What Is Ethereum and How to Make Money With Ethereum?
Ethereum has touched its highest point at the time of writing following the reveals of several new projects being developed on the Ethereum platform. You might have heard some people have made some good money due to the recent hike. However, before investing your hard earned money in Ethereum, one has to learn what exactly is Ethereum and how it works. If you are keen to know how to make money with Ethereum, read on and find out more.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. The opinions expressed in this article are the personal opinions of the author at the time of publication.
I started paying attention to this so-called Cryptocurrency 2.0 from last year and make a huge purchase of 550 Ethereum ($5,500) early this year in January at the price of $10. I will just leave it there and let you do the math on how much I have earned at the time of writing (I have been updating this post every two to three days and the price has spiked many times since this post was written).
There are several factors behind this price hike. One of the main reasons was Ethereum has been marketed to various potential corporate and government partners are a way of generating revenue through its integration of blockchain technology. Some highly publicized partnership are JPMorgan Chase, Cisco Systems, Inc, Bank of New York Mellon Corp, Microsoft, and other 30 big brands to create a partnership known as the Enterprise Ethereum Alliance (EEA).
Update (22 May 2017): Enterprise Ethereum Alliance has just grown in size after 86 firms including State Street, Toyota, Merck, ING, Broadridge, Deloitte, Samsung SDS, the National Bank of Canada, and Rabobank joined the collective that is seeking to use blockchain technology to run smart contracts at Fortune 500 companies.
Ethereum is an alternative to Bitcoin, which still dominates the cryptocurrency world. But while Bitcoin has become a haven for speculators trying to win big by trading coins, Ethereum’s promise is that its blockchain, the public ledger that records all transactions, is chiefly a platform for developing apps, powered by economic incentives.
Hence, if you are looking into another opportunity after Bitcoin to start your investment, Ethereum is probably the best choice for you. To me, it has an enormous potential and it should be the next big thing after Bitcoin.
What Is Ethereum?
Ethereum was initially proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher, and programmer. Vitalik Buterin is very well-respected and most people in the Ethereum community believe in his vision. Development was funded by an online crowd sale during July–August 2014 and the system went live on 30 July 2015.
Ether is a digital currency used for operating smart contracts on the Ethereum network. Like Bitcoin, the Ethereum network and Ether tokens are not controlled or issued by any bank or government – instead, it is an open network which is managed by its users.
If you are not familiar with the term Smart contracts, they are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. Smart contracts often emulate the logic of contractual clauses.
In a laymen term, smart contracts are Blockchain technology that will replace lawyers that will save you time and conflict where there is no need to pay intermediaries (middlemen). That is partly the reasons why banks and governments are turning to them as Blockchains are rated, undeniably faster, cheaper and more secure than traditional systems.
Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications.
Centralized systems are vulnerable because they have a single governing element, which can become a target of an attack. Ethereum’s vision is to decentralize the internet by creating a platform where applications can be built and run on a decentralized network. A decentralized system doesn’t have a single point of failure, and if any one element goes down, the rest of the network stays intact. Hence, Ethereum is also called a “world computer”.
Quite simply put, Ethereum is a worldwide distributed decentralized computer with a theoretically unlimited power.
Before Ethereum was developed, blockchain applications were designed to do a very limited set of operations. This meant that developers faced a problem. Either expand the set of functions offered by Bitcoin or any other type of application (which is difficult & time-consuming) or develop a new blockchain application and an entirely new platform as well.
Instead of having to build an entirely original blockchain for each new application, Ethereum enables the development of potentially thousands of different applications all on one platform.
What makes Ethereum standing out from all the other altcoins is that it is the very first available platform that is truly a world computer that is distributed across many machines (nodes) that will run applications in an unstoppable, uncensorable, trustless manner. It takes the uncensorable nature of a cryptocurrency (e.g. Bitcoin) and extends that to almost any application that you can imagine.
That is the reason why many cryptocurrency experts think Ethereum will likely surpass Bitcoin as the most valuable blockchain.
Ethereum has been deployed in different phases. Currently, the Ethereum project is in the 2nd phase, called “Homestead”.
The 4 planned phases for the growth of the Ethereum network are, in order: Frontier, Homestead, Metropolis, and Serenity. Ethereum Homestead clients are working smoothly after being in beta for several months without any major incidents.
Frontier was the initial release of the Ethereum network pushed live in July 2015. It was a bare bone release planning to allow the more technically minded to release their own apps, allow people to mine, and get exchanges up and running.
Homestead was planned to be released after a month of frontier going live as a best case scenario. As of January 2016, the Homestead release is about 80% complete – but the goals have been altered somewhat as frontier took in a large part of its projected development pipeline – for example, the block reward was set to the full 5 ether.
In its new form Homestead has become more of a patchwork of fixes to remove the risk warning attached to the Ethereum homepage.
Metropolis is the release that opens the gates to the masses. This is where there are fully fledged and tested user interfaces for the non-technical users. Although this is now being performed by individuals – for example, the Ethereum desktop wallet. Again it is unclear when this phase will take place and whether it depends on the pace of external community development.
Serenity is the last phase and has one key principle – to switch the Ethereum network from proof of work to proof of stake – essentially reducing the power consumption of the Ethereum network. When this is going to take place and under what conditions is of course anyone’s guess – although it is thought to be in the planning for the start of 2018.
Even though the price of Ethereum has already appreciated significantly in 2017, there is still 10x, maybe even 100x long-term upside from current levels. Ethereum hasn’t come close to mainstream adoption yet, but there are hundreds, possibly thousands of applications in development.
Recent News: Ethereum Foundation Strikes Deal with Russian Development Bank
The most recent news in August 2017 was the Ethereum Foundation will work together with the VEB to support its new blockchain research center, providing specialist training for distributed ledger technology and the ethereum platform. The partnership hopes to help foster a community of ethereum experts within Russia and to assist the formation projects based on ethereum and other blockchain.
The union is intended to create a new Blockchain technology training program in order to move Russia forward in the Blockchain world. The program will produce educated and trained Blockchain experts for use and help in state-owned corporations as well as government bodies.
The impact on Ethereum is extremely positive in the short term. Additional partnerships, especially with government bodies, create much greater chain stability and confidence, as well as use. Prices should respond positively to this partnership.
Will Ether Price Drop off the Chart?
On 21 June 2017, someone sold $30 million worth of Ether and sent the price down to $0.10. The flash crash has caused many investors lost a few thousands of dollar within a second as the drip triggered a series of stop loss orders.
Can this happen again in the near future?
In my opinion, there are two reasons that can possibly cause a downfall of Ether price, a repeat of Mt. Gox‘s incident and the influx of Initial Coin Offerings (ICO).
#1 Major Exchange Outage
Almost every market crash is a result of panic selling due to the lacking of proper evaluation of the fundamental of a market condition.
Although the standards in cryptocurrency exchanges have considerably increased since the devastating bankruptcy of MT Gox which lost almost one billion dollars as valued at the time, there is still a possibility that the exchange is hacked like Bithumb. The hacking has caused monetary losses from compromised accounts have started to surface, and are quickly reaching into the billions of won.
#2 Initial Coin Offerings
Ethereum is way more than just a cryptocurrency as it is also a platform which offers decentralized services based on the blockchain. Its underlying currency is Ether. It’s also a project which helps start-up launch their decentralized services, raise funds through ICO.
At the time of writing, there are more than 20 offerings being carried out a month. You can check the ICOs and Crowdsales on Smith + Crown website. According to Smith + Crown, there have already been more than $150 million raised this year through ICO.
If you pay enough attention, there is a slight correlation between the ups and downs of the Eth price and the crowdfunding closing dates.
Although this may not be entirely right, there is still a big risk where the Ether raised by these ICO will be retained or dump on exchanges for fiat.
One prime example is Bancor Foundation that raised more than $150 million worth of Ether by offering their own token. Once the tokens were sold out, ETH was priced at $410, and drop to $310 a few hours later. Coincidently, Coinbase has crashed along with GDAX exchange and users are unable to sell or buy.
Could this really be a coincidence?
You can find more information on What Can Cause Ethereum Price Falls off the Charts?
How to Make Money With Ethereum?
#1 Buy and Sell
At the present stage of Ethereum, it could be just like Bitcoin when it was first introduced to the world in 2009. There was this story where this Norwegian man bought $27 of bitcoins in 2009 and forgot about them. He then discovered their value had since shot up to $980,000 at today’s price. Will Ethereum repeat the same history? No one knows what will happen 10 years down the road but it has a bigger potential growth as compared to Bitcoin.
There are several reasons you should consider buying Ethereum for long-term investments.
(+) The technology that underlies Ethereum means that it can be used for a number of other purposes that will be built off of a decentralized and autonomous system. Simply put, it potentially will be a revolutionary technology with the potential to impact a whole spectrum of industries.
(+) As the demand for the Ethereum platform and its smart contracts enabled network increases, the value of Ethereum as a cryptocurrency will continue to surge.
(+) Stability – Ethereum had an organic growth, without massive spikes, and it seems to be stable, if not even predictable. The increasing demand and value of a certain cryptocurrency serve as an indicator of its potential. Whatever the reason is, it still increases the demand – meaning a further increase in Ethereum price.
(+) The developers at Ethereum want one to think of the network as a large virtual computer that facilitates applications to run. It is indeed this allure that has been the reason that the project has got the backing from a number of individuals such as Bill Gates.
(+) Making waves in the established industry: Microsoft offers Ethereum as a blockchain-as-a-service, IBM’s in the game too, MIT teams are doing active research and even proposing their own alternatives (Lisk – Decentralized Application Platform)
(+) The second biggest market cap after Bitcoin only, and one of the most popular cryptocurrencies ever in terms of volume and buzz.
How and Where to Buy Ethereum?
There are several numbers of platforms online that you can use to buy Ethereum. One of the most reliable platforms is Coinbase that you can buy and store it securely in the e-wallet. It available to users in over 30 countries such as the United States, United Kingdom, Canada, Singapore, and the following European countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland.
As of 2017, Coinbase is the world’s largest Bitcoin broker. You can buy Bitcoin and Ethereum with a connected bank account, SEPA transfer, Interac Online, and many more payment methods.
Below is a print screen of my Coinbase dashboard. It is ver user-friendly, easy for new users to buy and sell Bitcoin and Ethereum. Furthermore, you can make an instant buy with a credit card or debit card.
If you are wondering if it is a reliable platform, Coinbase is a Bitcoin company based in San Francisco and backed by trusted investors.
#Step 1: The first step is to sign up for a Coinbase account. This will give you a secure place to store your Ethereum, and easy payment methods to convert your local currency into or out of digital currencies.
NOTE: At the time of writing, when you sign up Coinbase account, buy and sell $100 of Bitcoin or more, you will be earning $10 of free Bitcoin.
#Step 2: Connect Your Bank Account, Credit Card or Debit Card. After you sign up, connect your bank account, credit card or debit card. You’ll need to complete some verification steps before you can use the account. Once the verification steps are complete, you can start a purchase.
#Step 3: Buy and Sell Ethereum. After starting your first purchase, Coinbase will complete your buy and deliver your Ethereum. (Sells work the same way but in reverse). The price of Ether changes over time, so Coinbase will show you the current exchange rate before you buy.
Should I Buy Ethereum Now?
“Buy Low, Sell High”.
Ethererum is currently priced high but it could be one fo the best time to invest when you look back a year later.
Ethereum is at an All Time High at the time of writing. I’ve been investing in Ethereum for less than a year and I’ve seen the price rise and fall many times. The price could still rise to a new high in the upcoming days and weeks, but history says otherwise.
#2 Ethereum Mining
Bitcoin mining started out with simple CPU and GPU mining that can be done on high-powered home computers before the introduction of ASIC miners overwhelmed the industry resulting in only specialized hardware being capable of any worthwhile mining. The Ethereum blockchain, however, is far more resistant to ASIC miners which result in most of the processing being done on rigs mounted with GPUs.
If you have a high-powered system for gaming then your computer is more than capable of mining Ether at a respectable rate. You can choose to mine Ethereum solo but you’ll probably get better results by contributing your resources to a pool. Personally, I have never mined any myself but I have a good read on Nanopool and they’re easy to use. Thanks to their great help page.
In my opinion, Ether could be at a high price but still not profitable to mine because your electricity costs are so high, or visa Versa. You also have to account for the difficulty increase associated with a price spike.
Furthermore, the Ethereum Founder’s view on the ETH mining community can be described as neutral to wary due to the example that Bitcoin mining community gave us. Today, more than 90% of all mining power for the Bitcoin blockchain exists in China, causing a lack of innovation and significant political strife. The Ethereum founders are aware of this and attempting to prevent this.
Hence, it may not be a good idea to make a huge investment in mining equipment as it can be tough for you to be profitable in a long run.
Other than Ethereum, you can also look into Bitcoin. If you really want to make some investment in cryptocurrencies, you should diversify your investment portfolio. If you have some budget to make an additional investment in Bitcoin, you could do that too.
Although Bitcoin has been the top-performing cryptocurrency in the world in the six of the past seven years, climbing from zero to a value of more than $2,000 (going to hit $3,000 soon), Bitcoin still has its enormous potential to grow.
The first investor in Snapchat thinks Bitcoin could realistically be worth more than $500,000 by 2030. I am not sure about you but even if Ethereum is going to surpass Bitcoin one day, it is will still be one of the most valuable cryptocurrencies that you should hold on to.
The rise in the price of Bitcoin is not going to stop anytime soon as one of the many reasons is the remittance transfers or electronic money transfer to foreign countries have almost doubled over the past 15 years! (At least, that’s how I transfer my money across the countries I go/work/travel).
Furthermore, it is predicted that Bitcoin’s 2030 supply will be about 20 million and that simply means average Bitcoin value held will increase to around $25k per Bitcoin holder based on the current market cap and more than 10 million user count.
Hence, hold on to your Bitcoin and keep it!