Ethereum; the cryptocurrency tiger chasing bitcoin

Fredrick Awino
18.06.2022
304 Views

Investors and traders in cryptocurrency know it too well that their margins depend largely on volatility in the market. Something else that smart investors also know is that the more popular a cryptocurrency is, the higher the incidents of volatility which then increases the opportunities available for making a kill. It is not rocket science that when a currency is used by so many, its supply and demand will fluctuate so much.

WARNING: Investing in crypto, or other markets, can be of a high risk for your savings. Do not invest money you cannot afford to lose, because there is a risk for losing all of your money when investing in crypto, stocks, CFDs or other investments options. For example 77% of retail CFD accounts lose money.

Ethereum being the second most popular cryptocurrency after bitcoin fits the bill as a great crypto to invest in. But as we always say, it is foolhardy to blindly invest your hard earned money without at least taking time to know its critical aspects. So lets unpack what is in this second most popular currency offering.

Ethereum in a Nutshell

Ethereum is a decentralized blockchain having smart contract functions. Ethereum is also called ETH, Ξ, or Ether. The platform establishes a peer-to-peer network that securely verifies and executes the application code (smart contracts).

Furthermore, Ethereum is a programming language. It helps the developers in establishing distributed applications. In the past, Ethereum has partnered with Microsoft by providing Ethereum blockchain as Microsoft Azure’s service. This is to enable the enterprise clients as well as developers to have a single click cloud-based blockchain developer environment.

Ethereum Features

Ethereum consists of Ether, smart contract, decentralized applications, and Ethereum Virtual Machine. They play different roles.

1. Ether

Ether or ETH is Ethereum’s cryptocurrency. It is what runs the network. It helps in paying transaction fees as well as computation resources for any transaction taking place in the Ethereum network. Just like Bitcoin and Dogecoin, Ether is a peer-to-peer currency. Apart from paying transactions, Ethereum helps in purchasing gas utilized in making payments for any computation of any transaction that takes place in the Ethereum network.

2. Smart Contracts in Ethereum

A smart contract refers to a simple computer program facilitating any asset’s exchange between two parties. It can be a digital asset, property, shares, or money that you may need to exchange. Any person in Ethereum has the opportunity of creating these contracts. Simply, they are the terms and conditions that parties or peers mutually agree on. One of its features is that once a person executes it, then you cannot alter or reverse it.

3. Ethereum Virtual Machine

The Ethereum Virtual Machine (EVM) operates as a runtime environment used in deploying as well as compiling Ethereum-based smart contracts. It is the engine that understands smart contracts language written in Ethereum solidarity language. Besides, it is operated in a sandbox environment. Every smart contract’s language is compiled to bytecode, and EMV understands it.

4. Decentralized Autonomous Organizations (DAOs)

A decentralized Autonomous Organization is a digital organization operating with no hierarchical management. It operates in a democratic and decentralized fashion. Therefore, it is an organization where a decision is not made by a central authority. Instead, it is done by a group of designated individuals or designated authorities. It is important to also remember that it exists in a blockchain network in which protocols govern it.

The Process of buying Ethereum

  1. Picking cryptocurrency exchange

There is a misconception among the people who are new to the cryptocurrency world. You should understand that you do not purchase ETH as it is the network. Instead, one needs to buy Ether and then utilize it on Ethereum.

The crypto exchanges refer to the trading platforms utilized in purchasing and selling varied cryptos. The main crypto exchanges include eToro and Binance. Moreover, in case you have an interest in purchasing common coins like Bitcoin and Ether, then you may also use an online brokerage, including SoFi and Robinhood. However, remember you have to pay processing and trading fees.

  1. Making a deposit of Fiat Money

The next step is depositing money in the trading platform. You can deposit cash like euros and dollars. Also another way is linking your debit card or bank account to funding Ether purchases.

  1. Purchasing Ether

After funding your account, you can utilize the money to purchase ETH. You can do so at the current ETH price as well as assets. After getting the coins in your account, you may choose to trade them, sell them, or even hold them. When trading in crypto, it is important to know that you will incur taxes whenever you make a sale.

  1. Use a wallet

Even though there is a possibility of storing Ether in the digital wallet of a trading platform, it is risky. The reason is that in case one hacks the exchange, then they may steal your coins. Another option which you may take is transferring you will not trade or sell soon to another digital wallet. You can even transfer them to a cold wallet not connected to the internet.

Applications of Ethereum

Ethereum creates value and offers utility in various sectors. Various industries in the world, including real estate, entertainment, and healthcare, are developing novel tools for the protocol. The aim of the tools is to enhance efficiency, trust as well as democratize access to varied kinds of services.

In the entertainment industry, it offers a solution to manage royalties. It does it by distributing the tokens representing ownership rights which enhance seamless and automated distribution of the royalty payments. Some of the works Ethereum has done include Open Music Initiative, Mediachain, and Ujo.

Through the utilization of cryptographic methods, Ethereum makes sure that there is secure information sharing. This is important in transferring sensitive data, including identity information and medical records.

The Ethereum tokens also ensure that people can access products that were initially beyond reach. For instance, through it, you have the capacity to own just a piece of a good and not the whole. It gives one to own things like real estate as well as luxury goods. It is a good option as it enables the consumers to diversify investments. I can say that it is also a way of spreading the risk.

Ethereum has also played a role in global remittance. Through a P2P protocol such as Ethereum, cross-border payments can be sent inexpensively, quickly, and directly. Firms including BoomX, Abra, and Everex utilize blockchain technology in cutting intermediary banks charging fees because of currency exchange.

The real-world application of Ethereum

  • Voting systems where poll results are publicly available
  • The banking system makes it hard for hackers to get unauthorized access
  • In shipping to help in tracking a cargo thus prevents goods from being counterfeited or misplaced
  • Through Ethereum’s smart contracts, agreements can be executed and maintained with no alteration

Pros of Ethereum for Organizations

  • A decentralized network that distributes trust and knowledge among the network members
  • Rapid deployment
  • Permissioned network which allows you to build on the private or public Ethereum networks
  • Large network size
  • Enables private transactions
  • High performance
  • Tokenization of every item registered in a digital format
  • High standards

Cons of Ethereum for Organizations

  • Utilizes complicated programming language
  • Investing in it may be risky
  • Scaling issues

 

Author Fredrick Awino