Key Factors to Check Before Investing in Ethereum Coin

Key Factors to Check Before Investing in Ethereum Coin

Introduction

Ethereum is a blockchain-based decentralized computing platform. Ethereum’s native currency, Ether (ETH), is now the second-largest cryptocurrency (after Bitcoin). Ethereum has had an incredible year, breaking multiple records. Despite its widespread use, Ethereum is still a risky investment.

What is Ethereum?

Ethereum is a decentralized open-source computer platform. Tokens are issued by a third party to verify and record financial agreements. The Ethereum network, like Bitcoin, is founded on blockchain technology. 

Ethereum is a worldwide computer for decentralized apps (dApps), not a coin. The Ethereum network is powered by Ether (ETH), which must run your app or complete your transactions on the highly coveted Ethereum blockchain.

A brief history of Ethereum

Vitalik Buterin, the creator of Ethereum, wrote a beginner’s white paper in 2013. The concept harnesses Bitcoin’s blockchain technology to create a decentralized, programmable platform.

Here are a few crucial moments in Ethereum’s history:

2014: Ether goes on sale, originally at 2,000 ether per bitcoin. The Ethereum blockchain went live the following year.

2016: The decentralized autonomous organization (DAO) attack sparks a debate about whether victims should be compensated for their losses. The DAO fork creates Ethereum Classic, a fork of the original blockchain, and Ethereum.

2017: Popular dApps like CryptoKitties start. ETH rose from roughly $8 to over $700 in 2017.

2021: The London hard fork introduces EIP-1559, decreasing ether supply and making network costs more predictable.

How Does Ethereum Work?

Ethereum runs on computer power. Individuals and corporations utilize computers to run specialized software (nodes). Anyone may put up a node.

Node operators conduct cryptocurrency transactions using technology and software to process these transactions. The expenses are called gas fees and are paid in Ether (ETH).

Ethereum, like Bitcoin, uses it to enable peer-to-peer transactions tracking ownership. Developers can create and run smart contracts linking dApps on the network.

Data “blocks” are cryptographically “chained” to a parent block, thus locking last changes.

Growth of Ethereum Till Now

Ether was introduced in 2015. In August, it was $1.25, and in December, it was $0.96.

Ether began 2016 at $2.48, peaked at $13.04 in September, and then fell to $8.1 in December.

2015 and 2016 helped ether gain acceptability after Bitcoin.

Ethereum multiplied in 2017, from $10.51 in January to $719.83 in December.

In 2018, Ether reached $1066.72 in January but fell slowly to $131.37 in December.

In 2019, Ether started at $107.57, rose to $314.05 in June, and sank to $132.07 in December.

By December 2020, the coin had reached a peak of $746.06. 

In November 2021, Ether was over $4800, also as per Ethereum projections by crypto experts forecast Ethereum price will be kept short-time up and downs but might cross all-time high for 2022.

Risks of ETH Coin

While Ethereum may play a role in future money exchange and global computer networks, you should be able to fathom the risks associated with cryptocurrency investing.

Risks of investing in Ethereum:

 Volatility

On December 17, 2017, Bitcoin was worth $20,000 if bought then, but you couldn’t sell your stock for more than $7,051. So keep a watch on the market to avoid short-term losses.

 New rules

As the government won’t let cryptocurrencies run uncontrolled for long, new rules may disrupt company paradigms and trigger uncontrollable crashes.

Online hacking risk 

Many bitcoin investors fear hacks. While most exchanges provide a mobile app or website to purchase and sell bitcoin, many users also utilize exchange wallets. They risk losing their funds if the exchange is hacked and their private keys are taken. Most cryptocurrency exchanges aren’t FDIC-insured. 

Competition 

Emerging intelligent contract platforms like Binance Smart Chain, Cardano, and Polkadot give Ethereum a run for its money. While these coins are more scalable than ETH, they lack decentralization and the DeFi ecosystem that Ethereum offers.

Consensus on Proof of Work 

Although Bitcoin uses proof of work, it is a disadvantage for Ethereum. While Bitcoin transactions are only required to transfer crypto, Ethereum’s network is used for many purposes. Compared to many of ETH’s rivals, which rely on proof of stake, proof of work is more costly and takes longer to verify. 

Is it a good investment in Ethereum? 

Is Ether a wise investment? Providing you do your homework, handle your coins appropriately, and monitor the market. Buying or selling crypto is not as straightforward as phoning a broker. Users are actively involved. 

So it depends. Investing in Ethereum requires a lot of research and consideration. As with any other investment, its inherent risk is the most important thing to keep in mind. 

While Ether is becoming more publicly available and its value is rising, it’s crucial not to get caught up in the hype. 

By 2020, Ethereum network upgrades may have made crypto-staking a $40 billion enterprise. 

Scope of ETH’s Future

Ethereum is actively upgrading to 2.0, due next year. By diverting from proof of work to proof of stake, Ethereum’s mining becomes faster and more eco-friendly.

Crypto miners validate transactions through a time-consuming process of solving complex mathematical puzzles. 

Ethereum 2.0 will offer it a competitive advantage over other cryptocurrencies. Other coins like Solana and Cardano that use the PoS algorithm can compete with Bitcoin.

Is Ethereum right for you? 

Ethereum may have a terrific next year, and now is the time to buy. But Ethereum (and cryptocurrencies in general) isn’t for everyone, no one knows what lies ahead for Ethereum. Long-term Bitcoin investing is still risky. In the wake of the crypto ban, its future is uncertain. 

Don’t invest money you can’t lose if Ethereum fails. Plan to hold onto your investment. Despite recent highs, Ether remains quite volatile. Expect more ups and downs with Ethereum 2.0. 

But Ethereum seems to have a promising future. 

Bottom Line

Ethereum is a decentralized network built on blockchain. The Ethereum network is powered by the ether cryptocurrency, which a trader may buy. Buying Ether, like any other cryptocurrency, is speculative. Before investing in any digital currency, the trader should ensure they understand the risks involved.

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