How Do You Ethereum? A Step-By-Step Guide • Benzinga

When blockchain burst onto the scene at the beginning of the decade, few people took notice.  Then, as the value of cryptocurrencies like Bitcoin grew, suddenly everyone wanted a piece of the action. Ethereum offered different products than Bitcoin, yet still built on blockchain concepts

What is a blockchain?

Blockchains are giant digital ledgers where one transaction is linked to both the transactions that came before and after the transactions. The technology uses a consensus of computers across a network that validates these transactions by solving mathematical problems. When these computers, known as nodes, solve a problem, the transaction is added to the ledger and the node is awarded a token or coin.

It’s virtually impossible to tamper with a continuous ledger shared among participants. It also contains information going back to the beginning of the ledger, which allows industries along a supply chain to instantaneously verify all the aspects of what they’re receiving.

How does Ethereum work?

Ethereum set out to establish itself as the platform for peer-to-peer contracts as well as applications through its currency. The idea was to have a way to establish smart contracts that allowed entities to exchange everything from goods to services, not just currency.

Like Bitcoin, Ethereum uses consensus through computer nodes that solve mathematical problems to added contracts to the ledger. In turn, these nodes (miners) are awarded Ether for their efforts.

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A brief history of Ethereum

First proposed in late 2013 by Vitalik Buterin, Ethereum was launched in 2014. It offered Ether as its primary cryptocurrency through a crowdsourcing campaign. The initial sale brought in $18.5 million and sold around 60 million Ether. In 2016, $50m Ether was pilfered by an anonymous hacker, which made users question the platform’s viability. Consequently, the blockchain split into two currencies: Ethereum (ETH) and Ethereum Classic (ETC).

If you had bought Ethereum in April of 2016 with $120 at a price of $15 per coin (8 coins), you would have seen your investment go up to $1,100 per coin at the beginning of 2018, only to watch it collapse within months, to approximately $200 per coin.

Ethereum rise in early 2018 and fall just a few months later. Source: Gatehub.net

How Ethereum is different?

Ethereum expands on the concepts of Bitcoin by moving beyond digital currency and allows for seamless transactions. Smart contracts allow for integrated transactions for things like real estate and goods. Think of a real estate transaction and all the various players that are involved removed, automated through a single smart contract.

Ethereum also allows for applications to be built within its platform. This can lead to applications such as Decentralized Autonomous Organizations (DAO), organizations that have no single leader. Rather than a person running the organization, the system is run by consensus and a set of governing rules. However, the major hack in 2016 led to a split in the currency and brought the viability of the system into question.

How to buy Ethereum

If you’re interested in investing in Ethereum Classic or Ethereum, you should follow these steps:

1. Decide on your investment vehicle

There are two ways to invest in Ethereum or Ethereum Classic, directly and indirectly. Direct investment involves the purchase of the cryptocurrency. Indirect investment involves purchasing derivative vehicles such as futures, options or other trading vehicles.

2. Determine the amount you want to invest

Consider that you’re choosing to invest in something both highly speculative and not widely adopted. Choose an amount to invest that takes this into account as well as your overall portfolio.

3. Find an appropriate broker

The type of broker you choose will depend on how you want to invest.

    • Derivatives: Unlike stocks, bonds, and other commonly traded financial instruments, cryptocurrency derivative brokers are fairly new. You’ll need to research which brokers offer the derivatives you’re looking for.
    • Direct investment: If you’re looking to invest directly in Ethereum, you’ll need to use a specialized broker such as Coinbase. These brokers typically charge fees as a percentage of the total amount exchanged and vary greatly by country and funding institution.

3. Set up an account

Whether you’re using traditional stockbrokers or a specialized cryptocurrency broker you’ll need to set up and account and provide information about how you plan to fund your account.

4. Fund your account.

Once you’ve set up an account, you’ll need to transfer funds into the account. You can fund your account using everything from banks to Paypal.

5. Purchase Ether

Note that the fees associated with Ethereum, Ethereum Classic or a derivative may change from broker to broker.

Final thoughts

What makes Ethereum unique is its seamless, integrated commercial contracts and true potential of blockchain.  

Unfortunately, the other thing that makes Ethereum unique is that it was hacked. Though Ethereum isn’t alone in the problem, it’s arguably the most notable.  

As the currency moves further away from the hacking event and gains greater commercial adoption, we’ll likely see the cryptocurrency stabilize and lose some of its volatility.

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