This is the second part of our series that aims to introduce major Digital Assets and the technologies behind them. We are taking the most important questions that future community members are asking themselves and answer them so you as a reader can lean back and do a bit less research. The first part has went into detail with EOS, another similar cryptocurrency that is capable of executing smart contracts.

Understanding these cryptocurrencies is crucial when you are planning to invest or trade as the fundamentals count for atleast 50% while the other 50% is technical knowledge like charting and market cycles.

Contents:

1. What is Ethereum?

2. Who created Ethereum?

3. Who owns Ethereum?

4. Can Ethereum be mined?

5. Which Ethereum wallet to use?

6. Can Ethereum be hacked?

7. Can Ethereum overtake Bitcoin?

8. Where is Ethereum traded?

9. Ethereum’s Price Stats

9.1 What is the Ethereum price today?

9.2 Is it profitable to invest in Ethereum?

9.3 Will the price of Ethereum fall or drop?

1. What is Ethereum?

Ethereum firstly is a Cryptocurrency or a so called Digital Asset. Secondly it is an open-source, blockchain-based distributed computing platform and operating system (or a type of supercomputer) that offers smart contracts and is turing complete.

Being turing complete means that you can write programs or contracts which are able to solve any reasonable computational problem.

But wait, let’s start with the basics first.

You might already know what Bitcoin is: it is a cryptocurrency that can be mined and that can be used for transacting value across the globe while offering freedom from censorship.

Well, Ethereum is similar on the very basics, but to name the most important feature it can execute contracts.

Image Alice and Bob make a deal to rent out an apartment for money. Bob is the buyer and he locks up the ETH in a smart contract that only releases the money to Alice if a digital key gets delivered to the contract address. After Alice sends the key the ETH gets released and a trust-less trade happened where no third parties were involved to judge over the outcome. To make seamless trades like this a contract has to be well defined as there is no turning back from an agreement when the trade has happened. More complex contracts can be done in the future with the help of Oracles, which supply data from outside of the network to achieve more complex contracts.

Another very important feature currently is that startups can also manage a crowdfunding via the smart contracts and issue tokens on the chain. These tokens inherit the ability of the main chain, security and transaction times for example. The tokens can also be used for certain tasks and might also have some utility. Some projects might migrate to their own chains later, but some will stay on the original chain.

There are a lot of tokens already on the Ethereum and here are some of the popular ones: Aeternity, Augur, Golem, Status, Loom, etc.

2. Who created Ethereum?

While Bitcoin’s creators identity is still not known to this day, Ethereum’s founder is Vitalik Buterin who is a Russian-Canadian programmer.

Vitalik is also the co-founder of Bitcoin Magazine. He learned about Bitcoin at a really young age (17) from his father. He has written a lot of publications regarding Bitcoin and has also took a tiny part in Bitcoin development prior to working on Ethereum as he dreamed of creating a functional smart contract platform.

3. Who owns Ethereum?

Ethereum is a decentralized system meaning it is owned by no one and everyone at the same time. Even though Ethereum has lead developers and a founder it is technically owned by no one as anyone is free to make developments to the chain or to fork the chain and use it to build a different dream.

This is the beauty of decentralized systems. If the users and investors are not happy with how the system works, they are free to contribute or even change it. As long as the majority of people agree on Ethereum being Ethereum… it will be Ethereum.

4. Can Ethereum be mined?

Ethereum can be currently mined as it is a Proof of Work (mine-able) coin, but it has plans to migrate to Proof of Stake (stake-able) later, which is a system that rewards holders of the coin.

Currently Ethereum is mined with GPUs (Video cards) and ASICs as well. Ethereum is using the Ethash algorithm for mining:

https://github.com/ethereum/wiki/wiki/Ethash

Bitmain, which is one of the biggest mining companies to date, has recently sold out its first batch of ASIC miners:

https://shop.bitmain.com/product/detail?pid=00020180403174908564M8dMJKtz06B7

ASIC is short for Application-specific integrated circuit meaning that it is a custom built chip that has one particular use, in this case to mine Ethereum.

5. Which Ethereum wallet to use?

Ethereum has a wide range of wallets that users and investors can use. Firstly you need to understand how you store funds, what wallets are, what kind of wallets exists and how they work.

Ethereum, like every cryptocurrency, validates and stores the wallet address data with the help of keys. If you own a private key to an address you own the sum of coins that are stored in the address. Some wallets let you own your own keys and some will offer you an easy wallet management, but without letting you use your own keys meaning that ownership is not really in your hands.

Secondly there are the differences between wallets.

There are hardware wallets that are similar to USB drives, which act as a form of cold storage meaning that they store your private keys and funds offline away from attackers. Hardware wallets give you full control on your funds.

Example:

Ledger Nano S: https://www.ledgerwallet.com/

Trezor Wallet: https://shop.trezor.io/

There are full node wallets that store the complete information that is present on Ethereum’s chain. These wallets build the backbone of the network like peers do for the torrent networks. These wallets also give you full control on your funds, but have bigger storage needs and also longer sync times when launching them.

Example:

Ethereum Frontier: https://ethereum.gitbooks.io/frontier-guide/content/getting_a_client.html

Thirdly there are desktop wallets that act like lite clients, meaning they don’t store the data of the chain, but still give you full control of your funds.

Example:

Exodus Wallet: https://www.exodus.io/

Jaxx Wallet: https://jaxx.io/

Next up there are online wallets that allow you to access your funds when you load up your keys on their interface. They can’t read or store your keys, but only give you the opportunity to read those. These are a bit more risky in the case the website of the online wallet gets hacked and redirected to a malicious site that will store and read your keys. Usually these are open source and with being up-to-date with news regarding them you can avoid the use of it in case it is compromised. There are similar to the lite-clients, but are hosted online.

Example:

MyEtherWallet: https://www.myetherwallet.com/

Lastly there are wallet services or mobile applications that don’t let you access your keys, but offer an easy and fast to use experience for spending your funds. Usually you want to use these, for example a smartphone wallet, when you want to spend your Ethereum somewhere or want to do a personal trading with someone where you only send the disposable funds to the application and spend it afterwards.

These are all over smartphone app stores, but we would advise you to avoid them in case you have the possibility for it.

6. Can Ethereum be hacked?

Ethereum just like every blockchain or open source project can have security vulnerabilities. Luckily projects like Bitcoin were never ‘hacked’ and funds are usually safe. Since Ethereum’s smart contracts features are new technological advancements it is still in a pretty experimental phase, but can be quite secure when audited properly.

There was an incident previously where a DAO (decentralized autonomous organization) was created via smart contracts and a hacker used a vulnerability to siphon the funds gathered out of a smart contract. In this case the Ethereum community agreed to hard fork back to a point where the hack didn’t happen. This was a highly controversial incident, but the funds ($150m worth of Ethereum) were saved in this case.

The chances for you losing funds from your address directly are very minimal or almost impossible though as they are independent from smart contracts and rely on the security of the network, which is pretty high in Ethereum’s case.

To read more about the DAO incident:

https://en.wikipedia.org/wiki/The_DAO_(organization)

7. Can Ethereum overtake Bitcoin?

In case you are wondering if Ethereum can overtake Bitcoin, this is a very tricky question to answer. The two networks can pretty much co-exist currently as they deliver a different function.

Bitcoin will have no inflation after the last blocks are mined and will live on with the transaction fees as block rewards. Ethereum will technically be inflating forever as it currently stands, but this can change as well in the future.

Bitcoin also aims to be a world currency and it is looking as a bright future in case it succeeds. Nevertheless Ethereum is a very valuable project as it stands and it should have a bright future as well with all the fundamental upgrades it will get in terms of scalability and performance.

8. Where is Ethereum traded?

Ethereum is traded on various exchanges that lets users deposit Bitcoin or fiat money (USD,EUR, etc.). It really depends on where you are located and where you want to trade at.

You can of course buy it via several online forums, facebook groups or any place where you find other traders, but this might also pose some risk of getting mugged or scammed when the buyer doesn’t possess enough knowledge about the project.

You can also buy Ethereum with the help of decentralized exchanges that connect buyers and sellers for a minimal fee. These exchanges might have a higher spread, but offer better privacy as most don’t ask for any documents.

An article can be found on decentralized fiat exchanges here.

A non-complete list of trustworthy centralized exchanges:

OKex: https://www.okex.com/

Binance: https://www.binance.com/

Huobi: https://www.huobi.pro/

Bitfinex: https://www.bitfinex.com/

Bithumb: https://www.bithumb.com/

Bitstamp: https://www.bitstamp.net/

9 Ethereum’s Price Stats

9.1 What is the Ethereum price today?

To see the current price you can use the following site:

https://walletinvestor.com/currency/ethereum

9.2 Is it profitable to invest in Ethereum?

Historically speaking Ethereum has been a very good investment. We are currently below the all time high of the coin, but so far it has made over 10000%+ in returns for investors.

9.3 Will the price of Ethereum fall or drop?

No one knows for sure even though TA,FA and ML based methods exist, but again historically speaking it was a good investment for longer periods.

Our parent site WalletInvestor.com is hosting free Machine Learning based price prediction services. The forecast for Ethereum can be viewed here: WalletInvestor Ethereum Prediction