Introduction to Ethereum
During its nascent years in the 1990s, we weren’t sure how useful the internet would be today. Most of us shrugged it off as just a fad and another tech buzzword that would come to pass. In fact, a lot of people were not using the internet. In 1995 only 16 million users were online, around 0.2% of today’s population.
Fast forward nine years to 2004, Web 1.0 transitioned into Web 2.0, a dynamic system that allowed users to communicate on the internet through applications such as Facebook, Google, and Gmail. After this transition, the potential of the internet was becoming more apparent as more businesses started using it.
Today, most of us cannot go more than an hour without using it, whether it’s sending a text, replying to an e-mail, or simply Googling something. To some of us, it’s our jobs and where we host our businesses. If I were to tell you to stay away from any internet connection for a day, you would see me as crazy.
As with the internet revolution, we are yet at another crossroads. People are questioning whether the Ethereum blockchain will help the internet transition from Web 2.0 to what is now being called Web 3.0. Most people view it as a complex network for the everyday user.
Having a basic understanding of the Ethereum blockchain will put you ahead of the herd, much like the early adopters of the internet.
What exactly is Ethereum?
Ethereum is a decentralized and distributed blockchain-based network powered by the Ether token. Like Bitcoin, Ethereum facilitates peer-to-peer transactions between users using ether tokens. Unlike Bitcoin, Ethereum goes a step further and many consider it to be the next step in the internet revolution.
Simply put, Ethereum is a blockchain-based software platform that allows developers to build applications across a distributed network. It supports decentralized applications, decentralized finance platforms, and decentralized exchanges. It’s adaptable, programmable, and flexible by design.
Where centralized platforms like WordPress and Amazon allow you to build and host applications on top of centralized servers, Ethereum allows you to develop and deploy applications across distributed networks.
Ethereum VS Bitcoin: What’s the difference?
Bitcoin aims to facilitate peer-to-peer transactions and act as a replacement for FIAT currencies without the inherent challenges associated with FIAT currencies. Ethereum, on the other hand, also enables peer-to-peer transactions, but its main aim is to provide a platform for building decentralized applications.
Bitcoin is a first-generation blockchain, and its code is rather rigid. Developers cannot change Bitcoin’s code without splitting it into another new blockchain. It was intentionally designed this way to enhance security. Unlike Bitcoin, Ethereum is flexible, and it allows developers to change the base code from time to time to improve scalability. It also enables users to develop custom applications on top of its base layer using a programming language known as Solidity.
Bitcoin has a capped supply of 21 million coins, while Ethereum has an unlimited supply with a deflationary mechanism. As of August 5, 2021, Ethereum deployed a burning mechanism (destroying ether tokens) to limit the number of ether tokens created annually.
A brief history of Ethereum (mention DAO and Ethereum classic)
Viatbilik Buterin introduced the concept of Ethereum in 2013 through the Ethereum white paper. This was the first time someone had considered the full potential of blockchain technology beyond peer-to-peer transactions. It was later launched on July 30, 2015, by Buterin and Joe Lubin, the founder of ConsenSys.
Ethereum launched with a supply of 72 million ether tokens. 80% of these tokens were distributed to individuals who had purchased ether in a crowd sale conducted in July and August 2014. The remaining 12 million tokens were distributed at the launch, where the early contributors of Ethereum received six million tokens. The other 6 million was set aside for Ethereum Foundation — a non-profit organization focused on promoting the adoption and growth of the network.
In 2016, the Decentralized Autonomous Organization (DAO) hack brought one of the most significant security vulnerabilities on any blockchain to the public’s attention. Launched in 2016, DAO was an innovative idea to let users crowdsource funds and run the organization entirely with code. However, all this went south when a group of hackers gained majority control of the Ethereum blockchain to steal over $50 million worth of ether tokens that the DAO project had raised.
While most of the community decided to reverse the theft and invalidate blocks associated with the hack, some chose to maintain the hack blocks. As a result, the Ethereum blockchain split to become the cryptocurrency Ethereum Classic (ETC). This was a pivotal moment for the Ethereum network.
Since then, the Ethereum blockchain has undergone constant upgrades to make it more scalable, secure, and sustainable. As of December 2020, the Ethereum blockchain had begun shifting to Consensus Layer (previously known as Ethereum 2.0), which we’ll look at later in this guide.
Fundamentals of how Ethereum works
The ethereum network shares some similarities with the Bitcoin network in that it relies on blockchain technology. Simply put, blockchain technology is a chronologically ordered ledger that records everything on the network and stores data from valid transactions.
Among its core features, the blockchain ledger is publicly available to users meaning that anyone can track and verify transactions on the Ethereum network. You can do this by using a block explorer — a software that aggregates all Ethereum transactions and displays them in one place.
The blockchain ledger is also distributed to all network participants, commonly known as nodes. This ensures that the Ethereum ledger maintains consistency. If a ledger entry does not match the rest of the network, it’s automatically invalidated. This feature also plays a crucial part in making Ethereum immutable.
Moreover, blockchain technology ensures that the governance of the Ethereum network is entirely in the hands of the users. To accomplish this, different nodes perform various tasks such as verifying transactions, making decisions on the network changes, and storing transactions. This architecture makes the Ethereum network censorship-free.
What are smart contracts?
Smart contracts are the fundamental building blocks of the Ethereum blockchain. Like any contract, blockchain networks use smart contracts to establish the terms of an agreement. However, unlike traditional contracts, smart contracts are programs executed as code running on the Ethereum blockchain. Essentially smart contracts allow developers to build apps that leverage the main features of blockchain — security, reliability, accessibility, and distribution.
Smart contracts were first proposed in the 1990s by a computer scientist and lawyer named Nick Szabo. In his paper, Szabo compares smart contracts to a vending machine in that if you put in a dollar in a vending machine, there is a fixed number of pre-determined outcomes. If you’re buying a soda, the vending machine will produce your drink and your change, say $.75. If the drink is not available, you can choose another drink, snack, or get your dollar back.
Like the vending machine, smart contracts have a set of pre-demined outcomes that ensure the parties involved act honestly according to the rules put in place. Unless specified in the code, users cannot delete smart contracts. Moreover, as one of blockchain’s core features, once a smart contract transaction is initiated, data validated and added to the blockchain is irreversible.
The Ethereum blockchain uses the Solidity programming language to code smart contracts. It’s also crucial to note that there are fees incurred when deploying a smart contract. A simple, smart contract can easily cost upwards of around $500, while a meaningful and intensive contract can easily cost more than $10,000. The cost depends on the sort of smart contract.
What’s the difference between Ethereum and ether?
To put it in simple terms, Ethereum is a blockchain-based software, while ether is the cryptocurrency that fuels it. You’ll also often come across investors and developers calling ether an altcoin. This means that it is an alternative coin to bitcoin. All other cryptocurrencies other than bitcoin are also referred to as altcoins.
How does Ethereum Work?
Like all cryptocurrencies, Ethereum works based on a blockchain network. However, where the Ethereum blockchain differs from other cryptocurrencies is that it also allows users to store the state of the network. Most people refer to it as a state machine.
The state is the current information on all the applications running on top of Ethereum, each user’s balance, all the smart contract code used to develop applications, and any changes made to the network.
Transactions on the Ethereum network are mostly run within smart contract applications. As of June 2021, developers had deployed around 2.5 million contracts on Ethereum. This means that the network processes thousands of transactions at any given time. To keep track of all these transactions, every node has to run the transaction and store the output.
The blockchain uses a special mechanism known as mining to update the state. Mining is done through the Proof-of-work (PoW) algorithms. However, as of December 2020, Ethereum deployed its roadmap to shift to a Proof-of-Stake (PoS) algorithm.
How is new ether created?
If you have read our Bitcoin article [reference link to Bitcoin article], you are familiar with the PoW algorithm and how new bitcoins are generated. The same mechanism also applies to the Ethereum blockchain. Mining generates new ether tokens and distributes them to miners as block rewards.
How does Ethereum mining work?
On the Ethereum blockchain, mining means more than just increasing the supply of ether tokens. It also means enhancing the security of the Ethereum network and ensuring all participants collaborate in a just manner.
Like Bitcoin, Ethereum currently operates on the Proof-of-work (PoW) protocol. It implements PoW to ensure that all the nodes on the network agree on the state of data recorded on the blockchain. The protocol also aims to deter network attacks or abuse. It achieves this by forcing some of the nodes, known as miners, to solve complex mathematical calculations and computations to verify transactions on the network.
Miners ensure that all the transaction data is valid and agreed upon by the network before appending it to the blockchain. They accomplish this through a hash function that hashes pending transactions and other transaction data. The resulting hash value must be within a specific range of numbers to be considered valid. If it’s not, the hash value is considered invalid, and the miner has to solve the problem again.
The difficulty of the mathematical problem is known as the hash rate, and the state of the network determines it. If there are a lot of miners with advanced mining devices, then the hash rate will increase. Meaning miners will have to dedicate more computational power to compete with other miners. On Ethereum, it takes an average of 12 seconds for miners to find the winning hash value and generate new blocks.
When a miner successfully solves the problem, they broadcast the value to the network to prove that they used computational power to solve the problem. As an incentive, miners are rewarded with ether tokens. The reward per block is currently two ether, although it might vary depending on network activity. The block rewards are generated from the new ether tokens and transaction fees.
Ethereum is considered more profitable due to the many decentralized applications running on the network compared to Bitcoin. Bitcoin is more of a transaction-based network; hence, the transaction fees are also lower than Ethereum.
What is Ethereum gas? (Gas limits)
To prevent nodes from spamming the Ethereum network, every transaction requires a small fee to send ether tokens from one wallet to another. Moreover, running smart contracts on Ethereum also incurs a fee. This fee is known as gas.
Gas is the unit of measurement for the amount of computational power required to process a transaction on Ethereum. It’s paid in ether tokens. However, since gas prices cost a fraction of a single ether token, they are denominated in a unit known as gwei i. A single unit of gwei is equivalent to 10-9 ETH or 0.0000000001 ETH.
The gas fees are distributed among the miners as a reward for processing and appending new blocks to the blockchain. Gas fees might vary depending on the type of transaction. The fee is relatively cheap for simple ether transactions, while large transactions involving smart contracts and decentralized applications are quite expensive.
Since the gas fees can reach high prices, Ethereum allows you to include a gas limit when making a transaction. The gas limit refers to the maximum amount of gwei you are willing to spend on a transaction.
It’s crucial to note that miners process transactions depending on the gas fee. So a transaction with a higher gas fee will likely be processed faster. The standard limit for Ethereum gas fees is 21,000 units. If you set a high enough gas limit and the transaction does not use all the gwei, the balance will be refunded to your wallet.
Ethereum standards and tokens
As stated above, smart contracts are fundamental to the Ethereum network as it allows developers to build decentralized applications (apps). Another crucial aspect of Ethereum is the Ethereum Virtual Machine (EVM). It’s a software platform that runs on Ethereum, allows developers to run programs, and simplifies building apps.
The blockchain deploys various Ethereum application-level specifications known as Ethereum Request for Comments or ERC standards to support a wide range of apps. In short, ERC standards can be described as a set of functions for a certain smart contract. The function can include name registries, library/package formats, how the smart contract will run, node functions, and more.
Moreover, the function can include token standards. A token in the crypto space refers to a special type of smart contract that defines a bundle of conditional rights assigned to the token holders.
A cryptocurrency like ether is the native currency on the Ethereum blockchain, while a token is considered the “currency” of a smart contract. However, unlike native cryptocurrencies, tokens have various applications such as transactions, voting rights, representing different asset classes, or membership rights in a particular community.
Numerous ERC standards serve multiple purposes, but here are the top three in terms of adoption and usability:
ERC-20 is the standard interface and API for fungible tokens used for various applications like voting tokens, staking tokens, or even virtual currencies.
ERC-721 is the standard API for non-fungible tokens (NFTs) like deeds for artwork, songs, or real estate. An excellent example of a project developed using an ERC-721 standard are Cryptokitties.
ERC-1151 – a token standard that integrates the functionalities of ERC-20 and ERC-721. It can contain both fungible and non-fungible tokens within the smart contract.
Ethereum and a decentralized internet (Web 3.0)
Today, intermediaries are everywhere. Behind the scenes, they help users accomplish all sorts of digital tasks. For instance, Gmail helps us send messages, while WhatsApp allows us to communicate in real-time. To access most of these services, we must provide our personal information. The data is stored on other people’s computers, and servers such as Facebook servers, Amazon servers, or even Google servers.
According to the Ethereum community and decentralized advocates, this structure is flawed. It implies that users have less control over their information and must abide by the rules set by centralized institutions.
The idea that Ethereum presents is eliminating all the centralized parties (intermediaries) and replacing them with smart contracts that will execute automatically and according to the rules put in place. Moreover, Ethereum also distributes data across various nodes to curb censorship. If an entry is deleted in one node, it will remain in the network since the other nodes have a copy on the blockchain ledger.
Moving to a decentralized internet means developing apps. Some of the popular Ethereum apps include:
Metamask is a digital wallet that lets you perform peer-to-peer transactions and browse on a decentralized browser.
Chainlink is an oracle platform that provides real-time data from the outside world to Ethereum smart contracts.
Axie Infinity – an online play-to-earn role-playing game that lets players battle out their monster avatars to earn rewards in the form of Axis that can be swapped for other cryptocurrencies of Fiat currencies.
Ethereum and decentralized finance (Defi)
What is decentralized finance?
Decentralized finance is an emerging financial technology that leverages distributed ledger technologies to provide financial services. In the Ethereum context, Defi provides financial services to anyone using Ethereum.
Since Defi applications are developed on top of Ethereum, they inherit all the features of a blockchain. The markets are always open, and no central authority controls the Defi ecosystem.
Moreover, since transactions and operations are peer-to-peer, they are settled faster and, for some, in real-time. Defi services are also highly secure and transparent as Ethereum provides a block explorer to go through the transactions.
It all started with Bitcoin
Bitcoin, in many ways, was the first Defi application. It introduced a new financial infrastructure that instantly sends and receives funds worldwide. It’s also decentralized and distributed, meaning it does need intermediate financial institutions to process transactions. Additionally, it runs purely on code, meaning that users have to observe the rules in Blockchain’s code.
Ethereum builds on top of what Bitcoin achieved. It adds a layer of programmable money through smart contracts. Ethereum allows developers to program logic onto the blockchain. So users get the control and security of Bitcoin and financial services provided by traditional financial institutions.
What can you do with Defi?
- Access stablecoins
Cryptocurrency volatility is a significant challenge when pricing financial services, products, or when it comes to general spending. To curb this, Ethereum introduced stablecoins which are crypto tokens pegged to a currency like a dollar or a euro. This makes it easier to transact with crypto, calculate debt, and for financial services.
Some popular stable coins on Ethereum are USDT, DAI, and USDC [Link to all these projects].
- Borrowing and Lending
Ethereum provides a decentralized system that allows users to borrow or lend cryptocurrencies without a central authority. These services come in two varieties:
Peer-to-peer, where users borrow and lend among themselves directly
Pool-based systems where lenders provide funds to a collective pool where borrowers can borrow.
Actually, one of the easiest ways to borrow funds is through the CEX.IO Loan platform. Simply transfer ether tokens to your wallet, make calculations on the CEX.IO calculator, agree on the loan terms and conditions and get your loans.
- Trading tokens on the Ethereum network
The Ethereum network also allows developers to develop decentralized crypto exchange platforms (DEX) that allow users to trade crypto tokens directly without centralized exchanges. The best example of an Ethereum DEX is Uniswap [Link to uniswap].
- Decentralized marketplaces
NFTs on the Ethereum blockchain have gained popularity due to the recent spike in interest in NFTs. Apart from allowing developers and creators to generate non-fungible tokens in the form of art, music, or digital goods, Ethereum also hosts several decentralized markets. They enable users to trade one-of-a-kind crypto-collectibles like the famous Cryptopunks. This shows that NFTs on the Ethereum blockchain can generally represent any asset that has value.
Blockchain trilemma and Ethereum protocol
Why does Ethereum need to scale?
Blockchain trilemma, a term conceived by Vitalik Buterin, refers to the challenge of creating a scalable, secure, and decentralized blockchain network. In most cases, developers fail to create applications that offer complete decentralization without compromising scalability or security.
As the second top cryptocurrency by market cap, Ethereum was the first network to deploy decentralized applications. This placed it as the pioneer of a decentralized internet (Web 3.0). However, the current functionality of Ethereum makes it unsuitable as a base layer of Web 3.0. To support the numerous smart contract transactions on the network, Ethereum needs to be fast and scalable.
Currently, Ethereum operates by limiting the gas limit for transactions on each block. For instance, if the gas limit is 100,000 gwei, two transactions each with a gas fee of 50,000 gwei will be processed. Also, 10 transactions will be processed, each with a gas fee of 10,000 gwei. Through this model, Ethereum can offer an average of 15 transactions per second. This is not ideal for a platform aiming to become a world computer.
Another critic that faces the Ethereum blockchain is its resource incentive. To append a block on the blockchain, miners need to solve complex mathematical calculations. As more miners join the network, the hash rate inherently increases. This forces miners to upgrade their devices to rather expensive ones to compete with other miners. Moreover, mining also consumes a lot of electricity which adds to the mining cost.
How is Ethereum addressing scalability issues?
Ethereum developers and researchers have pioneered various solutions to address the above issues. Many of these solutions are available to test out today, and more are on the way.
The solutions come in twofold:
On-chain solutions: This scaling method requires changes to the main Ethereum protocol, the Layer 1 Mainnet.
Off-chain solutions: are implemented separately from the Layer Mainnet and require no change to the Ethereum protocol. They are developed on the Layer 2 network — networks that run separate from the Mainnet but depend on its consensus mechanism for security.
Layer 2 scaling solutions (off-chain solutions)
These are the most widely used Layer 2 scaling solutions on the Ethereum network. They allow participants to transact outside the Mainnet. The users only need to send the initiating and final transactions to the Mainnet. The rest of the transactions are processed by the channel.
Although channels are the most popular scaling solutions, they have some drawbacks. The participants have to know each other upfront, and they have to lock up funds in a multi-sig contract, and they can only withdraw the funds when the channel is closed. Moreover, channels are supplication specific and are used mostly for payment channels. This concept is also widely used by Bitcoin’s Lighting Network.
From Csiri research
One of the top projects that leverages channels on Ethereum is Riden.
Proposed by Joseph Poon and Vitalik Buterin, Plasma allows users to develop scalable applications on Ethereum. Plasma leverages smart contracts and Merkle trees to enable developers to create unlimited child chains that offload transactions from the main chain. It allows the Ethereum network to process transactions cheaply and quickly.
One of the drawbacks of plasma is the waiting period. At times transactions may take too long to be processed.
Two good examples of Plasma Layer 2 solutions are the OMG Network and Matic Network.
Sidechains are Ethereum-compatible independent chains that run parallel to the Ethereum network. They have their consensus models and block parameters. Interoperability with the Ethereum network is made possible by the EVM. Therefore, sidechains can directly deploy smart contracts deployed on the Mainnet.
Form Academic Horizen
A good example is xDai.
Rollup provides a scaling solution by rolling up sidechain transactions into a single transaction and generating a cryptographic proof, known as a Succinct Non-Interactive Argument of Knowledge (SNARK).
In the rollup layer, transaction states and execution are handled by the sidechain, and only the proof is submitted to the base layer to be stored. There are two types of rollups:
ZKSnarks rollups: ZKsnarks stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. They run computation off-chain and then submit it in what is known as a validity poof to the layer one blockchain. The validity proof simply means that someone has gone through a set of transactions and has deemed them valid, and they submit their proof to the base Ethereum layer. This process functions similarly to the PoW. However, they occur off-chain. ZKsnarks rollups are a way for different parties to prove they have a particular transaction data without relieving the data.
From Electric Coin
Optimistic rollups: By using a virtual machine known as Optimistic Virtual Machine, this scaling solution will assume that transactions are valid by default hence the name Optimistic. Instead of using validity proof like ZKsnarks, Optimistic rollups use a fraud-proof but only when challenged. It also posts a fact checkable by other people. Since Ethereum involves people’s money, it is reasonable to assume that people check. That is why this works. If a transaction is found invalid, it is reverted, and the validator who validated the transactions gets some of their tokens slashed.
The consensus Layer
The consensus layer upgrades the existing layer 1 Mainnet, transforming it from a Proof-of-Work consensus algorithm to a Proof-of-Stake (PoW). In a PoS system, blocks are not mined but forged in a process known as minting.
Instead of miners using computation power to compete to mine blocks, the network will periodically choose validators to validate blocks and append them to the blockchain. If done correctly, the algorithm will select validators randomly, and after appending blocks, they will be awarded the block’s transaction fees and a block reward. To become a validator, users have to stake ether tokens on the Ethereum network. If by any chance, a validator acts dishonestly or fraudulently, they can end up losing some of their staked ether in what is known as slashing.
Although Ethereum launched in 2015 as a PoW, developers were already planning a long-term transition to a PoS blockchain. Ethereum will transition into a PoS blockchain through the Casper upgrade fully.
Sharding is splitting the Ethereum blockchain ledger into multiple smaller ledgers known as shards, each containing its independent state, account balances, and smart contracts. This aims to offload the bulk of the transactions and increase transaction speed. Although shards will have different states, they will still communicate in the broad Ethereum network.
Sharding is perhaps the most complex scaling solution, but it will be the most revolutionary and effective solution in the blockchain space if successfully implemented.
From Coding Bootcamp
How to participate in the Ethereum blockchain
Aside from just trading or hodling ether tokens, you can also participate directly on the Ethereum network by running a node and clients to support the network.
What is an Ethereum node?
An Ethereum node is a computer that performs a specific function on the Ethereum network and runs client software. Depending on the task you want to achieve on the blockchain, Ethereum nodes can vary in terms of devices. It can simply be a mobile phone running an Ethereum wallet or a full set up computer used to mine and store the Ethereum blockchain.
There are three main types of Ethereum nodes:
A full node is full of blockchain data. They also participate in block validation and state and block verification. Full nodes serve the network by providing data on request, and other nodes derive all block states from it.
A light node stores a lighter version of the Ethereum blockchain. It stores only the header chain, and if they need more block data, they request it from the full nodes.
An archive node stores everything on a full node and builds an archive of historical states. Archive nodes store data in terabytes, making them less ideal for average users but are handy for block explorers and chain analytics applications.
What is an Ethereum client?
An Ethereum client, on the other hand, is the software needed to allow Ethereum nodes to read blocks on the Ethereum blockchain and Ethereum smart contracts. In simple terms, you can view a client as implementing the Ethereum protocol in different programming languages.
Ethereum allows developers to build clients using various programming languages like Go, Rust, Java, and C#. They are useful for developers because they interact with the network.
Unlike Bitcoin, which only implements Bitcoin core as its primary node software, Ethereum implements a range of programs (clients) like Geth, which uses Go language, and Parity which uses Rust programming language. Each of these clients can have its own rules and consensus mechanisms. However, the technical specifications of how these clients work are outside the scope of this guide.
Like nodes, there are three types of clients:
A full client stores the entire Ethereum blockchain and allows connected nodes to perform all tasks on the network, such as mining, validating transactions, and running smart contracts.
A light client offers a subset of the functionality of a full client to provide faster transaction speeds and free up data storage.
A remote client does not store its copy of the blockchain or validate transactions or block headers. Instead, they rely on full and light nodes to provide them with access to the blockchain.
How to mine ether tokens on Ethereum?
You need to be either a full or light client to mine ether tokens. However, since a client is a software, you will need additional hardware to mine. A common practice is setting a mining rig with multiple connected Graphics Processing Units to hash at high speeds.
If you do not want to invest in your hardware, you can join a mining pool. Pools allow you to leverage the hashing power of miners in the pool, giving you a competitive edge. However, the block rewards are divided among the pool miners.
The Solidity programming language
Essentially, Solidity is the language used to write functions that specify the rules of a smart contract, how it will operate and how users will interact with it. The functions are then passed to the EVM, which executes the code. Solidity is not the only language used on Ethereum, Vyper is another language that can be used on Ethereum.
To better understand Solidity and how it works, you should look at Solidity’s GitHub pages.
Getting started with Ethereum on CEX.IO
How can you buy ETH on CEX.IO?
Before you can start trading, you first need to buy ether tokens. There are a number of ways to buy ether on CEX.IO, including
Buy ether online with a Credit or Debit card
How to deposit and withdraw ether on CEX.IO
How to buy ether tokens on the CEX.IO Exchange [Link]
How to buy ether through peer-to-peer transactions [Link]
How can you store your ether securely?
After purchasing ETH, you need to store them. The CEX.IO wallet allows you to store your ETH tokens safely. Additionally, it allows earning passive income on your ETH through CEX.IO Earn. It allows users to save their tokens, earn interest, or stake their tokens. Users can also delegate their ETH to Defi liquidity pools for high-risk interests.
If you wish to store your coins on an Ethereum wallet, there are two types of wallets to choose from.
Hot wallet: these are Ethereum wallets that are connected to the internet. Two great examples of Ethereum hot wallets are Metamask and Trust wallet. Hot wallets are ideal for frequent traders.
Cold wallet: unlike hot wallets, cold wallets are entirely cut off from the internet, and they only connect to it when the owner wants to make a transaction. Cold wallets are ideal for storing a large number of coins. Two types of hot wallets are paper wallets and hardware wallets.
Can you make money with Ethereum?
Simply put, yes, you can make money with Ethereum. In the same way, you can lose money with Ethereum. It all depends on your approach.
The most popular way to earn from Ethereum is through long-term investing. This strategy involves buying coins and holding them with the expectation the price will go up in the future.
Another popular strategy is trading. Like other cryptocurrencies, Ethereum is also very volatile. These price fluctuations provide an opportunity for short-term traders to buy low and sell high, thus racking in profits over time.
Defi applications also provide an excellent opportunity to make money. You can lend your coins and interest on the loan. You can also mint synthesis smart contract tokens that implement a PoS consensus algorithm. You can later sell these tokens for a profit.
Lastly, you can also take out loans using your ether coins collateral. If the price of your ether tokens rises, you can use some of the profits to pay out loans.
The Ethereum blockchain is quite diverse, and we cannot cover all its aspects in this guide. However, the best way to get started is to buy ether tokens and interact with the network.
CTA (Button) Buy ETH Today!
“I have my fair share of bitcoin, but I’m more of an Ethereum maxi”, Mark Cuban said on the Next with Novo podcast. Cuban went ahead to point out something that Ethereum developers have been saying for years, “What makes Ethereum standout is its utility and the use of smart contracts.”
Not only is Ethereum the most used blockchain, but its smart contracts power most blockchain-based projects today, from Defi, NFTs, and apps, to Web 3.0 projects. And yes, there are still technical challenges on the network, but the Ethereum developers and community have never shied away from tackling them.
Today, it’s hard to predict the future of Ethereum. However, looking at its roadmap since inception, its previous upgrades and accomplishments paint a clear picture of what’s to come — revolutionary apps, DeFi projects, and also a transition to Web 3.0.
Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.