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Ethereum is not a cryptocurrency — it’s a global computer for running decentralized apps (dApps). Ether (ETH) is the cryptocurrency that powers the Ethereum network, and it’s the required form of payment for running your app or processing your transaction on the highly-desired Ethereum blockchain.
While Bitcoin is really good as a store of value, it doesn’t support smart contracts like Ethereum does. Arguably, Ethereum is equally capable as a store of value. This being said, many prefer bitcoin to store value because of its hard-capped supply. While both the supply of Bitcoin and Ether are increasing, there will never be more than 21 million bitcoin in circulation. With Ethereum 2.0 and EIP-1559 however, Ether may become deflationary, that is, the supply of the token will actually decrease with time.
Ether has been competing with Bitcoin for the top spot as the largest cryptocurrency by market capitalization since its release in 2015 and came close to overtaking Bitcoin 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. Some experts predict Ethereum will “flip” Bitcoin this market cycle to become the dominant cryptocurrency in the industry.
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Investing in Ethereum vs. Bitcoin
Bitcoin and Ethereum have completely different use cases. Bitcoin acts as a store of value, similarly to gold. Ether acts as a store of value too, while the Ethereum Virtual Machine enables a host of innovative applications such as DeFi, NFTs and the metaverse.
The Ethereum Virtual Machine allows coders to write programs called “smart contracts.” Ethereum smart contracts can automate thousands of financial products and are the building blocks of non-fungible tokens (NFTs). These smart contracts enable full-fledged applications like decentralized exchanges (DEXs) and automated market makers (AMMs).
While very basic smart contracts are technically possible on Bitcoin’s blockchain, Ethereum’s custom programming language and huge team of developers make it the likely long-term settlement layer. Bitcoin’s blockchain acts as a decentralized ledger for processing payments. Ethereum is a ledger with a full computer attached, allowing much, much more than just processing payments.
As far as which of the 2 is a better investment, it’s impossible to say for sure. It’s likely that both Bitcoin and Ethereum will stand the test of time and coexist peacefully in the future. At the end of the day, your investment decisions must be made by you (or an investment advisor). The best thing you can do is to educate yourself as much as possible before risking any of your hard-earned money, and never invest money you aren’t willing to lose entirely. You don’t want to end up on the front page of Wall Street Bets, after all.
Where to Buy Ethereum
Decided you want in on the Ethereum action? Listed below are a handful of exchanges where you can purchase Ether. If you’re new to crypto, jump to our guide on How to Buy Ethereum or compare exchanges with the Best Cryptocurrency Exchanges guide.
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
- Active traders
- Intermediate traders
- No charges to open and maintain an account
- No account maintenance fees or software platform fees
- Intuitive trading platform with technical and fundamental analysis tools
- Only offers 14 coins
Founded in 2015, Exodus is a multiasset software wallet that removes the geek requirement and keeps design a priority to make cryptocurrency and digital assets easy for everyone. Available for desktop and mobile, Exodus allows users to secure, manage and exchange cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) and more across an industry-leading 10,000-plus asset pairs from a beautiful, easy-to-use wallet. The noncustodial functionality is encrypted locally on users’ own devices, ensuring privacy, security and complete control over their wealth. Exodus is on a mission to empower half the world to exit the traditional finance system by 2030.
- Newcomers to the cryptocurrency world
- Ease of use
- Trezor integration
- Free
- Huge selection of cryptocurrencies
- Excellent 24/7 customer support
- No personal info needed
- FTX app not available on the mobile app
SoFi takes a modern approach to personal finance. It recently created buzz with the release of SoFi Crypto, a way to trade cryptocurrency on the app. The platform allows investors to familiarize themselves with crypto. It offers a high level of security, great customer support and an intuitive interface. However, it does have shortcomings with the number of cryptos offered and geographic restrictions.
- Beginners
- Centralization of your money
- Charges low or no fees for some functions within the interface.
- Relies on Coinbase, a very secure platform, to process transactions.
- Presents a low barrier of entry — you only need $10 to start trading.
- Currently only offers 28 coins.
eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features
- U.S. based cryptocurrency traders
- Investors looking to CopyTrade other traders
- Simple user interface
- Several major cryptocurrencies and altcoins
- Expansive network of social trading features
- Large client base for new traders to imitate
- Only 29 coins available
Gemini is a cryptocurrency exchange and custodian that offers investors access to over 100 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.
Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader.
In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.
- New investors looking for a simple mobile and web app
- Day traders looking to use technical analysis tools
- Users looking for a 1-stop-shop to buy, sell and store all of their cryptos
- Easy and quick signups — can get started in as little as a 5 minutes
- Multitude of platforms to accommodate traders of all skill levels
- Hot wallets include insurance to protect your from theft and hacking attempts
- Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app
Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs.
You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.
Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.
- New cryptocurrency traders
- Cryptocurrency traders interested in major pairs
- Cryptocurrency traders interested in a simple platform
- Simple platform is easy to operate
- Comprehensive mobile app mirrors desktop functionality
- Coinbase Earn feature rewards you with crypto for learning about available coins
- Higher fees than competitors
Advantages of Ethereum
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:
- Volatility. While this was previously seen as a negative, smart investors have realized market cycle patterns and are able to capitalize on the parabolic gains produced by market bubbles.
- 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 that is subject to less meddling. The blockchain system is infinite, and there’s no need to worry about your crypto being deflated.
- Decentralized Finance. Ethereum and DeFi are relatively young — NFTs and many other new applications are becoming more mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
Disadvantages of Ethereum
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 investing in Ethereum:
- Volatility. 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. Although you would be doing great now, to avoid painful losses in the short term, keep a close eye on the market.
- High transaction fees. Arguably Ethereum’s largest drawback, transaction fees, hold back the network from reaching mainstream adoption. Using Ethereum’s blockchain can cost hundreds of dollars, so retail investors with smaller amounts of capital are priced out from using the network. While other smart contract blockchains have cheaper fees, Ethereum has the most applications and use cases built on its blockchain.
- New regulation. The government is unlikely to let cryptocurrencies remain completely unregulated for long. New regulations could interfere with business models, and cause crashes that are entirely out of your control.
- Threat of online hacking. Hacks are a threat facing many cryptocurrency investors. Most exchanges let you buy and sell your cryptos using a mobile app or website. However many users also store their crypto on exchange wallets. This leaves them susceptible to losing their investments should the exchange get hacked, and their private keys being stolen. Cryptocurrency held on most exchanges isn’t insured by the FDIC.
- Competition: There are a ton of emerging smart contract platforms giving Ethereum a run for its money, namely Binance Smart Chain, Cardano and Polkadot. While these cryptocurrencies offer better scalability than ETH, they lack decentralization and the robust DeFi ecosystem that Ethereum has on its network.
- Proof of Work Consensus: Although Bitcoin also uses proof of work consensus, this is more of a con for Ethereum. Transactions on bitcoin are only necessary to transfer the crypto, while Ethereum’s network is used for a variety of functions. Proof of work is more expensive and slower than proof of stake, which is currently being used by many ETH competitors.
Investing in Blockchain Tech
Unlike speculative stock investments, there are some additional storage risks to be aware of when investing in cryptocurrency specifically. It’s wise to understand the fundamentals of cryptocurrency, the blockchain and Ethereum before placing large sums of money into the technology.
Ethereum Wallets
So, is Ether a good investment? It can be if you do your research, manage your coins properly and keep an eye on the market. Crypto investing is not as simple as calling a broker and buying or selling. You are actively involved in the process, and that means you need a wallet. Cryptocurrency wallets are a fundamental part of the ecosystem, giving you the ability to easily send and receive money.
Crypto wallets use a computer science concept called public key cryptography. Public key cryptography uses the factorization of really big prime numbers to keep your money secure. Cryptocurrency wallets have 2 “keys”: 1 public key and 1 private key. The public key can be though of as the slot at the top of a mailbox, while the private key is the one needed to extract the mail from the bottom.
Your public key, or wallet address, is needed to send money to your wallet. Data must be encrypted before being sent over the network for privacy reasons. As the name suggests, your private key must never be shared with anyone. This is because your private key can be used to decrypt, or unlock, any data that was locked by your public key.
Crypto wallets don’t store cryptocurrency, they store your private key. Cryptocurrencies are stored on the blockchain, and your private key proves ownership.
There are 2 types of wallets: digital and hardware. MetaMask and Coinbase Wallet are typically the best route to go for digital wallets, and the Ledger Nano X is the best hardware wallet. If you get logged out of these wallets, you’ll need a recovery tool called a “seed phrase” to log back in. A seed phrase is a set of randomly generated and secret words that will allow you to recover your private key in a worst-case scenario.
Founded in 2015, Exodus is a multiasset software wallet that removes the geek requirement and keeps design a priority to make cryptocurrency and digital assets easy for everyone. Available for desktop and mobile, Exodus allows users to secure, manage and exchange cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) and more across an industry-leading 10,000-plus asset pairs from a beautiful, easy-to-use wallet. The noncustodial functionality is encrypted locally on users’ own devices, ensuring privacy, security and complete control over their wealth. Exodus is on a mission to empower half the world to exit the traditional finance system by 2030.
- Newcomers to the cryptocurrency world
- Ease of use
- Trezor integration
- Free
- Huge selection of cryptocurrencies
- Excellent 24/7 customer support
- No personal info needed
- FTX app not available on the mobile app
Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs.
You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.
Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.
- New cryptocurrency traders
- Cryptocurrency traders interested in major pairs
- Cryptocurrency traders interested in a simple platform
- Simple platform is easy to operate
- Comprehensive mobile app mirrors desktop functionality
- Coinbase Earn feature rewards you with crypto for learning about available coins
- Higher fees than competitors
Launched in 2014, Ledger has transformed into a fast-paced, growing company developing infrastructure and security solutions for cryptocurrencies as well as blockchain applications for companies and individuals. Born in Paris, the company has since expanded to more than 130 employees in France and San Francisco.
With 1,500,000 Ledger wallets already sold in 165 countries, the company aims at securing the new disruptive class of crypto assets. Ledger has developed a distinctive operating system called BOLOS, which it integrates to a secure chip for its line of wallets. So far, Ledger takes pride in being the only market player to provide this technology.
- ERC-20 tokens
- All experience levels
- Easy to set up and use
- Supports more than 1,500 different digital assets
- Tamper proof
- Portable
- Long-lasting battery
- Bluetooth connectivity features
- Can be quite pricey
Ethereum NFTs
A key driver for Ethereum’s blockchain is the rise of NFTs. Almost every high-value NFT is secured by Ethereum’s blockchain, including CryptoPunks, Bored Ape Yacht Club, and Art Blocks. Many new users on Ethereum were drawn to its network to invest in NFTs, so if NFTs continue to breach into the mainstream, it’s likely Ethereum will continue to gain adoption. While other platforms like Solana and Avalanche have NFTs, the market for non-fungible tokens on these blockchains is magnitudes smaller than that of Ethereum.
Pro Tip:
If you lose access to your wallet’s private key, whatever cryptocurrency was associated with the wallet is now lost forever. The best way to prevent this, is to handle your private key and seed phrase with extreme care. A forgotten seed phrase can remove currency from circulation forever. A memorized seed phrase can carry billions of dollars across borders with 0 physical evidence.
Disclaimer: Do not take out a loan to invest in cryptocurrencies like Ethereum. Do not purchase them with credit. Do not do anything that could endanger you or jeopardize your financial future. If you aren’t sure how much risk you are capable of handling, consult a financial advisor who is trained for this.
Frequently Asked Questions
What is Ethereum?
Ethereum is a global computing platform for decentralized apps (dApps). Ethereum smart contracts enable the automation of financial products and more, all peer-to-peer on the Ethereum blockchain.
How do you mine Ethereum?
Ethereum is an unregulated digital currency that can be mined effectively by most modern graphics cards (GPUs). Mining Ethereum is actually quite simple, and can generate passive income for people with low electricity costs.