s no adept and efficient way to stop exploitation or an attack, besides attaining a network consensus and having to re-write the code that’s underlying. It goes against the blockchain’s principle that is supposed to be unchangeable. As well, any action that’s taken by an important party raises key questions concerning the application’s decentralized nature.
Day Trading Ethereum
If you are only interested in earning on the exchange rate, you can invest in CFDs as well. The concept is that rather than having to buy Ethereum you can trade according to the exchange rate. The CFDs are better suited to experienced traders. However, many beginners are getting into Ethereum CFD trading. Currently, Plus500 is the only company offering Ethereum CFDs.
Proof-of-work is used in mining Ethereum. It’s very similar to Bitcoin mining because there’s a diminishing block reward earned for each block mined. If you retain a dedicated GPU that’s set up on your computer, then you can start to reap some actual rewards.
Ethereum and Ether are largely disruptive technologies that are positioned to alter how the Internet inherently works. For now, it is easy to get your piece of “the future of the Internet” by following the steps we mentioned above.
How to Choose an Ethereum Broker
As the trade volumes are reaching billions of dollars a day and the market caps are hitting tens of billions of dollars, it is no wonder that cryptocurrencies fuel the modern day gold rush. Today is an age of digital currencies, with cryptocurrencies birthed within the decade. There are already more than a thousand cryptocurrencies in the market and almost daily, an initial coin offering (ICO).
Because there’s so much competition in the Ethereum exchange market as well as having countless Brokers and Exchanges to choose from, it can be difficult to know which option will work best for you. Here are a few things we suggest keeping in mind before you decide on the right Broker for you:
Use a regulated Ethereum Broker or Exchange. The regulatory body develops rules and services protect the integrity of the market, as well as traders, and investors. Because of possible safety concerns, you should open accounts exclusively with regulated brokers.
Trading happens 24 hrs a day, so customer support should be available at all times. You’ll want to be able to speak with a live support person. The representative’s ability to answer your questions regarding spreads and leverage, as well as company details is very telling.
The details of a good broker should be out in the open for everyone to see, either online or otherwise.
Your ideal broker for trading Ether should be able to offer either multiple account options or provide you with an element of customizability. Look for an Ethereum Broker that offers competitive spreads and easy deposits/withdrawals.
Buying and selling Ether costs money. However, unlike buying stocks or bonds, brokers generally charge a percentage. You may consider looking for a broker that charges a flat rate fee instead of the percentage model.
Because Ether is traded in a market where people are both looking to buy or sell the digital currency, it’s crucial to consider the amount of liquidity that an exchange can have. Liquidity is the ability to sell without the price being significantly affected, causing the price to drop.
For more information on Cryptocurrencies, please see our tutorial: The Basics of Cryptocurrency.