The Ethereum blockchain has quickly emerged as the platform of choice for cryptocurrency investors, businesses and crowdfunding campaigns. As a decentralized platform with smart contract capability, Ethereum has introduced new efficiencies in transaction and payment technology. In the span of around a year, the Ether token, ticker symbol ‘ETH’, became the world’s No. 2 cryptocurrency, trailing only Bitcoin in market capitalization.
The growth of Ethereum has created a sense of urgency among investors to enter the cryptocurrency market. Luckily, owning ETH and selling it has never been easier. All that’s required is an online cryptocurrency exchange account and a method for funding that account.
What is Ethereum?
Before we dive into how to buy Ether, let’s first explore what Ethereum is. A blockchain-based decentralized ledger, Ethereum is aiming to be the first ‘World Computer‘, which seeks to up-end the current client-server model of internet services, and instead distribute its computing power across many different and decentralized nodes.
These nodes, which could be geographically located anywhere in the world, would essentially fill the traditional role of servers, providing information about on-chain events – i.e., transactions which happen on the blockchain – and validating blocks.
Ethereum wants to create a decentralized environment where developers can build and host apps – called ‘Dapps‘. It’s important to understand the role of the Dapp, as they have contributed hugely to Ethereum’s financial success.
Essentially, when developers build and deploy their Dapp on the Ethereum network, they must pay ETH as ‘gas’ to power their Dapp on the network. Similarly, their users, even if they have a native token, also usually pay some ETH as transaction fees.
As Ethereum was among the first blockchains to feature Dapps, it managed to capture a huge market share. With the explosion in the number of Dapps on the Ethereum network, there is now a strong demand for Ethereum – and therefore incentive for its price to rise.
How to Buy Ethereum
The simplest way to buy Ether tokens is through a debit card payment or bank transfer at one of the popular cryptocurrency exchanges. It should be noted that some methods of buying Ethereum are more expensive fee-wise than others. Credit/debit cards generally cost more than bank transfers.
There are hundreds of online exchanges that facilitate the trading of Ethereum’s native token, allowing you to buy, sell and even securely store Ether in a wallet. Brokers that offer Ether trading will usually display the token’s symbol, ETH. If you see this symbol, it often means you can do at least one of the following:
- buy, sell and store Ether
- trade Ether against fiat currency
- trade Ether against other cryptocurrencies
Brokers that enable the trading of Ether against other currencies operate very much like a foreign exchange platform. Under this setup, cryptocurrencies are traded in pairs against other tokens or fiat currency (i.e., ETH/USD, BCH/ETH).
Brokers such as Coinbase allow you to buy Ether tokens directly and store them in a wallet for further use or resale. Other platforms, such as Bitstamp and Bitfinex, allow for the trading of Ether as a currency pair against the dollar or other cryptocurrencies. When you can trade using fiat currency like the US Dollar, it’s known as a ‘fiat pair’.
To trade on these platforms, you must register your account and verify your identity, through a process known as ‘know your customer‘, or ‘KYC’. You will then be required to add and confirm a payment method. Once this step is complete, you can deposit money into your account and start purchasing Ether.
After accumulating tokens, you can sell them directly on the platform or transfer them to your wallet for safekeeping. After selling Ether for fiat currency, you can move the funds into your bank account.
In other words, you can use U.S. dollars to buy Ether. You can then sell the same Ether tokens for U.S. dollars and transfer the funds back to your bank account with relative ease.
Cryptocurrency exchanges have prioritized safety and convenience above all else. Although breaches do occur, most platforms employ highly secure protocols to protect your coins. Traders looking for extra security should choose exchanges that hold their Ethereum tokens in “cold storage.” This is just a different way of saying the coins you purchase are stored offline and outside the reach of hackers.
Many exchanges and digital wallets also offer a mobile app, which means you can access your trading account from anywhere.
Some of the most popular cryptocurrency exchanges for Ethereum include:
Always remember to set up 2-factor-authentication (2FA) when you create an account on a crypto exchange. 2FA ensures that whenever you log in, a code is generated on your paired device, meaning hackers can’t get access to your account without your mobile device as well.
Another option would be to use localethereum.com, where you can trade directly with individuals and companies. However, Local Ethereum is a new site so it would be advised to use caution if using this method. Start with smaller transactions and make sure the account you are trading with has an excellent review score.
The method by which you fund your Ether purchase will depend on the platform you choose and the jurisdiction in which you reside. For example, some platforms allow debit or credit cards and bank transfers, whereas others require local bank deposits or wire transfers. In general, the most well-known cryptocurrency exchanges will enable you to deposit cash instantly into your account with a debit card. Some banks prohibit their customers from buying digital assets, or any asset, on credit.
Depending on the exchange, users typically have the option of funding their account through multiple fiat currencies, such as the U.S. dollar or Euro. Although many of these exchanges operate globally, some restrictions may apply depending on your jurisdiction. For example, Bitfinex closed its U.S. retail segment, citing ongoing regulatory concerns. Others, such as Coinbase, are available globally but may restrict the selling of Ether to only select countries.
There are many factors behind an exchanges decision to restrict trading, so it’s best to confirm with them directly. Much of the confusion stems from a stagnant regulatory landscape, which hasn’t had time to adjust to the growth and widespread adoption of cryptocurrency. As the market grows and matures, investors can expect greater regulatory clarity around cryptocurrency trading. However, as China’s 2017 ban on Bitcoin exchanges demonstrated, the regulatory battle doesn’t always end in favor of the blockchain community.
How to Store Ethereum
Ethereum can be stored in an encrypted wallet just like any other cryptocurrency. Many online exchanges offer wallet storage services in addition to a live trading account, which means you can buy, sell and store Ether on one platform. You can also transfer your Ether to any other digital wallet you possess. To do so, all you need is the wallet’s address.
For more secure storage, you can also transfer Ether from your exchange account to a hardware wallet, which is stored offline. Two of the most popular cryptocurrency hardware wallets include TREZOR and the Ledger Nano S Wallet.
The World’s Fastest-Growing Market
As an asset class, cryptocurrency was the fastest-growing market in 2017. Ethereum is near the top of the value chain as businesses, individuals, and organizations, embrace its technical advantages. As an investor, this can make Ether a highly sought after digital asset.
By joining a recognized cryptocurrency exchange, you can easily buy, sell and store Ether from your phone or desktop computer. As the market continues to evolve, investors can feel confident that enhanced security features will protect their stake in the world’s fastest-growing market.
- Two-Factor Authentication Explained
- What It Means To “Know Your Customer”
- Blockchain Dapps (Decentralized Applications) for Dummies