Ever since Vitalik Buterin released his brainchild, Ethereum, into the cryptocurrency world, the digital coin “Ether” has been climbing steadily upward. Investors and traders alike have been scrambling for a slice of this crypto pie that quadrupled in value this year alone.
Ethereum is a digital platform where you can build decentralized applications (dApps). While you can make online payments with Ether, the platform is much more than that. Ethereum describes itself as a “technology that’s home to digital money, global payments, and applications.” Let’s cover the basics: what is Ethereum and how does Ethereum trading work?
What is Ethereum?
Like many cryptocurrencies, Ethereum dreams big: of a “fairer financial system” through their decentralized financial system and an “open internet,” where you don’t have to check in your data at the door. Ethereum uses blockchain technology to send digital money for a small fee in “blocks” of data that make up a “chain” on the peer-to-peer Ethereum network. In this way, Ethereum is built just like Bitcoin but with one big difference – you can build applications on top of the blockchain. Think of Ethereum like a programmable Bitcoin. Bear in mind that while the terms are often used indistinguishably, “Ethereum” refers to the blockchain and the platform, while “Ether” is the underlying digital coin. Here is what you can do with Ethereum:
- Private Internet
- No censorship
- Peer-to-peer network
Story of Ethereum
Ethereum has an unusual history. Back in 2013, Vitalik Buterin, the Russian-Canadian programmer behind the platform, had all the ideas but none of the capital required to bring his dream to life. He decided to crowd-fund the project and launched the public sale of Ethereum the following year. Ethereum was alive by 2015.
Ethereum is similar to Bitcoin. Some people see it as a fork in a different direction. To others, Ethereum is an upgrade, a programmable Bitcoin with infinite possibilities. As a 17-year-old programmer, Buterin was involved in Bitcoin and even helped create the Bitcoin Magazine. Buterin saw Bitcoin and thought better. In his own words:
I thought [those in the Bitcoin community] weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each [use case] in a sort of Swiss Army knife protocol.
While Ethereum reads like an avant-garde libertarian manifesto on the official website, the nonprofit is backed by some pretty big business. Banco Santander, Microsoft, Deloitte, and J.P.Morgan are just some of the names supporting the Ethereum platform. In fact, Ethereum is a centralized “decentralized” currency with a core team of developers and team leaders who direct the platform’s roadmap.
Banking for Those Without Banks
Like many cryptocurrencies, Ethereum is providing a financial service to those in need. There are millions of people around the world without a bank account or the means to open one. Ethereum provides an alternative to the banks. A digital “wallet” and potential access to borrowing, savings, and lending where all you need is an internet connection. The allure of a digital coin like Ether is similar to that of many other cryptocurrencies. Ethereum uses cryptography, a system of complex codes with a two-fold benefit; both securing the financial transactions and protecting the digital assets in your wallet. The beauty for many Ethereum users is that you essentially have complete control over your money. When you send money with fiat currency (your dollars, for example), you would have to go through an intermediary such as your bank. There is no central bank or third-party apps adding fees or setting the terms and conditions with cryptocurrency.
What's So Special About Ether?
With thousands of cryptocurrencies out there, what has made Ether (ETH) the second-biggest coin in the ranking? Ethereum’s underlying technology makes it stand apart from most other digital currencies, and for a good reason. The beauty of Ethereum being programmable is that the community of developers is constantly improving it. Long gone are the days where Ether was simply a coin to transfer between two users. Now, you can earn ETH every time you use Ether or any token built on the Ethereum blockchain.
ETH is described as the “lifeblood of Ethereum.” The users who process and verify each financial transaction are called “miners.” They are rewarded for their effort with more Ether. While this is an undeniable incentive to support the blockchain, it is energy-intensive and comes with an ugly carbon footprint similar to Bitcoin. For this reason, Ethereum is rolling out a new reward system called “staking.” Essentially, the more coins you own the more interest you earn and stake you hold. Ether transactions are near-instantaneous so that you can send money in real-time. More than just a coin, Ether is a whole financial system that allows you to borrow and lend ETH and earn interest.
How to Trade Ethereum
Since Ethereum grew from a seed in Buterin’s brain to the second-biggest cryptocurrency in the world, Ether’s rise in value has been meteoric. Of course, in the cryptocurrency world, nothing is inevitable, and Ethereum has not been without its setbacks. In 2015, an anonymous hacker stole a staggering $50 million in Ether. The security and longevity of the project were understandably brought into question. The controversy led to a split in the Ethereum community and the platform forked into two blockchains: Ethereum (ETH) and Ethereum Classic (ETC).
Yet Ethereum more than survived – it thrived. The digital currency grew by 13,000% in 2017 alone – no wonder investors and traders have been flocking to this market honey.
Which begs the (potentially) million-dollar question: where to buy ETH?
If you are looking for Ether, pure and simple, you can either buy the coins from a cryptocurrency exchange or obtain them in a peer-to-peer exchange. An increasing number of centralized exchanges will let you swap fiat currency for Ether, so all you may need is your credit or debit card.
The complication comes in the question of storage. You can choose to keep your Ether coins in the same exchange where you bought them. This is the easy option, but it may not be the safest one. Even major cryptocurrency exchanges are not immune to hacking, and you could lose all your coins in a single cyber-attack.
At this point, you could choose to send your Ether to an offline wallet. This could be a physical hardware wallet where you store your cryptocurrency without internet access – an ultra-secure option. There are also web wallets or mobile applications for easy access to your crypto on the move. If you decide to store your ETH in a wallet, you will get a “seed phrase,” a type of password you need to access your assets. Tattoo this seed phrase on your brain (metaphorically, of course!). If you lose it, you lose your cryptocurrency too.
Where to Trade Ether?
Not everyone will want to buy into Ethereum for the long term or even to use it in place of fiat currency. Many traders will look to speculate on the price movements of Ether in the financial markets. For this type of short-term trading strategy, you can use a traditional broker. You will need to find a trading platform that sells cryptocurrency pairs, ideally alongside other financial instruments.
Take TradeOr, for example. Here at our innovative platform, you can trade cryptocurrency like ETH alongside more traditional assets like stocks, indices, and commodities. TradeOr clients have exclusive access to our team of experts and industry heavyweight charting tools like TradingView. The cryptocurrency market is highly volatile, and beginners who have just started trading may find the markets overwhelming. However, our stellar customer team is available 24/7 to support you and make your Ethereum trading easy.
What's Next for Ethereum?
Ethereum is the second biggest cryptocurrency, and some believe it will one day take over Bitcoin. However, the platform faces stiff competition from other coins, and the gap is closing in the cryptocurrency race. Ethereum plans to roll out a platform upgrade: Eth2. Essentially, it will be an improved version of the current platform, Ethereum, as we know it, but more secure, scalable, and sustainable. Long and short-term investors alike are keeping a close eye on the Ethereum roadmap. If you are interested in trading Ethereum, this digital revolution is worth looking into.