April 16, 2019

How to Invest in Ethereum ETH

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Ethereum often stands out to investors in the world of cryptocurrencies. Learn how you can start investing.

© CreditDonkey

Ethereum offers big potential for investors. But there are risks, too. Here's what you need to know to start investing.

Ethereum, or Ether (ETH), is the second most popular cryptocurrency after Bitcoin.

But it has massive potential beyond what Bitcoin can offer. Ethereum is more than just a cryptocurrency - it's a powerful platform, as well.

In this guide, learn how these two cryptos differ, plus how to buy and safely store your Etherum.

What is Ethereum, and how does it work?

Ethereum is a blockchain-powered platform that runs decentralized applications. Ethereum is powered by its native cryptocurrency, Ether (ETH).

Many people use Ether and Ethereum interchangeably to refer to the cryptocurrency, which is often traded on exchanges like Coinbase or Binance.

Is it better to invest in Bitcoin or Ethereum?
81% Bitcoin
19% Ethereum
Source: CreditDonkey poll, December 18, 2021 to December 19, 2021

The Ethereum platform works by using Ether to fund smart contracts. Smart contracts are programs that automate transactions and agreements without a central authority.

To complete each transaction, the Ethereum platform charges an amount of Ether, often called the "gas". This is what you invest in when you invest in Ethereum. Think of Ethereum as the car, and Ether as the "gas" that powers it.

How is Ethereum different from Bitcoin?

Like Bitcoin, Ether has a dollar value and can be traded on an exchange. They also currently both utilize proof-of-work protocols (although Ethereum is switching to the less energy-intensive proof-of-stake in 2022).

However, there are some important factors that set Ethereum apart from Bitcoin:

  • Ether disappears once it's used: When you spend a Bitcoin, it recirculates in the system. When you use Ether in the Ethereum network, it disappears forever.

  • There is no limit to how much Ether can be produced: There will only ever be 21 million Bitcoins created. As for Ether, there is no limit as to how much can exist. Money supply economics, therefore, work differently with this cryptocurrency.

  • Ethereum has more industry support: Because Ethereum has many applications besides being a currency, it is seen as a more practical investment.

    Some people think that this means it has a more promising and "less risky" future—but there's no solid evidence to back this claim.

Ether isn't quite like other digital currencies. Its value comes from how business entities are invested in the network, rather than intrinsic valuations from individuals. Keep reading to learn how to buy Ether.

How to Buy Ethereum

The easiest way to buy Ether is on a cryptocurrency exchange. Here are a handful of popular crypto exchanges that allow you to buy, sell and trade Ether.

  • Coinbase
    Coinbase is known for being extremely user-friendly and easy to use. Their fees are on the higher side but this platform is an ideal choice for beginners, overall.

  • CoinMama
    An exchange that offers multiple digital currencies, CoinMama acts like a brokerage service. You submit an order and payment, and they fulfill it. Transactions are almost instant.

  • Kraken
    Kraken is one of the largest exchanges in Europe, though it supports the US and Canada as well. It offers users the ability to customize trade deals.

  • Gemini
    A security-minded exchange that operates in Canada, the UK, and Asian Pacific regions. Gemini offers trades with Bitcoin and Ether.

    It has low transaction fees and is highly secure.

If you want to maximize your Ethereum earnings, consider staking Ethereum. In staking, you deposit your coins for a fixed period of time. Then, they're used by the network to validate transactions on the blockchain. Best of all, you're rewarded with more Ethereum.

Can I buy stock in Ethereum? If you don't want to buy Ether directly, you, unfortunately, can't buy shares of Ethereum like you would buy shares of a company. However, you can buy into managed funds that invest in Ethereum for you, such as the Grayscale Ethereum Trust, Bitwise Ethereum Fund and the Staked ETH Trust. You can also buy stock in companies that utilize Ethereum technology (more on that further down.)

How to Store Ethereum

After purchasing your Ether, you'll decide where you want to store it. Many exchanges allow you to store your coins on their platform. However, withdrawing them from an exchange is a more difficult process.

For that reason, here are a few digital and hardware wallets that allow you to store (and even buy) Ether.

  • Mist: The official digital wallet of Ethereum. It's considered to be a good choice, but it does require know-how with blockchain.

    Transaction fees vary depending on the network or wallet you're using.

  • Ledger Nano X: The Nano X is a premier hardware wallet known for its capacity and features with Ledger's Live app.

  • Jaxx: This is a multi-currency wallet that allows you to trade different cryptocurrencies. It can be downloaded on a computer or a mobile device.

    Jaxx offers news, market prices charts, and a portfolio overview. It has a variable transaction fee that takes a small percentage of your Ether.

  • Coinbase: Another multi-currency wallet, Coinbase allows you to set some automatic buying and selling conditions. There is a transaction fee of 1.49% in the US.

  • MyEtherWallet: This is an open-source wallet that you can use in a web browser or by downloading it onto your computer.

    There is a variable transaction fee that takes a portion of your Ether.

Once you have a wallet picked out, you can start buying Ether. The smallest unit of an Ether is called a Wei, and is 0.000000000000000001 of an Ether. But keep in mind, most exchanges and wallets have a minimum purchase requirement.

Other Ways to Invest in Ethereum

If you're not keen on buying Ether directly, there are a few indirect ways of investing in this popular crypto.

Major tech firms, like Intel and Microsoft, are using Ethereum. By investing in their stock, you are indirectly investing in it.

A few crypto IRAs let you use Ethereum to build toward retirement. CryptoIRA and BitIRA are two of the options available.

Crypto IRAs act like most exchanges and wallets, except they put the gains in an IRA. You choose how much you want to invest and which currency you want to invest in. They take care of the rest.

Other than that, you'll have few indirect investment options with Ethereum. If you want more indirect investing options with a cryptocurrency, you should go with Bitcoin.

BOTTOM LINE

Ethereum is a great place to start investing in the complicated world of cryptocurrencies.

Because it is valued as a digital utility and a digital currency, Ether has the support of many companies and software developers. Therefore, it has the potential to stay active for quite some time.

Evan Manwell is a content manager at CreditDonkey, a crypto comparison and reviews website. Write to Evan Manwell at evan@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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How to Stake Ethereum

Staking Ethereum is a way to earn interest on this popular crypto asset. But how do you do it? Keep reading to find out.
Is it better to invest in Bitcoin or Ethereum?
81% Bitcoin
19% Ethereum
Source: CreditDonkey
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