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What is Ethereum?

By January 31, 2022June 1st, 2022No Comments

Ethereum is the second-largest cryptocurrency (digital currency) in market capitalization after Bitcoin. Ethereum is also the second most popular and second most known cryptocurrency out there.

Everyday, millions of people buy, mine, sell, and trade ethereum. You can even earn free ethereum on rewards sites like Swagbucks.

What is an Ethereum and How Does It Work?

Ethereum was created as a decentralized computing platform that can run a wide variety of applications to support the whole DeFi (decentralized finance) ecosystem.

The Ethereum network builds off the blockchain technology developed for Bitcoin.

Ether or ETH is Ethereum’s native currency. ETH fuels the Ethereum platform at every step. Applications are required to compensate for every operation they perform.

What Does Ethereum Actually Do?

The Ethereum network enables the deployment of smart contracts and decentralized applications (dApps) independently from a third party efficiently and securely.

How Does Ethereum Make Money?

Developers have to pay a fee to the Ethereum network to create decentralized apps (dApps) or new cryptocurrency tokens. The transaction fees are paid in the form of ETH known as gas fees.

Different actions are worth different amounts of ETH, and the gas fees get higher as the traffic to the network increases. These gas prices are one of the Ethereum disadvantages which have caused a barrier in Ethereum’s growth.

Future developments of the Ethereum 2.0 update will solve these issues to the Ethereum network. The Ethereum community will continue to grow which will increase ETH’s value.

Is Ethereum a Good Investment?

It may seem out of reach to invest in Ethereum at its current market valuation. However, Ethereum is a good investment long-term since beginners can purchase fractional amounts of ETH. 

The best strategy for anyone is to dollar cost average (DCA), as much as you comfortably can, every week or every month into Ethereum. Dollar cost averaging is where you’re investing a total sum of money in small increments over time instead of all at once to reduce risk.

You can also DCA as you sell and lock in your profits. It is advised to never spend more money than what you are willing to lose because cryptocurrency is extremely volatile.

Don’t panic sell at a loss whenever there is a big dip due to FUD (fear uncertainty, and doubt), and consider it as a buying opportunity at a discount.

If you have 32 ETH, then you stake your Ethereum and earn passive income off interest just for locking your ETH up. It is your best interest to do your financial research and diversify your portfolio.

Is Ethereum Better than Bitcoin?

Ethereum has outperformed Bitcoin by 5x this year. Unlike Bitcoin, you can stake your Ethereum and earn interest rewards for being an Ethereum validator. However, it is best practice to not put all your eggs in one basket and to diversify your crypto investment portfolio.

Is Ethereum Safe?

Ethereum is safe due to the ethereum blockchain technology and no central authority to facilitate peer-to-peer transactions. However, hackers can gain access to personal data, crypto wallets, or breach cryptocurrency exchanges to steal holdings. Therefore, it is best to store your ethereum in a safe place and practice good security habits like you would with your debit card’s PIN code.

Cryptocurrency exchanges offer storage for your coins on a hot wallet that is online and susceptible to hacking. Make sure you use an ethereum platform that has enhanced security features like its own cold storage and two-factor authentication (2FA) for users.

The best protection against fraud is cold storage or cold wallet where your ethereum is stored on an offline device not connected to the internet like a USB drive. The cold wallet stores the user’s address and private key to access your Ethereum wallet. Even the cold wallet storage method has risks if you forget your password or lose your offline device.

Is Ethereum Legal?

Ethereum is legal to buy, trade, mine and make payment with ether (ETH) in the United States.

How Do I Buy ETH?

You can buy ETH from exchanges or from digital wallets directly. You can’t buy ETH from the bank or online brokerage. You will need to choose a cryptocurrency exchange to purchase Ethereum. Some popular exchanges are Coinbase, Binance US, Gemini, and

You can also purchase ETH through PayPal and Venmo. Each platform has different transaction fees, security features, and ease of use. It is best to do your research before signing up. Some of the exchanges offer free cryptocurrency from signing up and referring to friends.

You can also mine Ethereum to receive compensation for lending your PC’s computing power to validate transactions on the Ethereum blockchain.

How Do You Convert ETH to Cash?

You will need to follow these steps to cash out your Ethereum.

  • Select a cryptocurrency exchange.
  • Register and connect your banking account.
  • Transfer your Ethereum to the cryptocurrency exchange. (Double-check the address is correct)
  • Sell your Ethereum to your preferred fiat currency. (USD if you’re in the United States)
  • Withdraw your cash to your bank account.
  • Be aware that you will need to pay the withdrawal and gas fees. Withdrawal fees vary with each cryptocurrency exchange and the gas fees increase as the blockchain network traffic increases.

Can I Send Bitcoin to Ethereum Wallet?

Sending the incorrect cryptocurrency like Bitcoin to a specific address meant for Ethereum may result in the loss of funds forever. Therefore, double-check and verify transactions are sent to Ethereum specific wallet address.

What Can You Buy with Ethereum?

An increasing list of merchants are currently accepting ETH cryptocurrency as payment include Overstock and Shopify. You can also book flights and hotels with ETH through Cheapair or Travala. 

Cash apps like PayPal and Venmo allow you to make payments with Ethereum. You can also purchase NFTs (non fungible tokens) like digital art with ETH since the NFT marketplace runs on the Ethereum blockchain.

Once you have an Ethereum wallet, you can trade your ETH for other cryptocurrencies like Bitcoin, Litecoin, or Dogecoin. Please keep in mind the gas price for Ethereum transactions. As cryptocurrency becomes more mainstream, additional financial services will accept Ethereum.

Will Ethereum Make Me Rich?

Ethereum has made millionaires out of early investors. It is never too late to invest and hold Ethereum. You just need to follow the golden rule of “buy low and sell high” to be on your path of being rich.

Final Thoughts on Ethereum  

Ethereum’s potential is met with pushback due to its scalability issues. However, the Ethereum 2.0 upgrade will make it more secure, more efficient, and lower transaction fees (gas fees). The Ethereum network is the future of decentralized applications and is just gaining popularity.

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