Before we discuss how to buy and trade ethereum we need to start in the beginning. The infographic below traces the history of Ethereum and identifies the key events that lead it to emerge as one of the most important cryptocurrencies.
Starting in 2013, the infrastructure started to be built that would allow this new coin to pose a major threat to the main 'rival': bitcoin. Let's then trace the origins and evolution of Ethereum - and lay the foundations for why, in our opinion, Ethereum is set to overtake bitcoin by 2018.
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How to Buy and Trade Ethereum: Staying Ahead of the Curve
Ethereum has been characterised by a lot of volatility in recent times. At the moment this guide is being written this cryptocurrency has just suffered one more 'shock' that saw its price fall sharply and rise again in a short period of time (less than 24 hours). But what is ethereum? Why is it that we need to start paying attention to it? And why is it set to overtake bitcoin by 2018? In this guide we will answer these questions and more.
Here is what we will discuss:
What is Ethereum? Key Terminology
In order to understand how ethereum is set to overtake bitcoin we will introduce key ethereum concepts first. This section will introduce key ethereum terminology and provide an overview of this coin.
Key Ethereum Terminology
‘Ethereum' a term that often works the tongue while pronouncing it. But yet, it is a word that we must become accustomed to in the new found world of blockchain technology. By definition, Ether is a decentralized platform that runs smart contracts. The platform was developed by Ethereum Foundation, a Swiss non-profit, with some expert advice from great minds across the globe.
The platform dawns us to a new found world of blockchain technology where all applications run exactly as programmed without fraud, third party interferences, or even a downtime. This is a feature that is only unique to Ether.
That said, Ethereum's applications potential are endless. As a matter of fact, Ether does not just offer a platform. It helps developers create markets, store registries of debts as well as move funds in accordance with past instructions. Ether is braised to change the global technological infrastructure as we know it.
Most cars run on gasoline while others have to be plugged in before they go out. With Ethereum, Ether, a new form of gasoline is required, something that all these new and exciting applications need in order to run. It is a platform-specific cryptographic token. Think of it as a ticket that gets you through the gates into a concert or a football match.
There is so much that is happening right now around the Blockchain Technology. New applications are being developed and by default, new terms, concepts, and languages. It is therefore imperative to keep pace with these changes.
Here is a list of key ethereum terms:
• Decentralized Application – It is a service that operates without a middle man. Ethereum application allows for direct interaction between end users and resources without a central trusted party.
• DAO – denoting a Decentralized Autonomous Organization, is a set of smart contracts on the blockchain whose work is to codify and/or automate the workings of an organization.
• Identity – This is a verifiable interaction and/or property that pinpoints to its creator.
• Digital Identity – Involves a set of cryptographically verifiable transactions using the same public key. This has been said to be similar to "voting" in a real-world scenario.
• Reputation – Ethereum is endeared as one of the most promising cryptocurrency technologies following in the footsteps of bitcoin in terms of success. It has slowly been building up its awareness over the last few years and is now already available in major forex brokerage platforms
• Escrow – Most online payments are made through Escrow. It is a kind of technology that keeps funds held up between the two transacting parties for a given time until all parties are happy with the service offered. Generally, a third party creates a medium where two mutually untrusting entities can transact without fear of losing funds through fraud.
• Ethereum - This is a decentralized platform that runs smart contracts. In a nutshell, Ethereum is nothing more than a service that utilizes Blockchain technology to facilitate cryptocurrency trading.
• Ethereum Client – when you run the Ethereum software on a computer, you create what we call a Blockchain. The blockchain is accessed by connecting through a client software.
• Ethereum Wallet – is used to connect to the Ethereum blockchain network. Users can create accounts and also transact from one Ethereum account to another
• Ethereum Account – Ethereum accounts are made up of blockchain public address with 40 hex characters and a private key. The two, respectively, from the user id and the pass key for the respective clients
• Smart Contract – is a computer program that can execute the terms of a contract when set conditions are met. It's pretty much like a Forex EA, where trading conditions and rules are set by the trader to enable the system to trade autonomously.
• Miners – These are nodes in the Ethereum network that receive, propagate, verify, and execute transactions. It is part of the overall infrastructure which other than enabling transactions, makes sure that the process is safe from manipulation.
• Ether – Ethereum network's medium of exchange. Also known as, Ethereum's value-token. You can try to relate this with Bitcoin's bits for easier understanding.
Advantages of Ethereum
• Ether clients can design and issue their own cryptocurrencies which can be used to represent virtual shares, assets or anything the client wishes
• Ether allows its clients to create contracts and source for funds without the involvement of a central party such as banks and/or other financial institutions.
• Ether's potential applications are only limited to users' level of imagination. From creating a virtual organization where members can vote and deliberate on issues, to creating their own countries with a unchangeable constitution.
• Ethereum's GHOST protocol allows for a faster block time, about 12 seconds, which leads to quicker confirmation of blocks.
• Ether uses a proof of work algorithm called Ethash to rewards its miners. This ensures that every miner is rewarded for their work, often with 5 Ether for each block mined.
Ethereum has faced heavy criticism for potential security problems and after $50M in Ether was claimed by an anonymous entity in June 2016. This attack raised more questions than answers resulting in a dispute that saw Ether split into two Ethereum (ETH) and Ethereum Classic (ETC). Subsequent attacks saw Ether improve its DDoS protection, de-bloat the blockchain, and thwart further spam attacks by hackers.
Ether's constant price fluctuation is seen warning sign to investors but some traders see this as an opportunity to buy and sell more Ether. Recent price surges have been a revelation to a lot of Ethereum clients with reports of up to 5,000% increase being recorded.
Should I Buy or Trade Ethereum? What's the Difference?
Like all cryptocurrencies, Ether prices swing wildly. This means that there is considerable money to be made by timing trades. Such volatile markets can also bring loses too. As in all forms of trading there is always risk involved. If you want to trade ether the challenge is to understand key fundamental factors that may affect this new coin or have a particular technical trading strategy that allows you to place the best trades at the right time.
For those who have faith in the Ethereum project but do not want to spend a lot of time thinking about what this currency will do in the next day or week, perhaps investing/buying Ether is a better idea than trading it.
To sum it up, the main difference between trading and buying ether is a question of timeframe the investment is made therefore. Trading ether requires a more day-to-day understanding of what goes on with this currency and taking advantage of small movements that may affect it. Taking advantage of these small movements can be done either through an understanding of the fundamental factors that affect this cryptocurrency or more technically driven knowledge.
Those that buy ether take a more long-term view. If you have kept hold of ETH since January 1st you would now be sitting with very good profits.
How to Buy Ether - Step by Step
Buying Ether is incredibly simple and there are various ways to do it. Perhaps most popular right now is by using a website called Coinbase. We’ve detailed a simple step by step guide to using the service below:
• Register an account – this is pretty self-explanatory. Visit the page, click “sign up” and enter your details.
• Next, set up a two-step verification for additional account security. For this you’ll need a mobile phone. Just follow the onscreen prompts and enter the code sent to your phone when asked to. You will also need to verify your email at this point.
• To start buying Ether with any currency you’ll need to add a payment method. Click the link and select the option that is most appropriate to you. You can add a Paypal or bank account, or a credit or debit card to begin making purchases. Verifying a bank account with Coinbase can take some time, and owing to the recent surge in popularity of cryptocurrency waiting over a week is now common.
• Once verified, you can then fund your account using any digital currency supported on Coinbase, using a SEPA or bank transfer, Paypal, or with your credit or debit card. The most appropriate option will depend on your location, and own circumstances. Different methods will take different lengths of time to make your purchase. Credit and debit cards, and cryptocurrency is very fast, SEPA and international bank transfers take much longer.
• To comply with KYC (“know your customer”) laws, Coinbase will ask you to verify your identity at some point. You can submit the necessary documents via webcam, or by using the identification submission option on the page. They are unable to accept emailed proof of ID for some reason.
Once you’ve completed all the above steps, you’ll have a completely verified account. Now, it’s time to make a purchase.
How to Buy Ether with Credit Card
Some exchanges, (Coinbase included) allow users to buy Ether using their credit or debit card. The steps for buying Ether with a credit card will differ from website to website but will be generally the same they are above, ignoring anything about SEPA or bank transfers. When prompted, just enter the relevant card information. Unfortunately, owing to the cost of using legacy payment systems, there are fees to pay when using credit and debit cards. This is just the price of instant purchases.
One thing to note: you will have to verify that the credit card you’re using belongs to you. This process is like PayPal’s – small withdrawal made from your account, and you must confirm the amount with the exchange you’re using. There will also be a fixed limit on how much you can buy using this method. This depends on the level of account verification you provided when using Coinbase. Daily limits vary from exchange to exchange but they are universally much lower than when using SEPA or bank transfers.
How to Buy Ether with PayPal
Buying Ether with PayPal is even easier than using your credit or debit card. Currently, the only secure site to use your PayPal at is Coinbase. This will likely change in the future. All you’ll need to do is enter their PayPal email address, and complete the same verification process as with credit or debit cards. Again, limits apply on the amount of cryptocurrency one can purchase using PayPal. Those wanting to make any kind of serious investment should use a more traditional bank transfer.
Once you’ve successfully registered and verified your account, you can head over to the “Buy/Sell” section of the exchange you’re using. You’ll see your payment methods, and boxes to indicate which cryptocurrency you’re buying and how much of it you want to buy. Some exchanges require you to fund your account prior to making a purchase. Others (like Coinbase) will let you use your payment method directly.
The simplest way to make your first purchase is to use the instant buy option listed at many exchanges. The price may be slightly worse than you could get using one of the other options but for your first try, let’s make it as simple as possible. Just enter the amount you wish to buy, and depending on whether your chosen exchange requires funding or not you’ll receive your cryptocurrency within the next few seconds to a full week. Accounts that require a deposit be made directly to them will be an instant trade and for those making purchases using wire or SEPA transfers on Coinbase it will take longer. Don’t worry that the price will probably be different by the time your funds are ready to make the Coinbase. The price is locked in from the moment you make the request and initiate the transfer meaning you’ll receive the market price you agreed to, not the one at the actual time of purchase.
How to Trade Ethereum - Step by Step
There are loads of different exchanges that can be used to trade Ether. One of our personal favourites is AVATRADE.This post will lead you step-by-step through the very simple and straightforward process of setting up an account with AVATRADE, familiarising yourself with the interface, and purchasing some Ethereum.
First of all, follow the link above and you’ll find the AVATRADE homepage in all its glory (see below):
Setting up an account with AVATRADE is a walk in the park. Simply hit ‘Open a Real Account’ and enter your details in. You can do this manually or AVATRADE gives you the option of signing up via Facebook or Google Plus to save time (see image below).
PLEASE NOTE: If anything is confusing you, the AVATRADE website features a ‘Live Chat’ with knowledgeable agents on hand who respond quickly and are keen to help with any queries you might have. Alternatively, the FAQ page is well stocked and might well have the answer you’re looking for.
Once you’ve entered in your name and email or, alternatively, registered via Facebook or Google Plus, you’ll land on the above screen. Here you’ll be prompted to enter your date of birth, address, create a password and select your desired ‘Trading Platform’.
PLEASE NOTE: Fill in the ‘Do you have any Trading experience in Options or CFOs?’ as required; for the purposes of this guide, we’ve gone with ‘No’ to keep things simple and intuitive for new traders.
Now, because we want to buy and trade Ether, we want to select a platform which caters for cryptocurrency trading; we’d suggest a Floating Spread Account with MetaTrader 4.
You’ll then reach the page below so fill in the appropriate details for yourself – don’t threat, you’re almost ready to start snapping necks and cashing cheques!
Fill in the boxes at the bottom of the page, hit ‘Submit’ and you’re almost done.
Finally, we made it! Now, all you have to do is fund your account and you can start buying Ethereum, trading other altcoins, and begin watching the profits roll in!
Click ‘Deposit Now’ to fund your account and you’ll be met with the below page:
Once you’ve funded your account, go back to ‘My Account’ (see below) and hit ‘Web Trading’ to begin trading!
Once, you’ve clicked on ‘Web Trading’, you’ll be met with the below screen:
Once you’ve added your email and other details you’ll finally see cryptos on the left hand side (hurray!) – see below:
Future of Ethereum Trading - Why Ethereum is Set to Overtake Bitcoin in 2018
Bitcoin, the digital, decentralised currency has grown massively since its shadowy inception as a tool for darkweb users, and money launderers. This year it has hit the headlines yet again with its exceptionally bullish run up to an all-time high of $3,000. It has since corrected somewhat but at the time of writing is still up over 150% on its start of year price.
What is markedly different about the run up in price this time is that Bitcoin is not alone in its meteoric rise. There is another name in the world of blockchains that is generating just as many, if not more headlines – Ethereum.
Wait, slow down. What is a Blockchain?
The blockchain is a revolutionary way of recording and transferring data with the necessity of any middlemen. The idea isn’t the simplest to grasp but once it clicks, the overwhelming potential of these distributed ledgers will also become apparent.
Data is stored in what are known as blocks. Each block contains its own data, and some from the previous one. The consistency of data from one block to the next is checked by randomly assigned members (nodes) of the network. Anyone with appropriate hardware can join this network of validators and these are known as miners. These miners are rewarded for securing the network with the token associated with that system. It is this decentralisation that makes the technology incredibly secure.
The beauty of the blockchain system is that the ledger of data, and the way the network operates is ridiculously difficult to adjust, and doing so would likely cause huge damage to the overall sytem.
Owing to the considerable (and growing) financial incentive for miners to act honestly, the risk versus the reward of sabotaging the network is far too great, and thus a game-theory equilibrium is realised.
Blockchains can be used for all kinds of different applications. Properly secured blockchains are immutable, and resistant to attack. They do not rely on the existence of a single point of failure meaning that for an attack to be successful, either a vast, global orchestrated attack would need to occur, or someone would need to manually “switch off” the internet. Put simply, a server block burning to the ground will cause no damage whatsoever to a blockchain, but several nuclear weapons, or similar apocalyptic event might.
But we’ve already got a blockchain right now, and it’s doing alright on its own…
Granted we do already have an immensely successful blockchain today. However, it’s usage is limited to finance. Sure, the history of Bitcoin Blockchain has proved itself a store of value, and can be used to send any amount of cash much more quickly and affordably than a bank has ever managed but aside from money matters, the Bitcoin system is limited. That is where interest in Ethereum arises.
What Makes Ethereum Special?
The most striking difference between today’s top two blockchains is the inclusion of what are known as “smart contracts”. This is where things really get interesting. Smart contracts can be thought of as like programmable money. A smart contract doesn’t need a set of high priced lawyers to mediate its use. They are self-executing, depending on conditions being met, and can even be coded to punish those participants who fail to meet the conditions.
This opens huge potential in the business world and beyond. Currently, there is talk of smart contracts being used for digital identity (removing a great deal of bureaucracy, and archiving from the current process), for keeping records (think nationwide health records that automatically update across the network), and even property ownership details. These are just a few of the present potential use cases. We are still in a very early phase of the Ethereum blockchain’s development, and as such its eventual purposes are likely yet to be discovered.
Many maximalists argue that the best thing about Bitcoin is its lack of a central authority. This dramatically increases the security of the network, and this should eventually form the reason behind its success as a global store of value. Bitcoin’s inventor/s are an enigma. Calling themselves Satoshi Nakamoto when initially publishing, and discussing the peer-to-peer cash system, they quickly vanished into obscurity.
For those that have the knowledge to study the code, and truly believe in the immutability of the Bitcoin blockchain, one of that blockchain’s most prized assets is undoubtedly is democratic nature. There is no one to steer, guide, or manipulate the path the technology follows (although many have, and continue to try to achieve this). All changes to the code itself must be agreed via consensus through the miners (validators) of the network agreeing which software to run their systems using.
Ethereum differs greatly here. There is a clear project leader. His name is Vitalek Buterin. He’s in his early twenties, and the entire network, and blockchain is his brainchild. Working with the rest of the Ethereum Foundation, Vitalek and his team strive to improve the functionality, and therefore increase the number of potential use cases for the Ethereum blockchain. His team are young, hungry, and eager to transform the world. Their vision is one of greater global efficiency, and collectively they work towards solutions to the largest issues facing all blockchains. The principle of these are scalability, and the environmental impact of using high-tech computer systems to constantly mine, or validate a network.
The Number of Applications Possible
Another key difference between Ethereum and Bitcoin is that decentralised applications (dApps) can be built on top of it. This opens thousands of new opportunities for creative developers. Already on the network we see teams attempting to host decentralised gambling applications, global supercomputers, and encrypted cloud-based storage solutions. This is just the beginning too. Think back to when the internet first came out in the early 1990s. People who saw email in those early days often presumed that was the peak of the technology. Back then, the potential was largely inconceivable. Today, just about every company on the planet has some form of web presence, and many industries have been completely revolutionised because of the impact it has had.
There exist many more subtle differences between the two blockchains at the coding level but we run the risk of boring you to tears with technical jargon. For those interested, lots of fantastic information can be found on either the Ethereum GitHub page, or Reddit. The differences we’ve outlined above should be more than enough to go on for our speculative analysis here today.
So, Will Ether Overtake Bitcoin?
There is strong evidence to suggest that Ether will one day become the dominant blockchain on the planet. Barring any huge technical issue (always a possibility), or some act of god (Vitalek being hit by a bus tomorrow), Ether has an incredibly bright future. Already many of the planet’s largest names are expressing interest in the technology, and a group of companies who are experimenting with its potential have formed. Within this group names like JP Morgan, Toyota, and Microsoft are particularly exciting. A full list of members of the Enterprise Ethereum Alliance can be found using Google.
Such massive corporate interest certainly bodes well for the platform. What’s more, thanks to the bustling ecosystem of dApp developers it looks like some truly disruptive solutions may eventually exist on the blockchain. Talks of a decentralised Uber, or Air BNB platform in the future are exciting, and owing to the complexity of smart contracts, Ether is needed to process them. If a few of these killer dApps reached mainstream adoption, we would see the price of a single Ether absolutely soar because every decentralised application would constantly use Ether to process information.
With so much innovation on the network, it is important that the platform is dynamic. Fortunately, as we’ve mentioned, Ethereum is not averse to necessary changes. Whereas Bitcoin’s immutability is a blessing, for Ethereum it would be a curse. Changes might be necessary in the future to make things work as they should, and the project itself is much more of a “work in progress” than the Bitcoin is. The fact that the Ethereum Foundation are so committed to ensuring a smooth platform for developers bodes exceedingly well for its eventual price point.
Bitcoin has proven itself as a store of value, immune to exterior attacks, and its relative simplicity is one of its greatest assets. Ethereum attempts to tackle an entirely different set of objectives, and the scope for adoption is certainly larger but so too are the obstacles in its way. That said, if the current road map of development is stuck to then we will likely see Ether overtake in market caps by the end of 2017. By the end of 2018, we might just see the two vying for top dog price wise too.
Because of its infancy, investors are still split between investing in Ether. Some are seeing it a passing cloud that will not last while others are taking advantage of its constant price fluctuations and speculating on future prices. Having said that, there is more to Ethereum than what some of these individuals perceive. The potential is far reaching and the applications are endless.
While the volatility of Ethereum and other major cryptocurrencies remains a reality, Bitcoin’s success serves as a great example to how patience can eventually pay off in the direst of situations. During its early days, Bitcoin rallied to more than $1,000 before plunging down to trade at just over $200. It has since recouped those losses to trade well in the $2,500 region. There is no saying where the next stop will be. But the point is that with Ethereum now trading at just a few hundred USD, there is certainly so much room to run if Bitcoin was to be used as a benchmark.
In our opinion, Ethereum is set to overtake bitcoin by 2018. Throughout the last years, it was able to develop an infrastructure that is better, more secure and reliable when compared to Bitcoin. It is also less monopolistic and is open to more sophisticated reform. These advantages set Ethereum apart when compared to other cryptocurrencies - and especially Bitcoin. Because of them, and in our opinion, it will emerge as the main cryptocurrency in the near future.