Keeping track of the ongoing evolution of virtual money, smart contracts, and the blockchain is like watching pillow lava roll down a Hawaiian hillside and into the sea. Parts of it solidify and hold still, and then a new blob bubbles up from below and everything shifts and changes. But above it all you realize you are watching a new landmass taking shape, and things will never be quite the same again.
In the world of virtual “currency,” people are slowly becoming aware of Bitcoin, currently the most famous of the payment systems, since it holds the lead in a field of about 700 other currencies. But because of its relative newness and complexity, few have been able get a handle on Ethereum, even though it may prove to be the next quantum leap forward in blockchain based currencies. So what is Ethereum actually?
What is Ethereum?
Let’s start by getting the terminology straight. Ethereum is an open source code designed primarily to govern smart contracts on the blockchain. A smart contract is any contract between parties, especially those that lack a level of trust or credit rating. An example may be the sale of fair trade coffee. How would a wholesale purchaser know the coffee is fair trade? They would feel much more confident if the entire coffee production and preparation process was verified and incorporated into a smart contract that itself is sealed immutably inside a block on the blockchain. Ethereum allows developers to build their own apps on its open platform.
Part of the Ethereum code is Ether, described as the fuel that makes the contracts work. It can also be seen as a currency of sorts, and may emerge as a competitor to, or even replacement for Bitcoin, depending on how the lava flows. Ether is presented in coins, and can also be referred to as an Ethereum coin.
As a virtual currency, there is not much you can buy with Ether. But you could acquire some for speculation and trading purposes, since its value has skyrocketed of late, and may continue to do so. Or not. Here is its performance over its short lifetime (Chart courtesy of worldcoinindex.com).
One Ethereum coin (symbol ETH) was trading around $320 U.S. as of the third week of June 2017, until a major market selloff – a “flash crash” dropped its value to 10 cents inside of an hour, before rebounding. This shows that proving that it, too suffers the same dramatic volatility as Bitcoin.
A fundamental truth, however, is that the world of virtual contracts and money, held in abeyance by the binding force of the blockchain will continue to change the world of transactions in the same way the internet changed the world of information flow.
How to buy Ethereum?
The short answer is:
- You find a reputable online trading house
- You purchase ether using your debit or credit card
- You transfer your ETH to your own secure wallet.
Some experts suggest buying Bitcoin first and then trading that for Ether, but there are houses that remove the need for that. It is important to remember that this is very new territory. There are many suppliers and houses out there, each striving for your business through commissions. Some of these are reputable, others less so.
A more detailed answer would be this:
Go to a currency exchange site like CryptoCompare.com to find out which exchange operates with your country of residence or business. Coinbase is one of the easiest and most straightforward purchasing houses, but it has limits on countries and amounts. You simply open a Coinbase account, add a payment type (credit card or your bank account), and then choose to buy (or sell) ETH. Kraken and CEX.io are two of the best known alternatives to Coinbase. You could also trade your existing Bitcoin through these houses as well as through specialist exchanges like shapeshift.io.
As for wallets, there are not as many user-friendly Ether wallets as there are for Bitcoin. Coinbase offers its own wallet, but it keeps control of your wallet’s private key, which does not sit well with some people. It also does not support Ethereum classic, which is an earlier version of Ethereum maintained by a faction of Ethereum programmers who rejected a recent “market correction” in Ethereum value, called the Hard Fork. (The history of the DAO incident and the Fork requires a separate post). Other user-friendly brands that give you total control over the keys include Exodus (desktop) and Jaxx (iOS or Android).
Mine it Yourself
You can also mine Ether yourself, if you want. Just like Bitcoin, you can run a computer (or several) and work to mine some new ETH, keeping a commission for all your hard work. But also, just like Bitcoin, this is not something anyone can do from their home PC in the basement. You will need to work with a pool of other miners. The official Ethereum web page has instructions on how to set up your mining operation.
Even if you choose not to invest in ETH for saving or trading, it is worth keeping a sharp eye out for Ethereum as a major player in the growing smart contract and blockchain movement. Banks and companies all over the world are actively setting up test cases and policies for what they see as a major shift in how business is done in all areas of retail and B2B marketplaces.