After a difficult few months, Ethereum is slowly regaining momentum. Is this a good time for investors looking to buy Ethereum? with all the information about the forecast, commissions, and important events for investors.
What is Ethereum?
Ethereum is best known as the world’s second-largest cryptocurrency, Ether (ETH), and has increasingly attracted the attention of institutional investors in recent years. Ethereum’s strength lies in its underlying technology. Ethereum is a decentralized software platform based on the Ethereum blockchain. Cryptocurrency is simply a function of the platform. Based on Ethereum, developers can create decentralized applications (dApps) that do not run on a single system but are decentralized on the blockchain.
With the help of smart digital contracts—called smart contracts—transactions between two parties can be processed securely. This makes Ethereum interesting to the new DeFi (decentralized finance) industry, which wants a decentralized financial system to replace traditional banks in the long run. But the Ethereum platform can also be used to make decentralized social networks that can’t be shut down by the platform or the government.
This creates a crypto-ecosystem based on Ethereum but lacking centralized authority. Anyone can create apps on Ethereum; there is no app approval process; the network does not receive a share of developer revenue; and apps are available to anyone with an internet connection. This is the huge potential of Ethereum.
Ethereum: the competition is getting stronger
Ethereum is solidifying its position as the second-largest cryptocurrency, but in the altcoin stream, there are now serious competitors. An increase in Ethereum’s price means an increase in Ethereum’s fees. While Ethereum transaction fees are implicitly linked to the Ethereum price, there is no such link with other cryptocurrencies.
What is Ethereum Proof of Stake?
Every transaction on the blockchain must be verified. Whereas in a classic transfer, the bank itself verifies that the data is correct, the blockchain operates in a decentralized manner. Ethereum currently uses a performance verification mechanism for this purpose. So-called miners verify transactions on their computers. These are very complicated computer tasks that need a lot of computing power, which means they use a lot of energy.
Other coins already use a more efficient proof-of-stake mechanism that can process more transactions in the same amount of time. With the introduction of Layer 2 (the consensus layer), Ethereum will also switch to this procedure. The lottery procedure automatically identifies validators based on the amount of ether. Ethereum requires a minimum of 32 ETH to enter the lottery.
Proof-of-work is based on competition, while proof-of-bid is based on randomization and ownership. With randomization, there is no need for huge mining farms, as less computing power is required, which reduces the gigantic energy consumption and thus benefits the environment. From the current 15 transactions per second, the throughput will go up to several thousand transactions per second. The upgrade will take place in several stages and is not expected to be completed before 2023.
Buying Ethereum: what trading floors do you need to know?
Unlike stocks and commodities, cryptocurrencies are not traded on a regulated exchange. Instead, investors can buy and sell Ethereum and other coins on specialized cryptocurrency exchanges around the clock.
Buy Ethereum: PayPal
Buying Ethereum via PayPal is not possible with almost any provider. The exception is a social trading provider. Here, investors can deposit money using PayPal and then buy cryptocurrencies such as Ethereum. Credit card deposits are also possible through the PayPal account.
Buy Ethereum: an overview of fees
If you want to buy Ethereum, you should expect various fees:
- ???? Network transaction fees: Transactions in the Ethereum blockchain are verified in a decentralised manner on the network. A fee is charged for this, the amount of which depends on the use of the blockchain.
- ???? Brokerage fees: Many brokers charge a percentage of trading volume for their services. Investors buy Ethereum on some platforms for free. Only the normal market spread applies here.
- ???? Spread: regardless of the broker, there is always a spread when buying Ethereum. The spread is the difference between the buy price and the sell price and the finances of the respective trading venues.
Buy Ethereum: commissions on trading floors
Commissions at cryptocurrency trading venues are also very different in some cases. Therefore, it is worthwhile for investors to compare the commission models of different providers. Examples:
- ???? A one per cent commission is charged when trading Ethereum. There is also a spread (the difference between the buy price and the sell price). Once the trading commission is introduced, most no longer show the spread separately.
- ???? You can only pay for the spread, which is at least 0.3 per cent on a buy and sell, which totals 0.6 per cent. However, the spread can also be higher. You must also invest at least $50 in each trade here.
- ???? In addition to the spread, there is an external commission of $1 per order. The spread depends on the conditions of the trading platforms.
Is it possible to buy Ethereum without registration?
Getting started with cryptocurrency requires good preparation. In addition to registering on a cryptocurrency exchange, verification is also required. A thorough customer verification process is required for any reputable provider. Strict rules leave providers with no other choice. Therefore, it is not possible to buy Ethereum without registering on a cryptocurrency exchange.
The only way to buy cryptocurrency without registration or verification is to exchange directly with the seller. Such platforms connect buyers and sellers of cryptocurrencies.
Ethereum to buy or not: forecast for 2023
Cryptocurrencies have long been mocked by the established financial world. They are too volatile, insufficiently recognized, and have many practical obstacles that detract from the idea of a decentralized currency. But as cryptocurrencies have managed to attract more and more money in recent years, financial experts see long-term potential in at least some of them.
As the second largest cryptocurrency, Ethereum is also being discussed. Compared to its bigger brother, Ethereum has a more modern technical infrastructure with an upcoming upgrade that provides much faster and cheaper transactions. At the same time, Ethereum is already the most important currency for the nascent DeFi industry and offers a powerful platform for smart contracts.