The What, Why, and How to Invest in Ethereum: Ethereum (ETH) is the decentralized, open-source technology that powers most of the crypto world. Everything from decentralized finance (DeFi) applications and non-fungible tokens (NFTs) to enterprise blockchain solutions rely on its technology. This has made Ether (ETH), the Ethereum blockchain token, one of the top three cryptocurrencies in the world.
Given the popularity of Ethereum, many people are wondering what it really is, how to invest in it, what are the risks involved in investing and the possibility of creating their own Ethereum wealth.
Check the current Ethereum price, market cap, circulating supply, trading volume, historical statistics on CoinStats, one of the top crypto platforms in the industry.
Read on to find out everything you need to know about Ethereum, its pros and cons, and how to invest in it in a few easy steps.
Let’s jump right in! How to Make Smart NFT Investments
Table of Contents
What Is Ethereum (ETH)
Ethereum (ETH) is a decentralized global software platform based on blockchain technology. It is best known for its own cryptocurrency, Ether or ETH, the second most popular digital token after Bitcoin (BTC).
Ethereum can be used by anyone to create any kind of secure digital technology. It has a token designed to be used on the blockchain network, but it can also be used by participants as a payment method for work done on the blockchain.
Designed to be scalable, programmable, secure and decentralized, Ethereum is the blockchain of choice for developers and businesses that build technologies based on it to change the way many industries work and the way we lead our daily lives.
It natively supports smart contracts, an essential tool for decentralized applications. Many decentralized finance (DeFi) and other applications use smart contracts in combination with blockchain technology.
Now let’s look at the pros and cons of Ethereum (ETH).
Pros
- Impressively large and fully decentralized global network
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Rapid deployment
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Permissioned network
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Possibility of private transactions
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Compatibility and open source
- Constant innovation
Cons
- Use of a complex programming language
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Scaling Issues
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Risks of investing in Ethereum
How to Invest in Ethereum
While all investments come with some risk, cryptocurrencies are especially vulnerable to price fluctuations. Even though Ethereum has had impressive returns in the past, it has also had major crashes, sometimes in surprisingly short periods of time. That’s why it’s important to consider your risk tolerance, as well as the diversity and stability of the rest of your investment portfolio, before you buy Ether.
However, investing in Ethereum may be easier than you think. Follow our step by step guide below to get started in just five steps:
Step #1 : Choose a Crypto Exchange
The correct process of buying cryptocurrencies begins with the choice of the cryptocurrency exchange used. You should compare cryptocurrency exchanges to be able to choose the one that supports ETH and best suits your investment needs. Some of the features to consider are low transaction fees, an easy-to-use platform, supported deposit methods, 24-hour customer support. Most importantly, always keep your safety in mind. Make sure the chosen crypto exchange is reputable, regulated, and secure.
Step #2 : Create an Account
Once you have chosen a reliable crypto exchange, you can proceed to create your account. Requirements vary depending on the platform you choose. Most exchanges will require personal information such as your name, contact number, email address, home address, social security number, and a copy of your driver’s license, passport, or government-issued ID.
If you want to deposit fiat money from your bank account to purchase the ETH token, you may be required to identify yourself using a webcam or smartphone in compliance with Know Your Customer (KYC) regulations.
If you already have a crypto wallet, you can simply skip this step.
Step #3 : Fund Your Account
Before you can buy Ethereum through a crypto exchange, you have to fund your account. In most cases, you deposit money from a bank account, like your personal checking or savings account. You can also complete wire transfers, use a debit card or deposit money from PayPal. When choosing a funding method, read the commission of the crypto exchange; they may vary depending on the method.
Some platforms even allow you to buy cryptocurrency using a credit card. While it may seem tempting, credit card companies generally consider cryptocurrency purchases to be cash advances. Depending on the card you have, you may have to pay a higher interest rate and cash advance fee on top of the crypto exchange’s fees.
Step #4 : Invest in Ethereum
Once your account is funded, you will be able to buy ETH tokens. Just go to the convert page of the trading drop-down menu, select the currency you want to convert from the list of available currencies and enter ETH as the cryptocurrency you want to convert to. Then select the number of coins you want to purchase, click ‘Exchange now,’ and you will be asked to enter your wallet address. ETH coins will appear in your wallet shortly. An alternative way involves placing a limit order which allows you to set the price at which you want to buy the cryptocurrency. The trade will only be realized when ETH reaches your desired price or below it.
It’s also a good idea to check the market conditions and recent performance to see if it’s the appropriate time to buy Ethereum before making a purchase.
What to Do With Your ETH After Purchase
Now that you are the proud owner of ETH, you can use it to your advantage in several ways.
Store ETH
If you believe that your Ethereum coins are a profitable store of value, you can keep them as a long-term investment. While you have the option to store them on the trading platform, for your peace of mind, it is better to store your digital assets in one of two types of third-party wallets: hot wallet or cold wallet.
Hot wallets are connected to the Internet and are accessible from a computer or smartphone. Although they are usually provided by cryptocurrency exchange platforms at no additional cost and are very convenient, due to their connection to the Internet, they are at a higher risk of security breaches. Meanwhile, cold wallets are external devices completely disconnected from the Internet, and they are paid. Although cold wallets are less convenient since you have to manually connect them to the internet each time you want to access your cryptocurrency, they are more secure and are definitely the best choice if you have a significant amount of Ethereum or other cryptocurrencies.
Stake Your Ethereum
While holding onto your coins is a valid option, you can easily earn rewards by making Ethereum coins work for you instead of leaving them idle. Ethereum is a Proof-of-Stake network, so staking is supported on the ETH network. Thus, you can temporarily lock your tokens on Ethereum in order to be rewarded for participating in the consensus mechanism. But given that the price of ETH is volatile, staking can be risky. Therefore, it is better to track price changes on various cryptocurrency price trackers such as CoinStats, CoinMarketCap or CoinGecko.
Spend Ethereum
Unlike many other cryptocurrencies, you can not only sell your Ethereum but also directly spend your ETH coins to purchase various goods and services. With the huge growth of Ethereum the number of vendors and retailers accepting ETH coins is increasing significantly.
Is Ethereum a Good Investment
Cryptocurrency is a highly volatile investment. It’s not for everyone and you should make sure you have enough risk tolerance before investing.
Today, Ethereum is considered a good investment. It has been widely adopted and is being updated, which will make it even more attractive in the future. This, of course, does not eliminate the risks associated with investing. Make sure your investments are less than 5% of your total portfolio, only invest what you may end up losing and never at the expense of any other financial goals such as paying off debt.
Closing Thoughts
Ethereum is a technology for building apps and organizations, holding assets, transacting and communicating without the control of central authority. To use it, you do not need to transfer all your personal data, all the data and what is shared is controlled by you. Ethereum is home to thousands of tokens, including its own cryptocurrency, Ether, which is one of the top three cryptocurrencies in the world.
Ethereum took a hit for the better in 2022. Being the second largest blockchain platform, it is definitely considered a very good investment. But still, since no one knows what the future might hold, the golden rule is to only invest in Ethereum as much as you are willing to lose.
