What to know before investing in Ethereum?


Ethereum is the second largest cryptocurrency by market cap just after Bitcoin in the market. The founders claim that Ethereum is a decentralized financial system built on the blockchain, and not just a means of exchanging or storing value on the internet. The article below will provide basic information about Ethereum and the difference between Ethereum and Bitcoin. We hope this information is valuable for your Ether fund.

What is Ethereum?

Ethereum is a distributed blockchain computing platform running on Blockchain technology via Smart Contract. Ethereum can perform peer-to-peer network transactions and contracts through the Ether Token (ETH).

Ethereum was introduced in late 2013 by Vitalik Buterin to create a coin that overcomes Bitcoin’s flaws. Ethereum is also seen as a useful app platform and creates its own distributed financial ecosystem. ETH’s capitalization reached 25 million USD on the first sale.

According to the development roadmap, Ethereum will go through four critical stages, including:

  • Frontier
  • Property
  • Metropolis
  • Ethereum 2.0

Currently, Ethereum is preparing to enter Phase 4.

How does Ethereum work?

Ethereum is built on a public and decentralized blockchain. Every transaction on the system is public, verified and recorded. No one has the right to modify the information recorded on the general ledger (blockchain).

  • Advertising, transparency: everyone has a copy of the general ledger and has the right to see all transactions that take place on the system.
  • Decentralized finance: Ethereum is not managed or operated by any organization / individual. All users participating in the system have peer rights.
  • Safety and security: Transactions on the blockchain use cryptography to keep the network secure.
  • Check transactions on Ethereum: users “mine” with a computer or solve complex mathematical equations and add new blocks to the Ethereum blockchain. Participants who verify transactions are rewarded with Ethereum tokens. The Ethereum token is named Ether (ETH).
  • Loans, borrowings, exchanges (via DEX – decentralized exchanges): Users use Ether to lend, borrow, and exchange goods and services.

Is Ether the same as Ethereum?

  • Ether (ETH) is the name of the cryptocurrency used in the Ethereum blockchain. Users use ETH to trade, trade, invest, or store assets. Users can buy ETH on most crypto exchanges like Coinbase, Binance, and Kraken. To buy ETH, you need to deposit money (e.g. US dollars) into a crypto exchange through a bank link or debit card.
  • Ethereum is a blockchain network that allows users to hold or trade ETH. However, in addition to the ETH trading function, Ethereum has many other parts.
    • Data storage: Users can use Ethereum to store data through decentralized applications. Data is understood as personal information or complex financial transactions.
    • Smart contract functionality: With Ethereum, there is no central authority to manage everything on this blockchain network. The business parties themselves enter into agreements on the purchase / sale, exchange of goods and services with the conditions published on the smart contract.
    • Transactions are automatically performed by the system, transferring ETH to the recipient when the contract conditions are met. The parties to the transaction do not need the intervention of a third party intermediary like conventional contracts.

Ethereum vs. Bitcoin

  • Bitcoin is a digital currency born with the mission of being a store of value, an alternative to traditional currencies. Ether is also a digital currency with the ability to store value. However, the decentralized Ethereum network is extended with other features such as building and running apps, smart contracts, and other transactions.
  • The Ethereum blockchain is considered to have a faster transaction processing speed than the Bitcoin blockchain.
  • Bitcoin announced the issue limit of 21 million BTC. Ethereum has no ETH limit.
  • Ethereum works with more extensive functions, which can lead to the risk of system failure, system crash, and hacking. The more features a system has, the more likely it is to encounter security vulnerabilities.

Is Ethereum a good investment?

Here are some reasons why you should consider investing in Ethereum:

  • Ether is the second largest cryptocurrency by market cap in the world.
  • Ethereum is a reputable blockchain network. It was launched in 2015 and is still evolving.
  • Ethereum is currently building an improved version of Ethereum 2.0 with more scalability and faster, safer, and more environmentally friendly transaction processing.
  • Ethereum’s Scaling Potential: Unlike other cryptocurrencies that only use the blockchain to record transactions, Ethereum is developing a network that helps developers build decentralized applications. It is the platform to build a decentralized DeFi financial system, which provides safe and transparent financial services without third-party intermediaries. In addition to dApps, Ethereum also offers non-fungible tokens (NFTs) – digital assets that people buy and sell as collectibles.

The financial report

Ethereum has a team of reputable creators and developers in the crypto community. ETH has also maintained its position as the second largest in the market for many years. Today there are over 3000 dApps in the cryptocurrency market developed on 16 major blockchain systems. Among them are more than 2,800 dApps developed on the Ethereum network. Over 100,000 active users per day.

However, the transaction fees that help the system keep running are quite high, more expensive than before and many other systems. Ethereum is also facing competitors like Solana, Cardano who offer similar services.

The volatility and unpredictability of the cryptocurrency market, in general, is also a factor that you need to consider carefully. If you choose the right time to buy / sell cryptocurrency, you can make a good profit. But you also have to accept the risk of losing your crypto investment due to sudden market fluctuations.

Therefore, for a long term investment, ETH is a coin to consider. If you are pursuing a short term investment strategy, this is not the best option.

The conclusion

There are many cryptocurrency platforms on the market and thousands of different cryptocurrencies. Choosing the right platform and the right currency to invest in requires you to spend a lot of time researching and evaluating.

Ethereum 2.0 is expected to be completed and applied in 2022. This prompts investors to pay more attention to ETH than ever before. Upgrading Ethereum could significantly increase the price of Ethereum. We hope this informative Ethereum article has given you an overview of the coin. Good luck with your investment decision.

About Troy McMiller

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