What is Ethereum and how to invest in crypto currencies

What is Ethereum and how to invest in crypto currencies

Everything you wanted to know about Ethereum: its peculiarities, advantages, and disadvantages. How to invest in Ethereum and earn with minimal risk

The return on investment in Ethereum has become the highest among more than 1000 crypto-currencies. This decentralized network is often compared to bitcoin, although these startups perform completely different tasks. Analysts believe that Ethereum will be one of the few projects that will survive when the crypto currency market finally collapses. Even the emerging competitors of the Ethereum cannot catch up with one of the market leaders in terms of capitalization and remain far behind. What is Ethereum, what is interesting about the decentralized network of the future, what are its strengths, weaknesses and features, how to invest in Ethereum – all of this is discussed in our review.

Ethereum - decentralized network of the future

Ethereum has become the most profitable asset in 2017 among more than 1,000 crypto-currencies. In less than a year, its price rose by 6000%. Even in February, Ethereum was sold for $12. USA, today it costs more than $700. Ethereum capitalization almost reached 70 billion dollars (about 11.55% of the total capitalization). And Ethereum may still be a long way from BTC, the closest competitor of BCH, which occupies the third place in this rating, has a capitalization of only 32 billion dollars. If you want to know what the Ethereum network is, and what its features and growth prospects are, keep on reading.

Ethereum – investing in the future tech

Project Ethereum, which differs significantly from bitcoin, appeared in 2013 thanks to Vitalik Buterin, a Canadian programmer of Russian origin. In 2014, at the age of 20, he won a grant for its implementation ahead of Facebook founder Mark Zuckerberg. In late July 2015, the Ethereum startup was opened to third-party users.

Ethereum is a platform that allows to create decentralized online services based on blockchain technology. Crypto currency for calculations inside the system is Ethereum (ETH). While bitcoin is a single system for enabling financial transactions between counterparties (payment system), Ethereum is a platform for creating thousands of similar projects. In other words, if the bitcoin’s or Ripple’s blockchain is designed to solve only one task (transfer of value), Ethereum is designed for the development and operation of a wide variety of applications (DApps).

Unlike bitcoin, the number of Ethereum coins is unlimited. Infinite issuing contradicts the principles of economics and pricing. Therefore, in the future, developers plan to achieve limited issuing, and the extra Ethereum will be extracted from the system. However, it is difficult to say as to how it will be realized.

Ethereum peculiarities:

• The system operates based on the big distributed computer network principle (EVM - Ethereum Virtual Machine). The uniqueness of Ethereum is in smart contracts, which represent a mini program for solving various tasks;
• programming language for self-executing contracts is Solidity. The language was developed in 2014 specifically for contracts executed on EVM. It is a statically typed Java Script;
• the basis of the network is the Proof-of-Work consensus algorithm, which is a way for miners to validate transactions and add them to the block chain. The drawback of the model is that network can be controlled by someone who has 51% hash capacity. The promotion of transactions (changes) cannot be stopped by a minority;
• network technology is used by companies such as Microsoft, IBM, Acronis, Sberbank, etc.

Advantages of Ethereum decentralized platform:

• unchangeable. An outsider cannot make any changes to the system. The minority also cannot make adjustments, but in exceptional cases, blockchain can be changed by the developer;
• system operation does not terminate in case of failure of any part of the chain;
• automatic network administration without human influence.

During its existence, Ethereum has had several forks, both planned and random. One of the unplanned forks occurred in the spring of 2016, when the DAO application was hacked because of an error in the code. Then, in order to save the investors' money, Vitalik Buterin had to resort to unpopular measures - to roll back the theft, and as a result the currency was divided into ETH and UTS. The cases of Ethereum hacking are numerous, because the network is often criticized for its low security.

5 disadvantages of Ethereum according to its creator:

• poor scalability. The network grows every day, and reaching consensus on major changes among network members will be increasingly difficult;
• Proof-of-Work. This algorithm is too expensive, and is costly for miners. According to Ethereum Digiconomist, now the maintenance of the network consumes as much electricity as Moldova;
• poor data protection. The problem of data protection was the reason for the emergence of Zcash and so-called mixers, which mix coins for transactions from several independent pools of miners;
• the risk for ordinary users losing crypto currency in the event of theft or loss of a private key. Private key is unique and cannot be recovered;
• minor technical problems that complicate the optimization of the system and the work of the applications themselves in Ethereum.

The newly launched global Metropolis fork is supposed to fix security and scale problems.

The success of Ethereum gave rise to many followers who tried to correct the mistakes of the first decentralized network. Not all competitors managed to achieve the same success, but some of them should be mentioned separately:

• Lisk. The project appeared in February 2016 and one of its developers is Steven Nerayoff, who left Ethereum after the hacking of DAO. Unlike Ethereum using Proof-of-Work, Lisk algorithm uses DPoS (Delegated Proof of Stake). Lisk does not have a virtual machine, and only 101 "delegates" can mine coins, which are chosen by crypto currency owners. In comparison with Ethereum, the network does not have many projects, and by the level of capitalization Lisk is on the 21st place with $1.41 billion. USA (as of 17.12.17);
• Ethereum Classic. The coin appeared after the hard fork of Ethereum in 2016 due to the hack and bankruptcy of the DAO project based on blockchain network. In fact, this is the same Ethereum network, which is supported by users who disagree with the change in the blockchain after the hack. The correlation between ETH and ETC is most often a reverse one (as in the case of BTC and BTH), and as of 17.12.17, the capitalization of the crypto currency is $3.45 billion at the 15th place;
• NEO. This decentralized network is referred to as Chinese Ethereum. The network appeared in September 2016 and quickly entered the TOP-10 in terms of capitalization. However, then the position was lost and as of 17.12.17, NEO occupies the 14th line with 3.65 billion USD. The network is distinguished from Ethereum by several significant points: using the Proof-of-Stake model, to which Ethereum is just about to switch, and smart contracts written in C, Sharp, Java, and Go languages. This greatly expands the capabilities of the network. Also parallel calculations and shading are implemented in the platform (the process of storing documents on several servers), which Ethereum does not yet have;
• EOS. A new project launched in June 2017. This is a consensus operating system, which provides access to databases, planning, authentication, and communication for Internet applications using parallel processing of data, which makes the network performance at least 100 thousand transactions per second, which is unprecedented for blockchain projects. The algorithm of the model is DPoS. With a capitalization of $4.59 billion, the project occupies the 13th place.

Becoming an owner of the Ethereum coin is very simple due to the popularity of the crypto currency, which acts as a kind of electronic equivalent on a par with BTC. There are several options:

• buying on the exchange by creating an account. Several hundred exchanges of the world work with crypto currencies, the largest turnover falls on Binance, Bitfinex, Bithumb, GDAX, and Poloniex. There are frequent cases of account hacking on exchanges, because many investors prefer online or cold wallets where ETH can be bought for fiat money;
• mining. This method of crypto currency obtaining is still profitable, although in the future Vitalik Buterin plans to switch to a model that will reduce the income of miners, and, accordingly, the attractiveness of mining. The minimum requirements for mining are the X64 system, 4GB RAM, 2GB GPU. You can mine both from your video card and leased capacities. The wallet can be opened locally or on the exchange. For example, Poloniex has deposits from 1 ETH, Exmo – from 0.01 ETH;
• faucets. The effectiveness of this method of Ethereum producing is doubtful - the profit is incommensurable with the lost time. However, you do not need initial investment and you can earn by running an automatic program.

Ethereum prospects for investors

Prospects of Ethereum, according to analysts, are more than optimistic. There are no prerequisites for the collapse of the crypto currency market yet, so in the long run the coin will continue to grow. The nearest competitors of the network are not even in the TOP-10, the remaining projects cannot be called competitor, since they are of a different nature. More and more crypto currency start-ups choose Ethereum. And with the transition to the Proof-of-Stake model, the popularity of the coin will grow even more.

Rules for successful investment in Ethereum can be formed as follows:

• buy on rollbacks, sell at peak, provided that the sale covers the margin and commissions, reaching up to 15-20% on some exchanges;
• try to invest for a short period. The crypto currency market is unpredictable and can turn around at any time;
• follow the news. If we exclude the overall growth of the market, then the most influential factors on the price of Ethereum are the news about the forks and their results, as well as information about the attention of the corporations to the crypto currency.

The safest way to invest in crypto currency is investing through a broker. There is no risk of account hacking or fraud from the wallet. Here you have simplified verification and reliability, guaranteed by an independent regulator. Learn more about this feature by clicking on the link. Earn on the most profitable asset in 2018!

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