Except for occasions when it’s slightly beaten out by Ripple, Ethereum is the second most valuable cryptocurrency in the industry. Second in value only to Bitcoin, Ethereum commands a huge following, and has even created the altcoin market in its own image.
Dozens of the top 100 crypto coins are ERC20 tokens – digital assets released using Ethereum’s technology. There’s so much more to say about Ethereum, both as a network and as a currency (though the currency itself is technically called “Ether”). We’ll explain it all, so you can know whether or not Ethereum is the right investment for you.
Ethereum was theorised, designed and released by Vitalik Buterin, the Russian-born wunderkind. The young Buterin had volunteered for Bitcoin in his teenage years, getting paid in BTC when it was worth next to nothing. The Ethereum founder was taught computer science as a child, and in high school started creating his own technologies and even a programming language.
Buterin released an academic paper presenting the concept of Ethereum in 2013. 72 million Ether tokens were pre-mined and sold to investors around the world in the summer of 2014, and the platform finally went live in July 2015.
Ethereum was co-founded with Mihai Alisie, Anthony Di Iorio and Charles Hoskinson. All of these people have had an impact within the Ethereum ecosystem and the broader crypto community, while Hoskinson has been intimately involved with Ripple, as well as being the founder of Ethereum competitor Cardano.
Smart contracts are one of the concepts that made Ethereum distinct from Bitcoin. Bitcoin is digital cash, plain and simple. However, Ethereum is a way of storing more than just financial data on a blockchain. Smart contracts are a kind of algorithm that performs a task within an application autonomously. Smart contracts, once initiated, will repeat their coded commands forever, without outside oversight. Theoretically, programs of any complexity could be composed and carried out by smart contracts.
Vitalik Buterin explains the origin of the name “Ethereum” better than anyone. “I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was the fact that sounded nice and it had the word ‘ether’, referring to the hypothetical invisible medium that permeates the universe and allows light to travel”.
Buterin’s goal was and is to remake the Internet, and even human society itself, with smart contracts as a foundation. His smart contracts could be used to simplify corporate structure, eliminate workforce inefficiencies, automate any number of routine computational and service tasks, and increase market productivity without making untoward demand on human labour.
Smart contracts already perform countless functions within the Ethereum blockchain network, and institutions and businesses around the world are incorporating these autonomous applications into their workflow more and more each day.
A Decentralised Autonomous Organisation is a business, institution, corporation, or other structure that is operated entirely by autonomous smart contracts and is made up of technologies and representatives spread out across the planet. Blockchain itself is a decentralised technology, with miners and users existing in every part of the world, with no centralised headquarters anywhere. When fully mature, Ethereum will be a decentralised autonomous organisation (or DAO, pronounced “dow”). Already, countless network functions are run entirely by smart contracts and artificial intelligence.
There were many early Ethereum investors who aren’t publicly known, but the most prominent ones might surprise you. Joseph Lubin is a major developer and personality within the Ethereum ecosystem, and he was there from the earliest days. Tyler and Cameron Winklevoss bought in early as well, growing their crypto wealth with massive returns from Ethereum. Richard Sherman, of American football team the San Francisco 49ers fame, was also an early investor. Finally, none other than Ashton Kutcher caught wind of Ethereum’s incredible potential very early and invested deeply, reaping incredible investment returns in the months and years that followed.
The pros of investing in Ethereum tend to be related to Ethereum’s potential, its head start compared to competitors, its excellent leadership, and the amazing team of developers and users it has all around the world. Ethereum has a massive scope, and even if it attains a fraction of what Vitalik has planned for it, Ethereum will be an important world technology. Ethereum is also more developed than almost any other blockchain, with a truly impressive bevy of developer talent. Sometimes people make it seem like Vitalik Buterin is the brain driving the whole operation, but Buterin admits he has brought so much talent into Ethereum development that he often feels like he’s the one in the presence of experts.
Now, for the cons. Ethereum’s potential is impressive, but that’s what it is… potential. Ethereum has failed to actualise many of its most important plans. The first DAO was a complete failure, resulting in the loss of millions in user funds and the eventual splitting of the network (the Ethereum Classic hard fork). Sharding, Casper, Proof of Stake – all of these are big ideas that Buterin has talked about endlessly, but all have been delayed by years, and some say they will never come to fruition.
We tend to think that the pros still outweigh the cons when it comes to Ethereum. After all, this is still a very young (decentralised) company, having only been founded in 2015. It takes time to create novel technologies from the ground up, and Ethereum has demonstrated massive growth and many successful implementations. We also tend to think that Ethereum’s unfinished plans (sharding, Casper, etc.) are more a case of “not yet” than “not ever”.
Ethereum has many competitors, most of which came into being after it was already on the scene. On the one hand, Ether is competing against cryptocurrencies like Bitcoin and Litecoin. Ether was never meant to be used as digital cash, at least primarily, but people use it this way nonetheless. Ether can be used to pay for goods and services almost everywhere that Bitcoin can be used. Ether is also sold alongside Bitcoin, Litecoin, and Bitcoin Cash on Coinbase, so in the eyes of the public, it’s clearly competing with these cryptocurrencies, even though it is in a class of its own (Ether is a utility token).
On the other hand, Ethereum is competing against countless other smart contract platforms. EOS, NEO, Qtum, Cardano, ARK, ICON… the list goes on. Each of these protocols has a different plan for becoming the biggest smart contract platform in the world, and each would like to steal from Ethereum’s market cap and dominance to do so. Major competitors like EOS would like to leave Ethereum in the dustbin of history.
Again, it’s important to point out that Ethereum has the head start and the most impressive team of developer talent in the industry. On the other hand, newer smart contract platforms have the benefit of being able to come after Ethereum, observing its methods and mistakes. Ethereum constantly has to re-examine its foundations, while new companies can implement newer methods from the very start.
Because Ethereum is one of the top two or three cryptocurrencies in the world, it’s sold by just about every cryptocurrency broker and exchange that exists. Most of these even use Ethereum as a fundamental trading coin, a cryptocurrency against which all other coins on the site may be traded.
The biggest Ethereum exchange in the United States is Coinbase. Coinbase only sells the most prominent cryptocurrencies in the world (Bitcoin, Bitcoin Cash, Litecoin, etc.). Ethereum being included on Coinbase makes it highly visible to buyers all around the world, as buyers in many countries use Coinbase.
Binance is another large international exchange that sells Ethereum and uses it as a foundation for on-site altcoin transactions. See our Binance review for more general information about this exchange.
It would be pointless to try to name every crypto exchange and broker that sells Ethereum. Ethereum (ETH) is a global standard cryptocurrency, so it’s very rare that an exchange of this type doesn’t trade ETH in some form or fashion.
Ethereum prices change because of the laws of supply and demand. The greater investors’ confidence in ETH is at any given time, the more they will be willing to pay for it, and the less ETH will be available on the international markets. Thus, the price of ETH will increase.
Ethereum prices have gone through all sorts of changes in its four years of existence. In its earliest days, ETH was traded for pennies, but only by very early adopters. When Ethereum became more widely known, this drove up its price above $1. By 2017, when ETH was added to Coinbase, prices went above $100. In late 2017, Ethereum prices peaked at above $1,300 per token!
Today, Ethereum prices are sitting at less than 10% of that previous all-time high. No one knows if Ethereum will ever recover to those old heights. However, if the price of ETH does rise that significantly once more, it will likely surpass past all-time highs. Put more simply, if Ethereum succeeds, it’s success will be enormous.
Ethereum is mined very much like Bitcoin and many altcoins. Ethereum miners use powerful computers called ASICs (Application-Specific Integrated Circuits) to perform the sophisticated mathematical functions that authenticate and secure the Ethereum network, and the people who operate these functions are awarded new ETH that have never been in the network before.
Ethereum mining can be very profitable, but it doesn’t seem to be a long-term solution for people who want to make money with Ethereum. The Ethereum network is moving from Proof of Work (Bitcoin-style mining like it has always used) to Proof of Stake (a consensus mechanism that doesn’t require mining and uses much, much less energy) in the coming months.
It’s recommended that if you want to get into Ethereum mining, don’t think of it as a long-term investment. Do your own research on Ethereum Staking, as this is the method of the future.
– Read our Ledger Nano S review to learn more about this amazing hardware wallet that stores Ethereum and many other coins in a real, physical device. The Nano S is highly secure because it’s not connected to the internet.
– Read our Exodus wallet review to learn about the multi-currency desktop wallet that supports Ethereum and most of the ERC20 tokens, as well as other currencies.
– Ethereum can also be stored in an Ether paper wallet, which is nothing more than the Ethereum private keys written down on a piece of paper. Unhackable!
Check out our handbook to learn more about the difference between Ethereum and Bitcoin.
Ethereum 2.0, also known as Serenity, is a series of proposed upgrades to the existing Ethereum model in order to make a quicker, more effective system. The Ethereum blockchain was initially designed to be a decentralised ‘World-Computer’, able to execute anybody’s code for a small fee.
Shortly after its launch, some issues with scalability and mining became apparent. Applications launched on the network have failed to attract anywhere near the daily numbers that the likes of Facebook and Google bring in. As the technology evolved, Ethereum began to show further problems relating to proof-of-stake, network security and more. Serenity is the fourth stage upgrade of Ethereum and was planned back in 2015 when the original platform was launched.
Proof of Stake:
The upgrade will introduce a Proof-of-Stake (PoS) mechanism, which is less expensive and much more energy efficient than Proof-of-Work (PoW) mining.
Proof-of-Work is a protocol that aims to deter cyber-attacks such as Distributed Denial of Service (DDoS), which exhaust resources by bombarding a computer with fake requests. This form of consensus requires a huge amount of energy though. Data taken back in 2015 reveals that one Bitcoin transaction required an amount of energy equal to powering 1.57 American households for an entire day.
Ethereum 2.0 will transition from the Proof-Of-Work into a completely virtual Proof-Of-Stake system, which is cheaper and better for the environment.
Data sharding will also be used on the new Ethereum 2.0 blockchain. Sharding is where information is split into smaller pieces and distributed across the network. This improves transaction speed, scalability and has improved security because the data is never stored in one single place.
Ethereum 2.0 (Serenity) will see the implementation of a new execution engine, known as eWASM (Ethereum Flavoured WebAssembly).
A WASM based on the Ethereum Virtual Machine (EVM) will be able to capitalise on improved hardware, creating a wider ecosystem of tooling and support. This upgrade should also make it possible to create smart contracts in any language that compiles into WebAssembly.
The inclusion of eWASM into Ethereum 2.0 should allow for faster execution, language portability, access to the WebAssembly ecosystem and increased tool support.
No, Ethereum 2.0 will not include the creation of a new coin. This upgrade has been planned for a long time, arguably since Ethereum’s inception. As such, the upgrade has a unanimous backing by the community, unlike the controversial Segwit activation, which did not have everybody onboard.
The fourth and final major incarnation of Ethereum should finally be released in 2019, though there is some contention about when and how it will be implemented.
People have been scared for years that if Vitalik left Ethereum, the project would fail. However, Buterin has been delegated responsibility to others for years, so Ethereum would continue in his absence.
Yes, hundreds of Ethereum apps are in operation today.
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