What is Ethereum – Beginner’s guide

Last updated on September 23, 2019

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You may hear bitcoin which is disrupting the traditional financial industry where we transact each other. After this huge innovation, New revolutionary Ethereum cryptocurrency born in 2015 which simply smart contract platform. In this guide perfectly suitable for beginners and cryptocurrency enthusiasts where explanation comes with short and simple manner. Some of the topics are going to cover Whats is Ethereum, Technology behind the Ethereum, Ethereum’s applications, how to earn money using Ethereum and complete guide to buying Ethereum worldwide.

Ethereum world of crypto

What is Ethereum?

Ethereum is open-source, distributed blockchain-based smart contract programming environment where developers can build decentralized applications top of the Ethereum blockchain. Ethereum is digital currency behalf of smart contract facility where the currency is Ether. Ethereum was founded by Vitalic Buterin who is a programmer and former contributor of the BitcoinMagazine.

History-Special milestones

There are a lot of updates and Events happened in Ethereums history, These are the major events and updates,

  • In February 2014, Ethereum foundation was born.
  • In May 2015, Testnet launched [Olympic]
  • In 30th July 2015, Mainnet launched [Frontier ] and Genesis block was created where the genesis block means first created a block of any blockchain.
  • In April 2016, DAO [Decentralized Autonomous Organization] launched and 150M raised where the DAO is a smart contract that describes the organization.
  • In June 2016, Bug in DAO code exposed and hacked by unknown. To refund 50M immediately decided to hard-fork the Ethereum blockchain [Hardfork is splitting the old blockchain and eventually creating new blockchain by Majority miners voting]. Someone stayed the old Ethereum chain which is called Ethereum classic.
  • In January 2018, Ethereum hit all the time high which was 1390$
  • Next Major Update has to come which Serenity

What is Ethereum smart contract?

Normal contracts are agreements of the two parties or more which written on paper and enforced by law. A smart contract is self-executed computer coding technique intends to digitally facilitate, verify, or enforce the traditional contracts.  First Nick Zhabo introduce the smart contract concept and, later Vitalic Buterin integrates into the Ethereum blockchain.

Advantages of smart contract

  1. No intermediaries – Normally traditional contracts rely on third parties likes lawyer and smart contract depends on the blockchain
  2. Speed – Typically more speed than traditional contracts because it is run by written codes. No paper works
  3. Transparency – Contracts open to the relevant parties and There are no doubts.
  4. Storage and Backup – All the copies of the contracts spread over the computer nodes and every transaction records on the blockchain.

Smart contract applications run on Ethereum blockchain help of computing power is provided by Ehtereum nodes spread all over the world. Nodes can introduce as decentralized world computer where contract transactions distributed publicly across these nodes and recorded in Ethereums blockchain. These nodes get paid from the native currency Ether(Eth) for computing power provided.

Ethereum typical terms

There are many terms used in the Ethereum platform where explain popular terms.

What is Ether, gas price, and gas limit?

Ether(Eth) is the native currency in Ethereum blockchain where Ether valued unit ( digital asset) used to pay out for computer power provided to the network.

Gas: When the transaction happens in Ethereum blockchain, Computer hash power need to process a transaction where the hash power required, is determined by the gas unit.

Gas Price: the Gas price is amount pay (amount of Eth ) per unit of gas for a particular transaction where high gas price faster transactions. ( Fee for transaction = Gas price * Gas limit) Gas limit: Maximum amount willing to pay for a particular transaction fee.

Whats Wei and Gwei?

Wei and Gwei also, a subunit of ether which is used to indicate transactions fees because that is very small. b[ 1Wei = 10^ -18 Eth ] [ 1Gwei = 10^ -9 ]

Key stats of Ethereum

TickerETH
Max supplyNo data
Circulation supply106,665,600 ETH
Official websitehttps://ethereum.org
Block reward2 ETH
Block reward timeAverage 14 – 15 Seconds
Block explorerEtherscan, Ethexplorer
Mainnet launch date30 July 2015

ERC -20 tokens: That is created in Ethereum blockchain when developing a new Dapp project. These tokens create, issues according to a set of standards provided by Ethereum. This token also traded in cryptocurrency exchanges.

Ethereum decentralized applications [Dapps]

Decentralized application[ Dapps] is an application that is run and build on Ethereum blockchain. When creating Dapp, we can create token to represent the Dapp brand, a token can be used to fundraise for project, used for the platform as a utility token. The Dapp tokens traded on exchanges and we can invest in Dapp projects that have the potential to grow in the future.

As example BAT token price in ICO stage was $0.035 and June 2019 price is near 0.25$. In case total gain is 7X within few years.

A typical process to build decentralized applications

  1. If you have an innovative idea write a white paper
  2. Establishing the startup
  3. Marketing the project to attract investors, Most startups hold bounty program to promote the project among the crypto community
  4. Hold ICO to raised fund for development and other expenditure
  5. Development and Launch

There are so many applications built on Ethereum blockchain almost over 1000 exists but most of the projects not performing well on the market right now. Most popular apps are listed category wise here for knowledge.

01.Necessary app to interact with Ethereum blockchain

Metamask: Metamask is Ethereum wallet application that is used to store, receive, send Ethereum. Which is build as a chrome extension and completely free. A good feature is you can create multiple Ethereum accounts on one extension with one key phrase and password. Metamask supports so many Dapps such as decentralized exchanges, MakerDao CDP, etc.

Myetherwallet: MyEtherWallet is one of the most popular wallet interfaces to interact with Ethereum’s blockchain secure way. MEW supports hardware wallet and so many Dapps such as MakerDao CDP. The MEWconnect app is available for Android and iOS. They support instant token swap( Token exchange ) with Kyber network, and Changelly, Simplex for fiat currency exchanges.

Mycrypto: Mycrypto is fast-growing Ethereum desktop wallet which is a good alternative to MEW. They also, provide buy and sell service partnering with Shapeshift exchanges and 0x instant.

Brave: Brave is a cryptocurrency web browser like Google Chrome. Brave native currency is BAT token which is ERC-20 token and Its supports the ERC 20 tokens.

Status: Status is a messenger, crypto wallet, and Web3 browser

Selfkey: SelfKey is self-sovereign identity management system for more freedom and privacy

02. Defi apps[ Decentralized Finance]

Ehtlend: This is a lending platform where taking loans with low interest collateralizing supported cryptocurrency. Loans offer for stable coins and fiat currencies.

MakerDAO CDP: CDP enables generate DAI stable coin for depositing and Lockup Ethereum as collateral future it supports many collateral assets. You can get back collateral making full payment of generated DAI where some fee will be charged using MKR.

BlockFi: Blockfi provides cryptocurrency loan service and earns interest from the deposing cryptocurrency.

Dharma: Dharma provides Lend, Borrow services.

Uniswap: Uniswap is cryptocurrency trading platform which provides instant buy and sells Eth and ERC-20 tokens.

03. Decentralized games

Nowadays, a lot of game developers are looking to decentralized game development and it is a new way to interact with developers and players each other. Let’s look at powerful games exist in the current market.

Cryptokitties: Cryptokitty is decentralized blockchain game which is consist of 100% owning breedable, collectible creatures. These collectibles cannot be replicated, taken away, or destroyed. 

0x universe: 0xUniverse is the next generation blockchain game where players can build spaceships, explore the galaxy, and colonize planets.

Megacryptopolis: Megacryptopolis consists of building the decentralized city on Ethereum blockchain.

God unchanged: God unchanged is a battle game which is transparent and immutable all transactions.

Axie infinity: Axie Infinity is a kind of digital pet community which lets you battle, collect and raise adorable creatures called Axies.

04. Decentralized exchanges

Idex: Idex is most popular ethereum decentralized exchange exists which is listed more than 400 ERC 20 tokens. The exchange has native token called Idex, formerly  Aura token.

Forkdelta: Forkdelta also, a decentralized exchange which is listed 15 verified tokens listing and lot of unverified tokens.

Bancor: Bancor is decentralized liquidity network that provides wallet service store, exchange for any other tokens automatically, send and receive. Bancor has own token call BNT.

Kyber Network: Kyber is an on-chain liquidity protocol that aggregates liquidity from a wide range of reserves, powering instant and secure token exchange in any decentralized application.

05. Market Places/Platforms

Aragon: Aragon consists freely creating decentralized organizations such as companies, communities without border or intermediaries

Augar: Augar is decentralized prediction market for real-world events

Distri0x: Distric0x is a network of decentralized markets and communities to create, operate and govern.

Decentraland: Decentraland is virtual world owning the users where users can build, explore and even earn cryptocurrency from the user’s creations.

06. Decentralized freelance platforms

Ethlance: An Ethlance is Decentralized Upwork for both Hire and work, both parties payments using Ether and Not fees charge for work or hire. In traditional market places, They are cut  10%  – 20%  from the freelancer’s earnings.

Bounties Network: This is a decentralized freelance market place, where any freelancer can contribute for a listed task by task owners where payments though Eth for both parties.

07. Decentralized gambling/betting

FCK: FCK is decentralized game or betting system which offer dice rolling, poker, roulette, lottery, etc.

Dice 2 win: Dice.2.win also, a decentralized betting system which offers coin flip, dice rolling, etc.

Edgeless: Edgeless is ethereum powered casino platform which offers dice rolling, treasure hunt, roulette, slots, blackjack, etc.

Etherol: Etheroll is an Ethereum smart contract for placing bets on our provably-fair dice game using Ether

What is Ethereum 2.0

Eth 2.0 update will huge for ethereum blockchain because It will solve a lot of issues arising in current ethereum blockchain then Ethereum will be faster, efficient and economical. Also, this major update called “Serenity” update.

Eth 2.0 major updates

01. Proof of stake – Casper

Next major update is converting proof of work( Ethereum used bitcoin transaction validation mechanism-miners ) to proof of stake(validator nodes locking up ethereum- stakers) where Staking users will earn the interest with Eth. Staking is more economical than mining.

02. Sharding

This is major integration into the Ethereum blockchain which is partitioning large chains into smaller parts which bring faster and efficient transaction. Eventually, the network becomes more scalable.

03.EWASM- Ethereum virtual machine improvements

EVM is a kind of code running environment in Ethereum where all nodes connected. EWASM will increase code execution speeds and time.

04.Plasma

Which is an extra layer or chain to handle a huge amount of transaction? It is Etherem’s lightning network. (Lightning network is a second-layer solution for bitcoin for scalability solutions)

How to invest in Ethereum

There are few methods to invest in Ethereum platform which are listed and explained.

01.Ethereum mining

Ethereum uses bitcoin mining concept to Validate Ethereum’s transactions. In this case, miners should provide computer hash power (GPU mostly used) to the Ehterum network. We can earn money for contributing hash power to Ethereum network. Cheap electricity is the main factor for profitable mining.

02.Hodl

Most investors and retails buyers buy Ethereum at a lower price and then sell it at a higher price which is the most popular and easy way to invest in Ethereum.

03. EthereumTrading

As traditional assets, Ehtereum also, traded in so many exchanges. To get start cryptocurrency trading, you need to learn TA, FA  and Basic trading technique to get constant profit.[TA- Technical analysis, FA – Fundamental analysis]

Types of trading

Buy/Sell

Which means buy lower prices and sell higher price like long term holding but this can be done for daily basis for gain 1% – 50% maximum return of investment. In this case, you can only get profit from the market go high(Bullish or Bull Environment). Where to buy ethereum for BTC, USD, EUR, and GB

Here is the most trusted list of cryptocurrency exchanges to get starting.

 ExchnageSupported countriesInitial KYCWebsite
binanceBinanceGlobalNoTrade Now
BittrexBittrexGlobalYesTrade Now
bitstampBitstampGlobalYesTrade Now
coinbaseCoinbaseUS,Canada,EuropeYesTrade Now
cex.ioCexGlobalYesTrade Now
etoroeToroGlobalYesTrade Now

KYC stands “know your customer” which means most exchanges ask to verify customer identity before start trading any digital assets. Some exchanges don’t ask initial exchange registering stage.

Ethereum margin trading

Margin trading is trading any digital assets either market go lower or go higher situations. Most popular margin trading platforms as follows,

 ExchangesSupported countriesInitial KYCWebsite
BitfinexGlobalYesTrade Now
Huobi globalHuobi GlobalGlobal without USNoTrade Now
poloniexPoloniexGlobalNoTrade Now
krakenKrakenGlobalNoTrade Now
binanceBinanceGlobalGlobal without USNoTrade Now
cex.ioCexGlobalYesTrade Now

Binance and Cex margin trading option still in the testing period which you can be used to learn margin trading.

Ethereum leverage trading

Leverage trading is a method to increase the capital through borrowing amount of asset from the broker, Exchange where high leverage, high return and high risk involving and low leverage, low return and low risk.

 ExchangeSupported CountriesInitial KYCLeveragesWebsite
bitmexBitmexGlobalNoupto 25xTrade Now

PrimeXBT
GlobalNoupto 100xTrade Now

5 Steps to buying Ethereum

01. Get an ETH wallet

Before buying Ethereum, You need to create Ethreum wallet, Let’s create ethereum wallet using MyEtherWallet[ MEW ]. This is the most popular Ethereum wallet for Store, Send, Receive Ether and ERC20 tokens.

Go to MyEtherWallet. Scroll down the web page and click “Create New Wallet” tab.

MyEtherWallet

Under Get a new wallet, There are three tabs, click on “By Keystore file”. Type the password in the field and click “next” button. Remember the password for access the wallet in the future.

Myetherwallet keystore file

Let to generate Keystore file and download and securely store in your computer. Next, you will see”Succeed” pop up screen. This stage you create your first Ethereum wallet. Now you should access the wallet created.

Click on “Access” button. Next screen clicks on the “Software” tab.

Pop up will come and select Keystore file and “continue”, Choose your downloaded Keystore file and click “Open” button.

MEW access

Next screen “Enter your password” click “access wallet” button.

All done, Now you are in your Ethereum wallet dashboard.

MEW dashbaord

Here is a list of Ethereum wallets which are the best industry-trusted wallets exists. Most secure way to store your cryptocurrency is using a Hardware wallet. Trezor, Ledger Nano, Keepkey wallet widely uses hardware wallets which you can buy now and That’s not free.

02. Find where to buy Ether using credit/debit card or Bank transfer? [USD, EUR, GBP]

There are so many places to buy Ethereum right way. In this guide, List of best exchanges to buy Ethereum with best rates using Credit/debit card, Bank transfer, etc. If you want to buy ETH using PayPal you need to signup for LocalEthereum where Some sellers sell ETH for PayPal. LocalEthereum is a market place to buy and sell ETH in peer to peer manner.

Some exchanges support worldwide but you need to check your country supported before engaging further steps. Let’s select Cex for buying Ethereum which supports credit/debit card, wire transfer. Also, you can buy Bitcoin, Ripple, Stellar, Dash, Omisego, etc from the Cex.

 ExchangeSupported CountriesFeePayment optionWebsite
coinbaseCoinbaseUS,Europe,Canada1.5%Credit/debit card,
Wire transfer
Visit
CexGlobal3.5%Credit/debit card,
Wire transfer
Visit
coinmamaCoinmamaGlobal5%Credit/debit card, Wire transferVisit
changellyChangellyGlobalN/ACredit/debit cardVisit
bitpandaBitpandaEurope5%Credit/debit card, Bank transferVisit
LocalethereumLocalEthereumGlobalN/AWire transfer, Paypal, CashVisit

03. Get exchange ready

In this section, you are going to verify your identity in order to buy Ethereum. Please look at this article for a complete guide to register and verify your account in Cex exchange.

After selecting a suitable exchange, You need to verify the identity with most of these exchanges, Some of the exchanges are not asking to verify identity for the initial time. If you decide to buy Ethereum using LocalEthereum website, They don’t ask to verify the identity.

04. Buy Ether right way

In this section consists, Buy Ethereum using a Cex exchange. Let’s go the Cex.io and log into your account which you are verified in the previous step.

Go to deposit section and deposit the USD, EUR or GBP in a minute If you do previous steps.

Then go to the “Trade” section. You can directly buy Ethereum from the Buy/Sell section but ETH rate is higher than the market price. This method is not recommended to buy Ethereum.

There is a left sidebar where listed different BTC, ETH, BCH, BTG, etc and called markets.

From that list, Select ETH market and select ETH/USD pair from the drop-down list.

Cex trading

After selecting that, You will see ETH/USD price chart, Market depth, Three tabs, Buy order and Sell orders sections.

Below market depth, There are three tabs which are Limit, Market, Margin.

Limit: you can buy ETH at a certain price which is lower price or higher price compared to the current price. Price decide you per ETH.

Market: Price determined by which time you purchased for Ethereum. [buy using current market price]

Margin: Trading method to get profited both markets go higher, lower In Cex exchange margin trading option still in the testing period.

Let’s select “Limit” from the three tabs. There are two sections “Buy Eth” and “Sell Eth”

Now you are going to buy Ethereum, You can see “USD balance” if you click on that price automatically buy Eth for Entire USD or you can set amount you want to buy ETH in “Amount to buy” field. You will see “How much USD going to pay”.

Then select a price per ETH, Which is determined by Market go higher or lower. A simple way to determine the short term in the market depth chart,

Cex trading ETH

“Buy wall” (left side) is higher than “Sell wall”(right side), which mean the market goes higher. Then select the price per ETH little higher than the current price. “Buy wall” (left side) is lower than “Sell wall”(right side), which mean the market goes lower. Then select the price per ETH little lower than the current price.

What is Ethereum- Cex market depth

After selecting both actions, Click on “Place order” button. If your order is executed, Your balance will display on top of the page and you can review all balance in “Finance” menu of the top menu. If you order not executed, You can see on the “Buy orders section” and “Active order sections”. If you want to cancel the order you placed, you can do it in ” Active order sections “.

05. Send your funds to your wallet

For security reason, Do not keep digital assets on ” Exchanges”. Send it back to your personal Ethereum wallet which is created in step 01.

Head over to the “Finance” section of the main menu. There are two sections which are “Fiat balances ” and ” Crypto balances”. Look for brought ETH and click on “Withdraw”.

What is Ethereum- Cex finance

Next screen, the select amount you want to withdraw and Enter the recipient’s address which can be copied from the MyEtherWallet dashboard.

What is Ethereum- MEW dashboard

Double-check the recipient address and then click the “Withdraw” button. After that, you will receive ETH to your personal wallet within few minutes.

What is Ethereum- Cex withdraw

Conclusion

In this article explain everything of Ethereum (world computer) such as, What is ethereum, Smart contracts, Ethereum major milestones and updates, Next major update Ethereum 2.0 which is called serenity, decentralized apps category wised, Ethereum investing and how to buy Ethereum, etc in a simple and understandable way.


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