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 Uphold or 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 Uphold)
- 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 Uphold or 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. Uphold is a fantastic choice for a crypto broker because it offers more than 200 different cryptos, crypto staking at up to 19.5% APY, and even stock trading.
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.
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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.
Frequently Asked Questions
Questions & Answers
The Ethereum merge will change the networks consensus mechanism from proof of work to proof of stake. That being said, mining will no longer be possible, however, the upgrade will allow for sharding on Ethereum.
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