Trading Ether: what you need to know

Ether, the cryptocurrency token of the Ethereum network, is the second-largest cryptocurrency in the world. Founded in 2014 by Vitalik Buterin, Ether (ETH) has grown to be valued at more than $27 billion. If you’re interested in trading financial markets, there are two primary methods you can get a piece of the action by trading this crypto. First, you can buy and hold ETH in a safe and secure digital wallet, via a cryptocurrency exchange. Second, you can use forex brokers to trade the ETH price without needing to own the underlying asset. This article explains what Ethereum and ETH is, how it works, and how you can make money from it.

Blockchain foundations

All cryptocurrencies are underpinned by blockchain technology. This allows for the distributed ledger platform. It is defined as a cryptographically secure singleton machine with shared-state. The cryptographically secure aspect means that it is created by solving complex mathematical equations while the transactional singleton machine means that there is just one canonical instance of the machine responsible for all the transactions being created. Finally, ‘with shared-state’ means that the state stored on the machine is shared and open to everyone.

While Ethereum and Bitcoin are created using the same technology, they have significant differences. Bitcoin was created to act as a replacement for fiat currencies like the US Dollar and Euro. Ethereum, on the other hand, was created to offer what is known as smart contracts in the development of applications. A smart contract is a computer code that is used to facilitate the exchange of money, property, content and other items of value.

Another difference between Bitcoin and Ethereum is the concept of ‘gas.’ All computations that occur because of a transaction on the Ethereum network have a fee, known as gas. This is the unit used to measure the fee of all computations. The gas price is the amount of Ether you are wiling to pay on every unit of gas and is measured in ‘gwei’. Wei is the smallest unit of ether.

Uses of Ethereum

Unlike Bitcoin, Ethereum was not created to replace fiat currencies. Instead, Ethereum is just one part of the blockchain universe. In similar way, while the web helped popularize the internet, other applications like e-commerce were built on top of it. The first use of Ethereum is that it helps developers build and deploy decentralized applications (Dapp). A Dapp is an open source application that is not controlled by anyone. Most of the other cryptocurrencies in the market have been created using Dapp methodology, including Bitcoin. Ethereum, and its token ETH, has a large potential because all applications that are centralized can be decentralized.

Another use of Ethereum is the building of Decentralized Autonomous Organizations (DAO). A DAO is a fully autonomous organization that is decentralized in nature with no single leader. These organizations are run by programming a code on a collection of smart contracts that are written on the Ethereum network. The DAO is owned by everyone who purchases tokens. Each token equates to equity shares & ownership and gives the owners voting rights.

In addition to the above, Ethereum can also be used as a platform to launch other cryptocurrencies. This happened recently with the ERC20 token standard, which was launched by the Ethereum Foundation. When this strategy is used, the issuers of the token set the amount they want to raise, create fundraising, and receive ETH in exchange.

The Way Forward

While there is a future for the smart contracting industry, the industry is still in its infancy. This means there is uncertainty whether Ethereum will become the main standard for the industry. Recently, other cryptocurrencies like ETH have gained prominence. A good example is EOS, which is now the sixth largest cryptocurrency in the world.
Therefore, instead of investing in ETH for the long term, you might consider trading it. Trading allows you to benefit when the price is moving upwards and when it is falling, unlike buy-and-hold investing. You can do this by trading the price of ETH against the US Dollar via a contract for difference (CFDs). This lets you make a buy or sell prediction for the amount you want to risk. CFDs on cryptocurrencies are available from many forex brokers like easyMarkets – just make sure you choose a regulated broker in a reputable jurisdiction such as Australia (ASIC) or Cyprus (CySec).

Disclaimer: This is a guest post. The information contained in this web page does not constitute financial advice or a solicitation to buy or sell any Cryptocurrency contract or securities of any type. Readers are suggested to fully understand all risks associated with any kind of investing they choose to do.

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