A Beginner’s Guide to Buying, Selling, Using, and Mining Ethereum:
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Few things have taken the world by storm in the same way cryptocurrencies have. Since their inception several years ago, major cryptocurrencies have soared to record heights. Even since coming down from earlier peaks, blockchain coins have still seen substantial gains.
Ethereum is one of the more popular cryptocurrencies and has enjoyed incredible gains since its inception in July 2015. As Ethereum grows in popularity, many are wondering what it actually is.
Simply put, Ethereum is a blockchain - think of a database, or ledger, that contains a history of all transactions on the platform. It is set in place and secured by a large distribution of network machines, ensuring general accountability and precise verification of all transactions that take place. The network currently has thousands upon thousands of participants, each of whom can audit the ledger.
Ethereum is also a cryptocurrency - or a digital token based on the blockchain platform. Perhaps the biggest benefit of cryptocurrencies like Ethereum is its decentralized nature--no middlemen are needed to oversee end user transactions. Websites like Reddit can also be used to find detailed explanations and definitions of Ethereum. Because it is not a regulated currency, research on Ethereum is confined largely to the internet and third-party websites.
Ethereum can be bought and sold like common securities--on an exchange. Of the many exchanges that exist, more popular exchanges like Coinbase are home to thousands of traders and investors. The whole process is quite simple. A potential buyer can go to an exchange’s website online and set up an account. Once the user has registered his or her account, fiat currency must be deposited--much like one would deposit money into an online brokerage or savings account.
The trade is executed through the exchange platform. The coins will show up in the user’s wallet - a piece of software that stores Ethereum assets. In many ways it is the cryptocurrency equivalent of a fiat currency bank account.
Ethereum can be purchased with cash or with a credit card. But this doesn’t mean someone can walk up to a bank and deposit cash or swipe their card. All transactions are done via the exchange online--no tangible assets are exchanged.
Another option is to purchase anonymously. Those who want privacy away from the public view of Ethereum exchanges can purchase Ethereum ‘peer to peer.’ There are various sites that provide this option, though this is traditionally riskier than purchasing Ethereum on an exchange and should be done at the buyer’s own risk.
Withdrawing Ethereum and converting it into cash is easy. Often times, users can sell or convert their coins directly into the fiat currency they initially used to make the transaction(s) through an exchange. Whether it’s USD, GBP, or the Euro, Ethereum buyers are able to cash out in the fiat currency of their choice.
In the same way that the account was funded, so too users can transfer converted funds to their bank account and withdraw cash from an ATM. However, not all exchanges allow easy, direct withdrawals. Some require users to turn their Ethereum into Bitcoins, and then exchange the Bitcoins for the equivalent value in fiat currency.
The use of Ethereum is based upon smart contracts, which are codes that automatically execute the terms of an agreement, thereby eliminating the need for a go-between. Smart contracts can be joined or created, and allow Ethereum users to create, join, or use decentralized applications. There has been a large influx of Ethereum based applications, including file sharing, content creation, and video streaming platforms.
Ethereum can also be used to make normal, everyday purchases. Stories abound of people using cryptocurrencies to purchase everyday items--like pizza. Ethereum can also be used for storing data and maintaining privacy from third parties. Ethereum can even be used for online gaming, with sites that offer Ethereum poker, or even an Ethereum poker app.
Finally, Ethereum can be used to trade and / or invest to build wealth. The tremendous capital appreciation that Ethereum has enjoyed the past few years has resulted in some very wealthy individuals. The cryptocurrency, due to its rise in price, is often seen as a way to make good money through various trading and investing techniques.
The value of the currency is not set by exchange rates or central bank policy. Rather, it is a truly free market currency whose value derives from the basics of supply and demand. Because there is a limited number of available coins, there is no fear of artificial inflation that plague fiat currencies.
Ethereum mining is the process of participating in a cryptocurrency network in consensus. Miners sort through blocks, the parts that make up blockchains, and analyze them to ensure smooth running transactions that make it all possible.
Miners are richly rewarded for their hard work by either parts of the transactions themselves, or digital coins like Ethereum. Calculators are used to determine profitability and play an essential role in mining the blockchain platform. Those that want to personally mine Ethereum can do so with their home computers, provided the computers are able to withstand the GPU and RAM qualifications.
The first step to mining Ethereum is to download an application that will link the miner to the Ethereum platform. Next, an account must be made and mining software must be downloaded. This will allow the user to begin mining with their GPU or CPU.
Mining that is done properly can result in higher profitability, often in the form of coins. As mining makes Ethereum more efficient and robust, the market cap of the cryptocurrency will only increase.
The growth of cryptocurrencies like Ethereum has caused many to question scalability. A simple review of Ethereum’s price chart and ledger platform will show the swift increase in volume and appreciation. As transactions continue to grow in number, solutions must be forged that allow the Ethereum blockchain to handle high volumes of transactions.
Some say that the Ethereum blockchain can support around 15 transactions per second. This pales in comparison to the 45,000 transactions that Visa processes per second. Though scaling is very difficult and a viable solution is without consensus, several websites have posted charts demonstrating how the scaling process is taking form. Time will tell how quickly Ethereum’s growth can be accommodated, but the future is promising.
Though blockchain technology and cryptocurrencies seem complicated at first, they are remarkably easy to trade, use, and mine. So much of the hype involving Ethereum is due to its incredible nature -- it really is a decentralized platform that encourages accountability and freedom of use. Far from being an impractical blip on the technology radar, Ethereum and its cryptocurrency counterparts can revolutionize the way transactions are processed and executed.