While Bitcoin has long been dominant in the cryptocurrency scene, it is certainly not alone. Ethereum is another cryptocurrency related project that has attracted a lot of hype because of its additional features and applications.
1. What is Ethereum?
Ether is the second most valuable form of digital money after bitcoin. The technology it runs on is called ethereum, which was first described by 19-year-old bitcoin programmer Vitalik Buterin in 2013.
Buterin envisaged ethereum as an improvement on bitcoin. Like bitcoin, it is a decentralised payment network, with its own cryptograpic currency, that allows anonymous payments to be sent across the internet without the need for a bank or other third party.
Transactions are stored in a decentralised ledger, the blockchain, and are visible for everyone on the network to see.
2. How Ethereum works?
The first thing about Ethereum is that it is not just a digital currency. It is a blockchain-based platform with many aspects. It features smart contracts, the Ethereum Virtual Machine (EVM) and it uses its currency called ether for peer-to-peer contracts.
Ethereum’s smart contracts use blockchain stored applications for contract negotiation and facilitation. The benefit of these contracts is that the blockchain provides a decentralized way to verify and enforce them. The decentralized aspect makes it incredibly difficult for fraud or censorship. Ethereum’s smart contracts aim to provide greater security than traditional contracts and bring down the associated costs.
The smart contract applications are powered by ether, Ethereum’s blockchain based cryptocurrency. Ether, as well as other crypto-assets, are held in the Ethereum Wallet, which allows you to create and use smart contracts.
3. How to mine Ether?
The Ethereum network is kept running by computers all over the world. In order to reward the computational costs of both processing the contracts and securing the network, there is a reward that is given to the computer that was able to create the latest block on the chain.
Every 12 seconds, on average, a new block is added to the blockchain with the latest transactions processed by the network and the computer that generated this block will be awarded 5 ether. Due to the nature of the algorithm for block generation, this process (generating a proof of work) is guaranteed to be random and rewards are given in proportion to the computational power of each machine. This process is usually called mining in the crypto-currency lingo.
4. How to Use Ethereum?
If you’re new to the crypto-currency space, you may find the idea of how to buy and store Ethereum is quite disconcerting. You’re not wrong, it might be confusing.
The good news is, you’re in the right place!
- Trading Ethereum:
There are several ways you can purchase Ethereum directly with fiat currency such as USD, EUR or GBP. All you need is a debit or credit card or just a bank account that facilitates international transfers.
You simply register an account on one of the recommended exchange platforms below, verify your identity, add a method of payment and you’re good to go to buy some Ether.
Obtaining ether varies by country, or at least by currency. You need to find someone either online or in-person who has ether and wants to trade.
The verification process that you have to go through in order to buy Ethereum takes now much quicker than it used to and the purchasing process is slowly becoming hassle-free.
That’s a good news!
Once you have ether, you can send it directly or sell to another person ('peer-to-peer'). It will likely cost a small transaction fee paid to miners.
- Storing Ethereum:
First, you need a place to securely store your ether (or at least a place to store your private keys). This brings us to ethereum 'wallets'.
One caveat is that losing your private key is a much bigger deal than misplacing a password: it means losing your ether, forever.
With that in mind, there are plenty of options for wallets to store cryptocurrency and each of them has different levels of security.
Paper wallets – Most secure
These are simply private keys written down or printed out on a laminated piece of paper and locked away in a safe or secure deposit box. You can make as many copies as you wish and store them securely in different locations
Pros: maximum security
Cons: impractical for regular use
Hardware wallets – Most secure
They are simply hardware devices that you use to put your Ether private keys on and lock it away somewhere safe. Because you can’t access them via net work, they cannot be hacked.
Pros: maximum security, altcoin support, excellent customer support, easy to use
Cons: no free substitutes
Desktop wallets – Good security
Desktop wallets are second most secure wallets available today. Their security level depends on the lengths you go into to ensure proper security of your own computer. An investment in a good antivirus and firewall could be a priority before you store a lot of coins on your computer.
Pros: altcoin support, accepts credit card, easy to use, offers hot wallet mobile version
Cons: slow customer support
Mobile wallets – Average security
Mobile clients, or 'light' clients, require less data to be downloaded to connect to the network and make transactions, so they are more suitable for download to a smartphone.
Pros: more convenient, easy to use
Cons: not quite as safe
5. How many people use Ethereum?
There are almost 5.3 million cryptocurrency wallets that hold ether, according to Etherscan. Wallets are the equivalent of accounts for ethereum and individuals can have more than one.
The number of wallets with ether in has dramatically increased in recent months, up from 1.6 million in May.
6. Should I invest in Ethereum?
Ethereum's price has soared recently and could continue to climb in the coming months. Cryptocurrencies are notoriously volatile and users are warned that the growing bubble could burst anytime. But many have become millionaires overnight thanks to ethereum.
7. Where can I find the latest news about Ethereum?
There are 11 Ethereum blogs and websites for you to read and update news.
Ethereum can be used to codify, decentralized, secure and trade just about anything: voting, domain names, financial exchanges, crowdfunding, company governance, contracts and agreements of the most kind, intellectual property, and even smart property thanks to hardware integration.
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