If you are new to the industry, and you are wondering whether it is worth it to invest in Ethereum, the answer is yes. However, there are a few things you need to understand about Ethereum. Like what is it, how does it work, and how can you invest in it. This article lays the groundwork for you so that you can start investing as soon as possible.
What is Ethereum?
Anytime someone mentions Ethereum, they could talk about any of these two things. One, Ethereum the open-source platform based on blockchain technology that allows developers to create DApps (Decentralized Applications) and smart contracts. Two, Ethereum or Ether, a cryptocurrency designed to operate on the Ethereum platform. Ether is basically the platform’s official token currency.
Ethereum borrows a few key features from Bitcoin, although with some significant differences. For instance, Ethereum uses the PoS (Proof-of-Stake) consensus mechanism, while Bitcoin uses the PoW (Proof-of-Work) consensus mechanism. Given the fact that Ethereum is the second-largest cryptocurrency in the market, along with its unique capabilities, it has attracted a lot of attention ranging from software developers, financial investors, and more.
How to Invest in Ethereum?
Investing in Ethereum follows a similar process to investing in Bitcoin. You can invest in Ethereum in several ways. They include:
- Investing in Ethereum using Fiat Currency
- Investing in Ethereum using P2P Exchanges
- Investing in Ethereum using other Cryptocurrencies
Investing in Ethereum Using Fiat Currency
If you are going to use fiat currency, then there is one way that you can invest in Ethereum. This is through a broker exchange. A broker allows you to exchange fiat currency for digital currency. There are several cryptocurrency brokers in the market today. However, only a few of them are considered reputable. Some top brokers include CoinMama, Coinbase, and Cex.io.
To access any of these platforms, all you have to do is sign up, verify your identity, and then deposit some cash into your account. Once you do all these, you can safely purchase Ethereum with no issues. Just do not forget to send your Ethers to your wallet for safekeeping. Just like that, you will have invested your money in Ethereum.
- Brokers are very liquid and highly professional
- They offer great customer service
- They are ideal for complete newbies
- They allow using bank credit or debit card for cash deposits
- They charge high transaction fees
- They are subject to KYC rules thus require ID verification
Investing in Ethereum Using P2P Exchanges
Another way that you can invest in Ethereum is by going through a P2P (Peer-to-Peer) exchange. The advantage of a P2P exchange platform is that you can purchase Ethereum anonymously with no necessity to verify your identity. Moreover, buyers and sellers meet on the market and decide on the price. A popular P2P exchange where you can gain Ether is LocalCryptos. You simply just purchase them and transfer them from their wallet to yours.
- Transactions remain anonymous
- You can easily negotiate for the price of Ethereum
- High probability of being scammed
- High feesSellers tend to overprice
Investing in Ethereum Using Cryptocurrencies
If you already own other kinds of Cryptocurrencies, you can still invest in Ethereum by buying Ether tokens. You can do so via a centralized cryptocurrency exchange platform. The only thing you have to do is to trade one kind of cryptocurrency for Ether. You will have to pay a processing fee for this, though. Some popular centralized cryptocurrency exchanges include Binance, Coinbase Pro, and Kraken.
- High volume allows for easy liquidation
- A large variety of coins are available other than Ethereum
- Low fees
- Simple and easy to navigate user interface
- Customer service is available
- Some exchanges require ID verification for large transactions
- You can’t purchase or withdraw to cash
- Exchanges are prone to hacks
Risks Associated with Investing in Ethereum
Just like other forms of investments, Ethereum is also associated with some levels of risks. They include:
- Volatility: Prices are constantly fluctuating. To ensure that you do not suffer losses, be sure to keep an eye on the market.
- Little or No Regulation: Governing bodies and central authorities have not found a way to regulate crypto. Ethereum is not regulated. For that reason, you risk exposure to fraud, malpractice, and price manipulation.
- Risk of New Regulations: Governments and authoritative bodies have been trying to find ways to regulate Cryptocurrencies. If new regulations are found, they could affect business models and cause crashes that could affect your investment in Ethereum.
- The threat of Hacking: Cryptocurrency exchanges are prone to hack and theft. Additionally, Cryptocurrency held within exchanges is not FDIC insured. By leaving your Ethereum in exchanges, you risk losing your investments.
- Loss of Wallets: If your hard drive crashes, your computer gets hacked, or simply a virus corrupts your wallet, you could lose all of your Ethereum investments.
Investing in Ethereum is just as risky as investing in any other form of investment vehicle. However, Ethereum’s unique capability to create smart contracts and run DApps makes investing in Ethereum a potentially lucrative activity. If you are still on the fence about it, start now. Just be smart enough to only invest what you can afford to lose.