ETH Beginner Guide: Pros and Cons of buying ETH
The market cap of ETH comes second in the world, and it is the second-largest cryptocurrency by volume, which is just behind Bitcoin. Even if you don’t follow the financial world closely, you are likely to be aware that cryptocurrencies have become one of its biggest stories recently.
However, the price of crypto can fluctuate a lot, which can be concerning to many investors. This article will detail what ETH is and compare it with Bitcoin. Moreover, it will also cover the trend of ETH, its key features and its risks.
Getting to know ETH (Ethereum)
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What is Ethereum (ETH)?
Ethereum, which is the specific blockchain technology, was invented by programmer Vitalik Buterin and it was first released in 2015. Ethereum’s native cryptocurrency is called Ether (ETH).
Like other cryptos, Ethereum was built on the principles of decentralized finance. Ethereum embraces an open-source software platform which allows developers to create cryptocurrencies and other secured digital applications, which can be anything from lending apps to payment platforms and with the potential to do far more. This is the reason why some believe that it could one day shunt Bitcoin from the top cryptocurrency spot.
Over the past year, Ethereum has gained in popularity and it is adopted by both retail and institutional investors alike.
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ETH vs BTC: What’s the difference between Ethereum and Bitcoin?
| ETH vs BTC | ETH | Bitcoin (BTC) |
|---|---|---|
| Price | US$2,736.62 (As of 5 May 2022) | US$2,736.62 (As of 5 May 2022) |
| Supply | Unlimited | 21M |
| Units | 1ETH=10^18 Wei | 1BTC=10^8 Satoshi |
ETH Market Trends
Since the launch of Ethereum, ETH has been in the general upward trend. It is the second-largest cryptocurrency by market cap (behind bitcoin). In the last 3 years, its price has risen a lot, from US$163.05 in 2019 to US$2,736.62 in May 2022, which is an over 1500% increase. No wonder it is predicted that it can potentially shunt Bitcoin from the top cryptocurrency spot in the future.
Key Features of ETH
ETH has an Infinite Supply
Unlike Bitcoin, ETH offers an unlimited supply. Bitcoin's supply cap is limited, standing at 21 million, meaning that once this limit is reached, there won’t be any additional Bitcoins available to mine, making it a precious but finite resource.
However, ETH doesn’t work in this way. It can never run out and its prices are not supported by the cap but its digital applications and its market value.
Ethereum Can be Used Widely
Ethereum can be used to create digital apps e.g. NFT. Think of Ether as the crypto token derived from the Ethereum blockchain, which allows encrypted data to be transferred securely, which makes it next to impossible to counterfeit. Moreover, Ethereum-based apps are built using its key innovation: “smart contracts”, which is just like regular paper contracts, which can establish the terms of an arrangement between parties.
ETH Price Has Been in a General Upward Trend
The market cap of ETH comes second and it is also the second-largest cryptocurrency by volume, which is just behind Bitcoin. Moreover, in the last 3 years, its price has increased by more than 1500%, and is purchased by both retail and institutional investors. But it also comes with risks.
Risks of Investing in ETH
The Price of ETH Can be Volatile
Although the price of ETH has been rising by more than 1500% from 2019 to 2022, it actually experienced quite a significant drop, from US$100 to US$1300 in 2018. Like other crypto currencies, its price can fluctuate a lot, which can be very concerning for risk-averse investors. You may have concerns about the rapid changes in the market.
Ethereum May Not be Widely Used Anymore
Ethereum can be used widely and ETH has been rising because of the popularity Ethereum has gained. However, if Ethereum is not widely used anymore, the price of ETH will dip.
Security Issue
Different from traditional currencies, ETH exists in digital form and stored in a digital wallet. If you lose your private access key, you may end up losing your ETH forever.
Virtual Commodity - Not Considered as Legal Tender
ETH is not considered a legal tender, which is outside the regulatory ambit of the Hong Kong Monetary Authority. Therefore, if the crypto exchange goes bankrupt or shut, your access is not protected by the Hong Kong government.
FAQ on investing in ETH
Is commission charged when purchasing ETH?
- No, you are not charged commissions in most cases.
Does ETH have a supply limit?
- No, it doesn’t have a cap.
What is the difference between ETH and BTC？
- ETH doesn’t have a cap in supply but the cap of BTC stands at 21M. Also, the key feature of ETH is that it can be used in Ethereum - which can be seen as a platform for any digital applications.
What is Ethereum? Are Ethereum and ETH the same?
- No, they are not the same. Ethereum is the specific blockchain technology, which allows developers to create any apps and Ethereum’s native cryptocurrency is called Ether (ETH).