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The Ethereum blockchain is more of an evolution of the internet than an evolution of currency. While digital currencies like Bitcoin are cool, fully functional smart contracts running on the Ethereum Virtual Machine are even cooler.
Smart contracts allow for complex financial tools and services to be built on a decentralized and peer-to-peer network such as Ethereum. The emergence of Ethereum and other smart contract blockchains has started a movement known as decentralized finance, or DeFi. DeFi promises to change the financial landscape as we know it, and Ethereum has the first mover advantage.
The Ethereum network is powered by a digital currency known as Ether, or ETH. As demand for DeFi and space on the Ethereum blockchain continue to increase, so will demand for Ether.
Our guide will help you learn more about this popular crypto and help you place your first ETH order on an exchange.
How to Buy Ethereum
If you’ve ever purchased cryptocurrency before, you’ll have an easy time investing in Ethereum. As the second most popular cryptocurrency on the market, most exchanges that offer access to crypto trading will allow you to buy and sell Ether.
Here are the basic steps you’ll go through when you open your first account.
- Open a Crypto Exchange Account
The first step to investing in Ethereum is to open an account with an exchange or broker like IFC Markets that offers access to cryptocurrency trading. As a large cryptocurrency, most exchange offer access to Ethereum. This means that you’ll have plenty of exchange to choose from, and you can be picky before you open an account.
Some of the characteristics you might want to think about when you open your account might include:
– The cryptocurrencies each exchange offers access to
– Each exchange’s platform (beginners might want to start with a more intuitive exchange like Coinbase)
– Other assets that the exchange offers access to (some exchanges focus on crypto only while others combine cryptocurrency access with stock accounts)
– Fee schedules, account maintenance fees and commissions
– Security features, encryption and two-factor authentication availability
After you select an exchange, open an account using the exchange’s process. Your exchange will need to collect a bit of personal information before fully opening your account.
Some of the information you might need to provide may include:
– Your full legal name
– Your address
– Your phone number and email address
– A copy of a government-issued photo ID (like a military ID, driver’s license or passport)
Most exchanges allow you to open an account in a few minutes, but some may take longer in order to verify your identity.
- Fund Your Account
After your account is open, you’ll need to link a funding method to transfer money between a payment source and your account. Most exchanges allow you to fund your account using a direct bank transfer, but select exchanges also allow you to buy cryptocurrencies using a credit card.
If you link your bank account, your exchange might need to verify that you own the account before you can start investing. They’ll usually do this by making a series of small deposits into your account and asking you to report the value of each deposit. This process may take anywhere from a few hours to a few days depending on the exchange and when you open your account.
- Place an Order
Once your account is open and funded, you can place an order through your exchange to buy Ether. First, check the current market price of 1 Ether coin. You can use the current market value to determine how much Ether you want to buy. Don’t worry if you don’t have $500 or more to purchase an entire coin — your exchange will allow you to purchase coins in fractions. Many exchanges even allow you to invest using a dollar amount.
When you place an order be mindful of the type of order you’re using. There are multiple types of buy orders, and the order you choose can affect how much you pay per coin and how quickly your order is filled. You can browse some of the most common order types here.
- Transfer Your Coins to a Wallet
After your order is filled, you’ll see your coins in your exchange account. If you don’t plan on trading again within the day, you should store your Ether in a secure wallet with private keys. A wallet is a storage device or application that protects your coins in the event of a hack. Your wallet app can often act as a crypto portfolio tracker, allowing you to manage how your holdings are changing over time.
What is Ethereum?
Ethereum is an open-source computer that allows developers to connect and collaborate with others using a decentralized application network. Ethereum works through a global network of computers that work together to verify transactions as a team rather than relying on a trusted third party.
As a reward for verifying transactions recorded on the Ethereum blockchain, operators are rewarded with Ether.
Though Ethereum is constantly being compared to Bitcoin, Ethereum’s network greatly expands upon Bitcoin’s infrastructure in terms of usability. Instead of only transferring coins between wallets, Ethereum’s network supports the creation of decentralized applications (dApps). DApps allow users to execute more complex payment agreements between one another without the use of a middleman – instead the possible outcomes are automated by smart contracts.
Because transactions executed on the Ethereum network are supported by a web of thousands of connected computers, dApss offer a much higher level of security and anonymity when compared to centralized applications. Though this technology is still in its infancy, its uses are being explored in the realms of finance, art, social media and many more industries.
DeFi on Ethereum
Decentralized Finance, or DeFi, is an innovative new industry being built on smart contract blockchains. Ethereum has over $100 billion of funds locked in DeFi applications already, which far outpaces its competitors. Binance Smart Chain and Solana also have DeFi applications, but far there are fewer apps and much less liquidity than on Ethereum. The 2 largest sectors being disrupted by DeFi today are lending and trading. Lending platforms, like Aave, allow anyone to lend or borrow cryptocurrency through automated smart contracts –– loans are guaranteed through over collateralization. Decentralized exchanges (DEXs) are used to trade cryptocurrency directly on the blockchain. This allows for greater security and anonymity when compared to centralized trading platforms. Some of the largest DEXs on Ethereum’s network are Uniswap, SushiSwap, and Curve.
Where You Can Buy Ethereum
The easiest way to buy Ethereum is to place an order through a cryptocurrency exchange like eToro. A cryptocurrency exchange is a crypto app or desktop platform that allows you to place buy and sell orders for cryptocurrencies. A crypto exchange is very similar to a stock broker — you’ll create an account, supply a little personal information to verify your identity and add funds. From here, you’ll be able to place buy and sell orders through your exchange, who will execute the orders on your behalf.
You’ll purchase Ethereum’s Ether using the same method you’d use to purchase other types of cryptocurrencies. Choosing an exchange that offers access to all of the coins that you want to buy and sell will make it easier to master your exchange’s tools and invest using a single platform.
eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features
- U.S. based cryptocurrency traders
- Investors looking to CopyTrade other traders
- Simple user interface
- Several major cryptocurrencies and altcoins
- Expansive network of social trading features
- Large client base for new traders to imitate
- Only 29 coins available
Founded in 2006, IFC Markets is a popular forex and contracts for difference (CFD) broker that provides high-quality trading services to over 185,000 clients from more than 80 countries. The broker has oversight from the British Virgin Islands Financial Services Commission (BVI FSC) as well as the Labuan Financial Services Authority (LFSA) in Malaysia.
IFC Markets offers trading in over 600 financial instruments including forex, stocks, indices, commodities, cryptocurrency futures and synthetic assets through excellent trading platforms: MetaTrader 4, MetaTrader 5 and its own developed NetTradeX advanced platform. IFC Markets also gives clients unlimited trading opportunities via its unique GeWorko Portfolio Quoting Method that lets traders create their own synthetic instruments or choose from PCI Library, synthetic instruments created by professionals.
- Traders who want to create their own trading instruments
- Intraday and mid-term traders
- Small volume traders
- Trading platforms variety
- The GeWorko Portfolio Quoting Method lets you create synthetic assets
- 15 years experience in the business
- Highly rated by clients with 8 recent international awards
- Insured by AIG Europe Ltd.
- Only regulated by 2 minor agencies
- Not available to traders in the U.S., Japan and Russia
Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 135 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.
- Detailed mobile app that makes trading simple
- Wide range of available account types and tradable assets
- Mobile app mirrors full capabilities of desktop version
- Easy-to-use and enhanced screening options are better than ever
- Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources
Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs.
You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.
Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.
- New cryptocurrency traders
- Cryptocurrency traders interested in major pairs
- Cryptocurrency traders interested in a simple platform
- Simple platform is easy to operate
- Comprehensive mobile app mirrors desktop functionality
- Coinbase Earn feature rewards you with crypto for learning about available coins
- Higher fees than competitors
iTrustCapital is a self-directed IRA provider that gives you the opportunity to invest in cryptocurrencies, gold and silver through your retirement account. iTrustCapital focuses on providing investors with a straightforward and easy-to-understand platform, which can be a major asset if you’ve never bought or sold alternative investments in the past.
When you reach retirement age, iTrustCapital allows you to choose whether you’d like to take your disbursements in cash or in the assets you’ve invested in. Though the platform does offer a limited range of cryptocurrencies when compared to brokers like Coinbase, its simple structure and unique IRA offerings make iTrustCapital a great place to invest.
- Investors who want to add gold, silver or cryptocurrencies to their IRA
- Those who are interested in taking a long-term approach to cryptocurrency or metal investing
- Beginner cryptocurrency investors
- Straightforward platform allows you to buy and sell assets in a few minutes
- Orders clear within 5 minutes
- 24/7 order placements and portfolio monitoring services
- Both live chat and phone customer service service available
- Limited number of cryptocurrencies to buy and sell
- No mobile app currently available
Should You Buy Ethereum?
Let’s take a look at a few of the pros and cons that come with investing in the Ethereum network.
- Ethereum’s development community and founder Vitalik Buterin have set clear and consistent roadmaps for the Ethereum network’s project goals. This enthusiasm has inspired confidence in investors.
- Ethereum’s decentralized structure is a major benefit. It provides users with a much higher level of privacy and security than centralized applications.
- The Ethereum network doesn’t rely on middlemen to service transactions. Thanks to smart contract technology, users can safely connect with each other without depending on a third party. This helps users avoid unfair transaction fees and censorship related to location.
- Ethereum is more than a currency. The ability to create decentralized applications has real-world use cases from banking to digital ownership.
- Ethereum is currently undergoing issues with scaling. Because it acts as a global computer, Ethereum’s functionality may lead to more demand.
Invest in the Ethereum Network
The Ethereum network and its smart contract functionality presents a multitude of opportunities for investors. If you’re considering investing in Ethereum, we recommend that Ether make up only a small percentage of your overall investing portfolio.
Cryptocurrencies can be exceptionally volatile assets. There’s no guarantee that they’ll retain any value. Find the right exchange and invest in the Ethereum network with knowledge and caution.