What is Ethereum?
Ethereum is a decentralized blockchain platform that facilitates the creation of “smart contracts” and “Ethereum Virtual Machines” (EVM). Smart contracts are self-executing contracts that are programmed to execute when certain conditions are met. EVMs are virtual machines that execute a program written on the Ethereum blockchain. Ethereum is the second largest cryptocurrency by market capitalization after Bitcoin. Trading of Ethereum tokens began in 2015 and gained significant momentum in 2017. The Ethereum network is used for more than cryptocurrency. It also supports decentralized applications and ICOs (Initial Coin Offerings). The Ethereum network is fueled by “gas”, which is the internal pricing unit of computations and transactions on the Ethereum blockchain. Gas is denominated in Gwei, which is 1 billionth of an Ethereum.
Ethereum trading basics
An Ethereum exchange is a digital marketplace where you can trade Ethereum for other assets, such as Bitcoin. Ethereum trading exchanges are similar to other financial markets in that they are open to traders who want to buy or sell Ethereum. However, unlike other financial markets, Ethereum trading exchanges don’t set the price for these assets; they’re determined solely by the market. Since they’re decentralized, there’s no single authority that regulates Ethereum trading exchanges. Therefore, it’s important to choose a trustworthy Ethereum exchange and conduct extensive due diligence before trading on one. Trading Ethereum on a trading exchange is similar to trading stocks. You want to buy low and sell high. You can use technical analysis to identify potential price reversals or other indicators that can help you make wise decisions. You can also use fundamental analysis to determine the long-term viability of a coin (i.e. Ethereum). The more you understand about a coin, the easier it is to make profitable trades.
Ethereum-based investment opportunities
The Ethereum network is used for more than cryptocurrency. It also supports decentralized applications and ICOs (Initial Coin Offerings). Ethereum-based investment opportunities include the following:
- Decentralized applications: A decentralized application (often abbreviated dapp) is an application that runs on a decentralized network of computers. dapps are often built on top of Ethereum’s blockchain. Examples of popular dapps include CryptoKitties and EtherTweet.
- ICOs: ICOs are a popular method of raising funds for new projects. Companies build their projects on top of Ethereum’s blockchain and launch ICOs to raise funds for their projects. Investors buy ICO tokens in exchange for Ethereum. ICOs can be lucrative investment opportunities, but they also have a higher risk of failure than traditional investments. Make sure you conduct thorough due diligence before investing in an ICO.
- Smart contracts: A smart contract is a computer program that runs on a decentralized ledger (such as Ethereum’s blockchain) to facilitate, verify, or enforce the negotiation or performance of an agreement. Smart contracts are self-executing contracts that are programmed to execute when certain conditions are met. Ethereum’s blockchain facilitates the use of smart contracts. If you want to make money with Ethereum, you can build applications on top of the Ethereum network or invest in ICOs.
How to trade Ethereum on an exchange
If you want to trade Ethereum on an exchange, you need to open an account with a trusted exchange. You will have to provide personal details, such as your name and address, as well as set up two-factor authentication (2FA) to increase account security. Once your account is open and verified, you can start trading Ethereum. Like other cryptocurrency exchanges, Ethereum exchanges allow you to buy and sell Ethereum for other assets, such as U.S. dollars or Bitcoin. When you buy Ethereum, you’re purchasing the Ethereum network’s native tokens. When you sell Ethereum, you’re selling the network’s native tokens. Ethereum can be exchanged for U.S. dollars or other cryptocurrencies such as Bitcoin, Litecoin, Dash, ETC, etc. You can also exchange one type of cryptocurrency for another via Ethereum exchanges. Before you start trading, make sure you understand Ethereum’s price fluctuations and how they impact your profits. You can also use technical indicators to help you make better trading decisions.
Using Ethereum to purchase goods and services
If you want to use Ethereum to purchase goods or services, you can do so via an Ethereum exchange. Alternatively, you can use a decentralized marketplace (such as OpenBazaar). If you want to accept Ethereum payments via your business, you can use a payment processor such as Coinbase Commerce. For businesses, accepting Ethereum payments is a great way to diversify your revenue streams and expand your customer base. Ethereum has become a popular payment method for many industries and businesses. Ethereum provides a more secure and decentralized way of sending and receiving payments. Large companies such as Amazon and Microsoft are already integrating Ethereum for payments. If you want to use Ethereum to pay for goods and services, simply buy ETH from an exchange and send them to the seller’s wallet address.
Cryptocurrencies are mined by solving complex mathematical problems. The first miner to solve the problem gets to add a new block to the blockchain and claim the mining reward, which includes a transaction fee. Mining for Ethereum is similar to mining for other cryptocurrencies such as Bitcoin. You can either mine solo or join a mining pool. Mining solo is a Herculean task, given the sheer number of mining rigs that are competing for the mining reward. Joining a mining pool is a safer and more profitable option. Mining pools enable miners to combine their mining power and split the mining reward. However, mining pools also come with a downside. You have to pay fees to the mining pool operator. If you use a trustworthy mining pool, the fees are worth the reward. However, there are many scammers operating fraudulent mining pools. Therefore, it’s important to conduct extensive research before joining a mining pool and avoid shady websites.
Ethereum staking refers to earning interest on your Ethereum holdings. There are several Ethereum staking platforms, such as Vizor and EthLend, that allow you to earn interest on your Ethereum holdings. You can also invest in an ICO to earn returns from an Ethereum staking platform. If you have a significant holding of Ethereum, Ethereum staking is a great way to earn passive income. You can also use Ethereum staking to diversify your investment portfolio.