Ethereum (ETH) - All you need to know
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Ways to invest in Ethereum
The first thing you need to know when investing in Ethereum is that you’ll need to sign up with either an exchange or an online broker. These platforms allow you to buy, sell, and trade Ethereum in Australia, with pros and cons to each approach.
There are a few different ways you can invest in Ethereum. Those include holding coins for the long term, engaging in short-term trading, or using financial instruments such as ETFs to invest. The links below take you to individual pages which guide you through each option in detail.
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Ethereum is a cryptocurrency project and Ether (ETH) is its native token. The Ethereum network allows developers to build their own decentralised apps.
- Ethereum is a cryptocurrency project with its own blockchain, much like Bitcoin (BTC).
- Ethereum’s blockchain can be used by developers to build their very own decentralised apps (dApps): software that runs on a decentralised computer system.
- These dApps function via something called a smart contract, which is a piece of code that automatically completes instructions when set requirements are fulfilled.
What is Ethereum?
Ethereum is a blockchain platform and Ether (ETH) is the cryptocurrency that powers it. ETH can be used as a store of value, unit of exchange, to pay for services on the platform, or to create other cryptocurrency tokens that run on Ethereum (known as ERC-20 tokens).
Blockchain technology is key to how Ethereum and most other cryptocurrencies work. Think of it as a large, decentralised ledger where transactions are recorded. As part of this technology, Ethereum uses a proof-of-work (PoW) mechanism where miners validate transactions. This means Ethereum is decentralised: there is no need for a central governing authority like a bank to manually oversee it.
In addition, it has quickly become the most popular platform for creating dApps. Using smart contracts, sectors like decentralised finance (DeFi), blockchain-based gaming and smart data transferring are just a few of the app types you can find running on Ethereum.
Ethereum 2.0 is the second version of the platform and is releasing in three phases; the first phase began on 1st December 2021. This new incarnation aims to make the entire Ethereum ecosystem run much more efficiently by using a proof-of-stake (PoS) consensus, which could make sense given growing environmental concerns.
Who created Ethereum?
It was launched in 2015 by founder, Vitalik Buterin. Born in 1994, the Russian-Canadian programmer became involved in cryptocurrency in the early stages of its inception by co-founding Bitcoin Magazine in 2011, and this interest later blossomed into one of the most successful careers in the blockchain sector.
A brief history of Ethereum
Ethereum’s rise to the top of the cryptocurrency ranking didn’t happen overnight, and each step of its development has played a role in where the project is today.
- The concept of Ethereum was first outlined in a whitepaper published by Vitalik Buterin in 2013.
- Ethereum was founded by 5 people in December 2013: Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, and Amir Chetrit.
- In January 2014, Ethereum was announced at the North American Bitcoin Conference in Miami. A year later, Ethereum officially launched, with its decentralised autonomous organisation (DAO ) following a year later.
- By 2017, serious corporate adoption had occurred, and the newly-created Enterprise Ethereum Alliance (EEA) had 116 enterprise members. By 2018, Ether was the world’s second most valuable cryptocurrency.
- In March 2021, Visa announced it would begin settling stablecoin transactions using Ethereum. A month later, JP Morgan Chase, UBS, and MasterCard announced they would be investing $60 million into a firm that builds Ethereum-related infrastructure. A few months later, Ethereum hit a new all-time high price.
How does Ethereum work?
The internet has a long-established client-server model, and Ethereum works by replacing this with a decentralised blockchain. The platform is used by many developers to provide services that we might otherwise have never seen. From banking to betting, Ethereum functions to improve services and security through smart contracts. Its aims are more extensive than most cryptocurrencies, such as Bitcoin’s aim to singularly act as an electronic payment solution.
Ethereum advances the blockchain concept, aiming to entirely remove third parties from the data control equation. It achieves this with a network of ‘nodes’ that are run by volunteers around the world, including mining nodes. Those who mine Ethereum are rewarded by the system with proportionate quantities of ETH.
What is the Ethereum merge?
The Ethereum merge is the point at which two Ethereum switches to a proof of stake blockchain.
The Ethereum merge refers to the process where Ethereum becomes a ‘proof-of-stake’ cryptocurrency. Since its foundation in 2015, Ethereum has run as a ‘proof-of-work’ blockchain, one that requires significant energy resources. The merge is the point at which it transitions from one to the other.
There are a few different reasons for the change, and environmental factors and scalability play a big role. The transition to proof-of-stake means that Ethereum will consume 99.95% less energy, according to the developers, and it will also introduce ‘sharding’, which is a method of breaking down data to enable it to cope with more information simultaneously.
As part of the development process, Ethereum has been running two blockchains since December 2020; the existing blockchain, known as the ‘mainnet’, which stores the Ethereum code and the entire history of all transactions made on the network, and the ‘Beacon’ chain, which uses the new technology. When the merge takes place these two will become one.
When is the merge happening?
It’s supposed to take place by the end of Q3 2022, which means before October. This date is not set in stone, however, and it’s possible the merge could be pushed back if there were any issues with either blockchain or more developer resources were needed elsewhere.
What happens to ETH after the merge?
In theory, nothing should change. The merge is simply the means by which it transitions to a new method of approving transactions and it shouldn’t have any material impact on the coins you own.
However, a successful merge might be very good news for ETH’s long term prospects. One of the barriers to Ethereum’s success up to now has been a lack of scalability compared to newer systems like Solana and Avalanche, which already use proof-of-stake. The merge could help Ethereum overcome those challenges.
How to invest in Ethereum
Get to know all the options available, so you can pick the investing method that works best for your specific needs and goals. Here is a quick summary of each method; if you want to learn more, simply follow the links to our guides on each subject.
- Broker platforms. The best and easiest way to get Ethereum is to use a broker. These platforms let you buy and sell Ethereum instantly at the current rates advertised on their websites. Brokers are also the most secure way to invest in crypto, because they must be regulated by the ASIC, Australia’s financial regulator. Australia offers lots of investor protection so brokers are a relatively safe way to invest.
- Cryptocurrency exchanges. Exchanges are peer-to-peer trading platforms that allow you to trade with other users in real-time. These platforms are harder to master than brokers but the upside is that they enable you to get Ethereum at cheaper prices and also allow you to trade your coins for a wide variety of other cryptocurrencies. Exchanges in Australia must register with AUSTRAC, the financial crime agency, in order to operate. Check that any platform you use has jumped through the right regulatory hoops before you start.
- ETFs. There are now a number of ETFs (Exchange Traded Funds) that follow the price of Ethereum. Through investing in one of these ETFs, you can trade in relation to the value of Ethereum without having to own any actual coins.
- Funds. A fund consists of investors pooling money together to be invested by a fund manager, in a way that hopefully generates steady profits for all. Some large funds are now getting involved in Ethereum, as well as other major cryptocurrencies. By investing in one of these funds, you can benefit from their cryptocurrency investments. Because these funds are managed, you’ll want to research how reliable the people running them are before investing.
- Crypto cards. You can now get debit cards which allow you to spend Ethereum in regular shops. These cards hold your coins, and instantly exchange them for Dollars whenever you make a purchase. Some of these cards, like Wirex, are available in Australia already and you can use them like you would any other payment card.
- Wallets. If you’re looking to hold coins for the long term, it can be a good idea to get a secure Ethereum wallet. This isn’t necessary, but is worth looking into if you’re security conscious, especially if you own a lot of coins.
Where can I buy Ethereum in Australia?
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