What Is Ethereum?
Ethereum is a programmable blockchain that can be used to build and access decentralised applications (dApps)—apps that run on the blockchain. This has created an open internet of services that anyone with a wallet can use. Ethereum has become home to a system of decentralised finance (DeFi), which is services such as decentralised applications or decentralised exchanges (DEXs), lending, and yield farming that don’t require a central authority.
This is possible thanks to Ethereum’s innovation of blockchain-based smart contracts, which are computer programs that execute automatically when certain conditions are met, removing the need for intermediaries between users.
Ethereum also has token standards that enable the creation of new tokens that are hosted on the Ethereum network. These include thousands of other cryptocurrencies and non-fungible tokens (NFTs).
The project’s own native token is Ether (ETH), which is needed to pay for transaction costs known as “gas”. Transferring tokens, accessing dApps, and deploying smart contracts all incur gas fees, while ETH can also be used for sending payments and staking.
All these points have made Ethereum the second-largest cryptocurrency by market capitalisation, take a look at our main Ethereum page for increased detail about the biggest crypto token after Bitcoin.
Ways to Invest in Ethereum
Every investor is different, which is reflected in the way they buy ETH. Some purchase it for the long term while others prefer to sell it for a quick profit as soon as possible. How you invest in ETH will depend on your aims and experience, as we’ll see below.
Buy and hold Ethereum
The simplest strategy to follow is to buy and hold, which involves exactly what you would expect- buy Ethereum and add it to your investment portfolio. This requires very little skill, hardly any of your time, and is popular with people who believe ETH will become more valuable over time.
Ethereum is gradually transitioning to a Proof of Stake network, which will be secured by staking rather than mining, which currently secures the network. In the meantime, long-term ETH holders can stake their tokens in the ETH 2.0 contract to earn staking rewards. This can make Etherium work almost like a passive income.
While buying is best done with online crypto exchanges or brokers, there are a number of Ethereum ATMs that allow you to purchase and sell ETH at real-world locations using fiat currency.
Best Ethereum wallets
Many long-term holders choose to self-custody their tokens in a private wallet. This means there is no need to rely on centralised services to access their tokens, which may be more secure as a result.
Once you've finished buying Ethereum the most secure place to store ETH tokens is in a hardware wallet such as Trezor, BitBox, or Ledger, but you will have to pay for this level of security. Alternatively, software wallets are free and easy to use. They can be downloaded onto a computer or mobile device.
Trade Ethereum
Ether also lends itself to trading within the crypto market as its price is highly volatile. This means that traders can take advantage of price changes by buying and selling ETH over shorter time frames to generate profits more frequently. Like buying and trading stocks, this will take up more of your time, and may require skills such as technical analysis.
If you want to trade with your tokens regularly, transferring them from a private wallet every time can be cumbersome. Web wallets tend to be less secure than hardware or software wallets but they are more convenient for traders and are provided for free by cryptocurrency exchanges.
Trading does not necessarily mean buying Ethereum with fiat currencies alone, some times traders will find better strategies when they trade coin to coin or C2C. The way you could take advantage of price fluctuations across other cryptocurrencies when there aren't any via just traditional currencies. For more information on price predictions, read our ETH price forecasts here.
Should I Buy Ethereum Now?
We can inform you about Ethereum’s fundamentals and potential but you will have to decide for yourself whether to spend your money on it. ETH was created with an inflationary supply but a network upgrade that resulted in part of every transaction fee being “burned” (permanently removed from circulation) could make the token deflationary—and a reducing supply could make ETH more valuable.
Every interaction with the Ethereum network—whether it’s sending tokens, deploying a smart contract, or using a dApp—requires ETH for transaction fees, creating a lot of demand for the token. More dApps and users interacting with Ethereum means more demand for ETH and more ETH from transaction fees being burned, suggesting the value of Ether could rise with the growth and success of the Ethereum ecosystem.
The network is currently somewhat hampered as it can’t handle a large number of transactions at the same time, making transactions slow and expensive when the network is busy. However, the project is in the midst of implementing the Ethereum 2.0 upgrade, which will see it transition to the more efficient Proof of Stake system and adopt technology that will enable it to scale to serve more users.
While Ethereum isn’t currently the most efficient smart contract blockchain, excitement about the upgrade, the growth of its ecosystem, and the popularity of DeFi and NFTs suggest that the project still has a lot of potential.
For more specific ways to buy, check out these individual Ether buying guides:
