Ethereum is an open-source, blockchain-based, decentralised software platform used for its own cryptocurrency, ether. It was launched in the year 2015.It enables SmartContracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control, or interference from a third party.
Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications.
The applications run on Ethereum are run on a platform-specific cryptographic token, ether. During 2014, Ethereum had launched a pre-sale for ether which had received an overwhelming response. Ether is like a vehicle for moving around on the Ethereum platform and is mostly sought by developers looking to develop and run applications inside Ethereum. Ether is used broadly for two purposes: it is traded as a digital currency exchange like other cryptocurrencies, and it is used inside Ethereum to run applications and even to monetise work.
According to Ethereum, it can be used to “codify, decentralise, secure, and trade just about anything.” One of the big projects around Ethereum is Microsoft’s partnership with ConsenSys which offers “Ethereum Blockchain as a Service (EBaaS) on Microsoft Azure so Enterprise clients and developers can have a single click cloud-based blockchain developer environment.”
In 2016, Ethereum was split into two separate blockchains, Ethereum, and Ethereum Classic, after a malicious actor stole more than $ 50 million worth of funds which had been raised on the DAO, a set of smart contracts originating from Ethereum's software platform. The new Ethereum was a hard fork from the original software intended to protect against further malware attacks. As of September 2019, Ethereum was the second-largest virtual currency on the market, behind only Bitcoin. It is much faster to acquire ether currency than bitcoin (about 14 or 15 seconds to bitcoin's near-uniform 10 minutes), and there are far more ether units in circulation than there is bitcoin.
Ethereum is not a cryptocurrency — it’s a platform for creating decentralised products. Ether is the cryptocurrency that powers the Ethereum platform and blockchain.
Ether has been competing with Bitcoin for the top spot since its release in 2015 and came close to overtaking it in February 2018. Both of these coins have hit new all-time highs since then, and there appears to be more room for both to grow in 2021.
One thing is certain, the cryptocurrency market is much more volatile than the stock market. If you are particularly risk averse, this might not be the market for you.
But if you’re a long-term investor who won’t lose sight over short-term losses, Ethereum may be a good investment for you.
Disadvantages of Ethereum Investments
Ethereum may play a part in the future of monetary exchange and global computing systems, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing.
Risks associated with Ethereum investments:
- Volatility. The price of cryptocurrencies are always changing. If you happened to buy Bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. To avoid huge loss, keep a close eye on the market.
- Little or no regulation. The crypto market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
- New regulation. The government is unlikely to let cryptocurrencies remain unregulated for long. New regulations could interfere with business models, and cause crashes that are entirely out of your control
- Threat of online hacking. Hacking is a threat facing cryptocurrency investors. Most exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. And cryptocurrency held on most exchanges isn’t insured by the FDIC.
- Wallets can be lost. If your hard drive crashes or virus corrupts your wallet file, you lose your bitcoins. You can go from a wealthy to bankrupt investor within seconds with no way to recover.
The overwhelming performance of Ethereum has attracted traditional and institutional investors alike. Ethereum and other cryptocurrencies provide you with the following advantages over traditional investments:
- Liquidity. Ethereum is arguably 1 of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges and online brokerages. You can easily trade Ethereum for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
- Lower inflation risk. Unlike world currencies — which are regulated by their governments — Ethereum has a transparent inflation plan and is subject to less risk. The blockchain system is infinite, and there’s no need to worry about your cryptos losing their value.
- New opportunities. Ethereum and cryptocurrency trading is relatively young — new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.