Ether Crypto: A Smart Investment Decision?

Ether is the native cryptocurrency of Ethereum, a blockchain platform created to support smart contracts and secure financial transactions. Ethereum is one of the leading cryptocurrencies in terms of market capitalization and technological advancements, and has established itself as a leading blockchain platform with strong utility and potential for growth.

Ethereum's native token, Ether, is the second-largest cryptocurrency after Bitcoin. Ethereum's network includes decentralised applications (dApps) for gaming, gambling, socialising, and even decentralised finance (DeFi). Most non-fungible tokens (NFTs) are also based on the Ethereum network.

Ethereum's price has been volatile since its launch in 2015, ranging from a few dollars per coin to an all-time high of $4,891.70 in November 2017. As of July 2024, Ethereum is priced at around $3,400.

There are several factors that make Ethereum an attractive investment option:

- Volatility: Smart investors have learned to capitalise on market cycle patterns and profit from market bubbles.

- Liquidity: Ethereum is highly liquid due to the global establishment of trading platforms, exchanges, and online brokerages.

- Lower inflation risk: Ethereum has a transparent inflation plan that is less susceptible to government interference.

- Decentralised finance: Ethereum and DeFi are relatively young and constantly evolving, bringing new opportunities for massive gains.

However, there are also potential drawbacks and risks to investing in Ethereum:

- Volatility: Cryptocurrency markets are highly volatile and unstable, and even digital assets with multi-billion-dollar market capitalisations cannot be considered reliable.

- High transaction fees: Ethereum's high transaction fees have prevented it from achieving mainstream adoption.

- New regulation: Cryptocurrencies currently lack comprehensive regulation, but this is likely to change, and new regulations could negatively impact Ethereum's value.

- Threat of online hacking: Hacks and security breaches are common risks in the cryptocurrency space, and losses due to hacking are often irreversible.

Overall, Ethereum has strong utility and growth potential, making it a potentially attractive investment option for those willing to tolerate the risks associated with the volatile cryptocurrency market.

Ethereum's performance since its launch

In its early days, Ethereum was trading at just a few dollars per coin. However, during the cryptocurrency boom of late 2017, its value increased dramatically, reaching a high of over $1,400. Ethereum's price continued to fluctuate, and in November 2021, it reached an all-time high of $4,891.70.

The implementation of Ethereum 2.0 brought about improvements in scalability and lower transaction fees, making the platform more attractive to investors and developers. The rise of decentralised finance (DeFi) applications and the creation of non-fungible tokens (NFTs) also contributed to Ethereum's performance.

In 2022, Ethereum underwent a major upgrade, switching from a proof-of-work to a proof-of-stake model, enhancing its efficiency and reducing its environmental impact. This shift was known as 'The Merge', and it aimed to address the energy-intensive mining process.

Despite Ethereum's strong performance and position as the second-biggest cryptocurrency by market cap, it faces competition from newer networks that offer faster and more cost-effective solutions. Additionally, Ethereum's transaction fees can spike during peak times, potentially discouraging users from utilising the network for smaller transactions.

As of July 18, 2024, Ethereum's price stood at $3,406.85, and experts predict that the cryptocurrency will continue to grow in 2024. Some even predict that Ethereum will "flip" Bitcoin during this market cycle and become the dominant cryptocurrency.

The pros and cons of investing in Ethereum

Pros

• Volatility: While this was once viewed as a negative, smart investors have learned to recognize market cycle patterns and capitalize on the parabolic gains produced by market bubbles.
• Liquidity: Ethereum is one of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges, and online brokerages. You can easily trade Ethereum for cash or assets like gold instantly and with very low fees.
• Lower inflation risk: Ethereum has a transparent inflation plan that is subject to less meddling. There's no need to worry about your crypto being deflated because the blockchain system is infinite.
• Decentralized finance: Ethereum and DeFi are relatively young, and non-fungible tokens (NFTs) and many other new applications are becoming more mainstream daily. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
• Finality: Ethereum offers customizable consensus methods such as RAFT and IBFT for enterprise networks, which provide quick transaction finality and require less infrastructure than the Proof of Work algorithm.
• Tokenization: Ethereum enables businesses to represent any digitally registered asset as a token. Tokenizing assets allow companies to diversify their product offerings, develop new incentive models, fractionalize previously large assets, and allow for crowdsourced data management.

Cons

• Volatility: Cryptocurrencies are extremely volatile, resulting in both increased gains and numerous losses. The price of Ether has fluctuated a lot in the past, which might be a major disadvantage for certain investors, especially novices.
• High transaction fees: Arguably Ethereum's largest drawback, transaction fees, hold back the network from reaching mainstream adoption. Using Ethereum's blockchain can cost hundreds of dollars, so retail investors with smaller amounts of capital are priced out from using the network.
• New regulation: The government is unlikely to let cryptocurrencies remain completely unregulated for long. New regulations could interfere with business models and cause crashes that are entirely out of your control.
• Threat of online hacking: Hacks are a threat facing many cryptocurrency investors. Most users store their crypto on exchange wallets, leaving them susceptible to losing their investments should the exchange get hacked and their private keys stolen.
• Competition: There are a ton of emerging smart contract platforms giving Ethereum a run for its money, namely Binance Smart Chain, Cardano, and Polkadot. While these cryptocurrencies offer better scalability than ETH, they lack decentralization and the robust DeFi ecosystem that Ethereum has on its network.
• Proof of Work consensus: Transactions on Bitcoin are only necessary to transfer the crypto, while Ethereum's network is used for a variety of functions. Proof of work is more expensive and slower than proof of stake, which is currently being used by many ETH competitors.

Ethereum's utility and growth potential

Ethereum is a global, open-source, decentralized platform that enables the creation and execution of smart contracts and decentralized applications (dApps). It was founded by Vitalik Buterin in late 2013 and went live on July 30, 2015, with the release of its first version, Homestead.

Ethereum's utility lies in its ability to extend the capabilities of Bitcoin beyond simple peer-to-peer transactions. While Bitcoin primarily focuses on being a digital currency, Ethereum is designed to be a platform for decentralized applications.

One of Ethereum's key innovations is the introduction of smart contracts, which are self-executing contracts with the terms of the agreement written directly into the code. Smart contracts automate and enhance the efficiency of various processes and can be leveraged by a range of industries.

Ethereum's decentralized nature also makes it resistant to censorship and fraud. It operates on a global network of nodes, which are computers that validate and store data on the blockchain, ensuring transparency and security.

Use Cases

Ethereum has a wide range of use cases, including:

• Gaming and NFTs: Ethereum's blockchain has found applications in the gaming sector, with non-fungible tokens (NFTs) playing a pivotal role. Ethereum-based NFTs represent unique in-game assets, such as characters, skins, or items, and players can buy, sell, and trade these assets securely on the blockchain.
• Decentralized Finance (DeFi): DeFi has emerged as one of the most impactful use cases for Ethereum, bringing financial services to a global audience without the need for traditional banks. Users can lend, borrow, trade, and earn interest through DeFi platforms, such as Aave and Compound.
• Supply Chain Management: Ethereum smart contracts enable transparent and automated supply chain processes, reducing fraud and ensuring the integrity of goods from production to delivery.
• Data Management: Ethereum's decentralized nature and smart contract capabilities contribute to secure and private data management. Projects like Filecoin and Arweave utilize Ethereum's blockchain to create decentralized storage solutions, enhancing data security.
• Identity Management: Ethereum facilitates decentralized identity solutions, allowing users to control and manage their digital identities without relying on centralized authorities.

Growth Potential

Ethereum has strong growth potential due to its innovative features and the ongoing Ethereum 2.0 upgrade. Here are some factors contributing to its growth:

• Increasing Adoption: Ethereum is the second-largest cryptocurrency in the world, and its reliability and high decentralization make it a popular choice for developers and users. The number of daily active wallets has been growing, indicating increasing interest and wider adoption of Ethereum-based applications.
• Enterprise Ethereum Alliance: Ethereum has the backing of major global corporations through the Enterprise Ethereum Alliance, which includes giants such as Intel, J.P. Morgan, and Microsoft. This support demonstrates the recognition of Ethereum's potential by major industry players.
• Technological Improvements: Ethereum is continuously evolving with upgrades such as scalability improvements, anonymous transactions, and the transition from proof-of-work to proof-of-stake, which will enhance its security, decentralization, and efficiency.
• Developer Activity: Ethereum has a thriving developer community, and its open-source nature allows developers to create decentralized applications using various programming languages.
• Network Effects: Cryptocurrencies, like social networks, have strong network effects. As the adoption of Ethereum continues to grow, its utility and value will increase exponentially.

In conclusion, Ethereum has strong utility and growth potential due to its innovative features, thriving ecosystem, and increasing adoption. However, it also faces challenges such as high transaction fees and competition from other blockchain platforms.

Ethereum vs Bitcoin

Ethereum vs. Bitcoin

Bitcoin and Ethereum are the two leading cryptocurrencies, making up about 70% of the entire global cryptocurrency market. While Bitcoin has a market cap of $1.3 trillion, Ethereum's market cap is $420 billion.

Bitcoin was launched in 2009 and was the first cryptocurrency. It is a blockchain-based, decentralized digital currency that allows financial transactions without relying on a central authority or intermediary. Bitcoin's value lies in its status as the first cryptocurrency and as an alternative to fiat currency.

Ethereum, on the other hand, was introduced in 2013 and officially launched in 2015. It is a global computer for running decentralized apps (dApps) and is intended for complex smart contracts and decentralized applications, which are believed to be part of the emerging infrastructure of the future of the internet known as Web3. Ethereum's native cryptocurrency is Ether (ETH), the second most popular digital token after Bitcoin (BTC).

Both Bitcoin and Ethereum are powered by the principle of distributed ledgers and cryptography. However, there are significant differences between the two. Here are some of the key distinctions:

• Bitcoin is primarily an alternative to traditional currencies, serving as a medium of exchange and a store of value. Ethereum, on the other hand, is a programmable blockchain with applications in DeFi, smart contracts, and NFTs.
• Bitcoin uses a proof-of-work (PoW) consensus mechanism, which is highly energy-intensive. In contrast, Ethereum recently transitioned to a proof-of-stake (PoS) model, which is less energy-intensive and more sustainable.
• Bitcoin transactions are recorded on a public ledger, while Ethereum transactions may contain executable code.
• Bitcoin has a finite supply capped at 21 million, while Ether has an infinite supply in theory.
• Ethereum has lower transaction fees compared to Bitcoin, making it more attractive for smaller investors.
• Ethereum has a faster transaction speed than Bitcoin, capable of processing around 15 transactions per second compared to Bitcoin's 7 transactions per second.

Both Bitcoin and Ethereum have their unique advantages and purposes. Bitcoin is a well-established, globally recognized cryptocurrency often referred to as "digital gold." It serves as a store of value and a hedge against inflation. Ethereum, on the other hand, offers more utilitarian value through its ecosystem of decentralized apps and smart contracts. It is a versatile platform that supports a wide range of applications, including DeFi, NFTs, and gaming.

When it comes to investing, both Bitcoin and Ether have been excellent long-term investments. However, both are subject to extreme price volatility. It is challenging to predict which will be the better investment in the future, as it depends on various factors, including adoption, regulatory changes, and the development of competing blockchain platforms.

In summary, the choice between investing in Bitcoin or Ethereum depends on your market outlook, risk tolerance, and investment goals. Bitcoin may be preferable if you seek a well-established, alternative currency with a finite supply. On the other hand, Ethereum could be more attractive if you believe in the potential of decentralized applications, smart contracts, and the development of Web3.

Where and how to buy Ethereum

There are several trading platforms where you can buy Ethereum, including some of the top platforms such as Coinbase, Kraken, Gemini, Binance, Bitfinex, and Bitstamp.

Coinbase

You can buy Ethereum on Coinbase's centralized exchange. Here's a step-by-step guide:

• Create a Coinbase account.
• Add a payment method such as a bank account, debit card, or wire transfer.
• Select Ethereum from the list of assets.
• Enter the amount you want to buy in your local currency.
• Finalize your purchase of Ethereum.

Binance

Binance is a centralized exchange where you can buy several cryptocurrencies, including Ethereum. Here's how to buy Ethereum on Binance:

• Create a free account on the Binance website or app.
• Verify your identification.
• Choose how you want to buy the Ethereum asset. You can buy Ethereum with a debit/credit card, Google Pay, Apple Pay, or a third-party payment channel.
• Store or use your Ethereum in Binance or transfer it to a personal crypto wallet.

Other Platforms

You can also buy Ethereum using PayPal or Robinhood. Additionally, you can use decentralized exchanges (DEXs) such as Kraken, Gemini, or Bitfinex. DEXs connect users who rely on smart contracts to execute trades, and users maintain control of their keys and wallets.

Frequently asked questions