The 4 Biggest Mistakes You Can Make When Buying Ethereum

]

Ethereum is on the rise. If you’re planning to buy some of your own, here are the mistakes to avoid.

Like many cryptocurrencies, Ethereum has been growing in value since last year. But in the last few weeks, its price has gone through the roof. It recently set a new all-time high by trading at over $3,500.

Ethereum has consistently ranked as the second-largest cryptocurrency after Bitcoin. With the recent price increases, you may have decided that now is the time to buy Ethereum. Before you do, learn about a few common mistakes that some new buyers make.

Not buying through a reputable crypto exchange

There are more ways than ever to buy Ethereum. Cryptocurrency exchanges, such as Coinbase, are the traditional option. There are also apps and online stock brokers where you can get Ethereum and other cryptocurrencies.

Not every option is a good one, though. Fake cryptocurrency exchanges pop up with the sole purpose of stealing people’s money. And even legitimate ways to buy crypto may have excessive fees or restrictions. PayPal and Venmo are notable examples: Although you can buy some cryptocurrencies through these apps, fees are high, and you’ll be unable to move your crypto out of the app after you buy it.

The Ascent’s picks for the best online stock brokers Find the best stock broker for you among these top picks. Whether you’re looking for a special sign-up offer, outstanding customer support, $0 commissions, intuitive mobile apps, or more, you’ll find a stock broker to fit your trading needs. See the picks

If you’re new to buying crypto, the simplest way to stay safe is by sticking to the best cryptocurrency exchanges. In particular, look for an exchange that offers insurance and keeps most of its crypto in cold storage, meaning it’s offline.

Not researching Ethereum first

Before you commit your hard-earned money to Ethereum, take some time to learn about it. This is a smart rule of thumb for any investment. You don’t need to be an expert in Ethereum, but it helps to know how it works and what makes it unique.

Knowledge of Ethereum is especially important because of how volatile it is. Odds are that there will continue to be significant price movements in the future. When you understand Ethereum and you believe in its value, you’re less likely to be influenced by the trends or the current price.

Trying to time the market

Considering Ethereum is near an all-time high, it’s tempting to wait until the price drops before you buy. You may find yourself thinking that you’ll wait until it drops below a certain amount, and then make your investment.

The problem is that no one can accurately time the market. There’s no guarantee that Ethereum will drop to your target price. Maybe it keeps increasing, which could leave you regretting that you didn’t buy right now. Or, imagine that the price does drop significantly. That would give you the opportunity to buy low – unless you start second guessing your decision because you’re worried the price will decrease even more.

If you’re going to buy Ethereum, look at it as a long-term investment. Buy because you believe the price will rise in the years to come, not in the hope of getting rich in a matter of weeks.

Putting all your money into it

Most cryptocurrencies are volatile, higher-risk assets, and that includes Ethereum. The returns have been fantastic so far, but that can change quickly. After Ethereum peaked at over $1,200 in 2018, the price sank to under $100. It took over three years before Ethereum broke the $1,200 mark again.

Buying your first stocks: Do it the smart way Once you’ve chosen one of our top-rated brokers, you need to make sure you’re buying the right stocks. We think there’s no better place to start than with Stock Advisor, the flagship stock-picking service of our company, The Motley Fool. You’ll get two new stock picks every month from legendary investors and Motley Fool co-founders Tom and David Gardner, plus 10 starter stocks and best buys now. Over the past 17 years, Stock Advisor’s average stock pick has seen a 582% return — more than 4.5x that of the S&P 500! (as of 5/3/2021). Learn more and get started today with a special new member discount. Start investing

To minimize your risk, make sure you diversify your investments. A good guideline is to reserve 5% to 10% of your portfolio for crypto. You could use that entirely for Ethereum, or you could include multiple cryptocurrencies. For the rest of your portfolio, stick to investments with less volatility and a longer track record of success, such as mutual funds.

This is an exciting time in the history of Ethereum. The price is rocketing upwards, and Ethereum’s blockchain technology is being used more and more. Ethereum could turn out to be a sound investment – as long as you avoid costly mistakes.

Should You (or Anyone) Buy Ethereum?

]

Bitcoin’s younger sibling is giving it a run for its money.

Ethereum is a digital currency that claims to be “the world’s programmable blockchain.” It is more nimble than Bitcoin, and chances are you won’t move far into the world of cryptocurrencies before you come across it.

But what does it do? And should you buy it? Read on to find out.

What is Ethereum?

Ethereum, the world’s second-biggest cryptocurrency by market capitalization, is like Bitcoin’s agile little sibling. It uses less energy and has faster transactions and more business applications.

Many digital currencies run on Ethereum’s platform, which launched in 2015. A new, improved, version called “Eth 2” is being rolled out in stages. It will support more transactions per second, consume less energy, and have enhanced security.

One big difference between Ethereum and Bitcoin is that its blockchain ledger has smart contract capabilities. Smart contracts are self-executing pieces of code that allow an action to be performed when certain conditions are met.

For example, a smart contract in a digital book might set out what royalties should be paid when the book is sold. Or it might mean an insurer automatically pays out in specific situations, without any need for the client to file a claim. Payments could also be set up to transfer automatically as goods move along stages in a supply chain.

Should you buy it?

Like every investment – but especially crypto investments – there are risks involved with buying Ethereum.

For one, its price is volatile. You might see dramatic gains, but you might also see heavy falls. Also, since cryptocurrencies are a new type of investment, it’s difficult to judge which coins will perform well in the long term.

I put a small amount of money into crypto each month. But before I started, I first built up my emergency fund. I also made sure my new crypto investing didn’t come at the cost of my retirement contributions.

These moves ensure I’m only investing money I can reasonably afford to lose. That way, if the price of cryptos collapses tomorrow, I can wait for it to rise again. And if it doesn’t, I can stomach the losses.

Where you choose to invest should depend on your own priorities and strategy, but here are the reasons Ethereum could be interesting.

Many things run on Ethereum

Ethereum underpins a lot of the exciting applications of blockchain technology. It’s designed to be used to create new coins and run smart contracts. Plus, right now, you need to own Ethereum if you want to do other things – such as trade on some platforms or buy NFTs. If the crypto world continues to grow, so should Ethereum.

Eth 2 will be more environmentally friendly

One concern I have about crypto is the environmental cost. To validate and confirm transactions, a number of cryptocurrencies use a proof-of-work (PoW) model, which uses a lot of energy.

Right now, Bitcoin uses about 130 terawatt hours (TWh) of energy each year, which is about the same amount of energy as countries like Ukraine or Argentina. Ethereum uses about a fifth of that amount, but it’s still as much as a small country like Ecuador.

Eth 2 will move from the carbon-costly PoW model to the more energy-efficient proof-of-stake (PoS) model. I won’t go into the technical details here, but estimates suggest the new mining model could cut its energy consumption by 99%.

Eth 2 will also be easier to scale and more secure, which is a bonus.

I can stake my Ethereum

One way to earn interest on your crypto is through staking.

Staking involves tying up your coins for a set amount of time so that they can be used to mine more coins. One challenge is that there are limited staking windows. Once they are full, you have to wait for another window.

I don’t have that problem with Ethereum. Right now, many top cryptocurrency exchanges will let you stake until the Eth 2 limits are reached. In doing so, you’ll also be part of the Eth 2 development.

The downside? Your Ethereum will be tied up for an undefined amount of time, which could be as long as two years. Since I plan to hold my Ethereum long term, I’m comfortable with this – especially as I’m earning about 8% interest on my staked coins.

What are the risks?

We’ve already touched on the general risks of cryptocurrencies. There are also some Ethereum-specific risks to be aware of.

First, Ethereum is not the only cryptocurrency to offer smart contracts. Currently, several coins are operating in this market. They include:

Neo

Cardano

VeChain

EOS

And if these coins can do it better, there’s a chance they could knock Ethereum off the top spot.

There’s also the ever-present danger of hacking. Not only could the exchange or hot wallet where you store your currencies be hacked, but so could the Ethereum network itself.

That’s why it’s better to be safe than sorry. As with any investment, don’t just take my advice – or the advice of anyone on social media. Do your research and try to understand what the cryptocurrency you’re interested in actually does, and what its long-term potential is.

Solana, a blockchain platform followed by top crypto investors, says it’s far faster than Ethereum – TechCrunch

]

Solana isn’t widely known yet outside of the crypto community. But insiders think the blockchain platform is interesting for a wide variety of reasons, beginning with its amiable founder, Anatoly Yakovenko, who spent more than a dozen years as an engineer working on wireless protocols at Qualcomm and who says he had a lightbulb moment at a San Francisco cafe several years ago following two coffees and a beer.

His big idea centered on creating an historical record to speed along “consensus,” which is how decisions are made on blockchains, which are themselves peer-to-peer systems.

Right now, consensus is reached on various blockchains when members solve a mathematical puzzle, a mechanism that’s called “proof of work.” These miners are rewarded for their efforts with cryptocurrency, but the process takes an hour in Bitcoin’s case and a minute in the case of Ethereum, and it’s insanely energy intensive, which is why neither Bitcoin nor Ethereum has proved very scalable. (Bitcoin’s heavy reliance on fossil fuel is the reason Elon Musk cited earlier this week to explain why Tesla is no longer accepting Bitcoin as payment for the company’s electric cars.)

But there is another way. Indeed, crypto watchers and developers are excited about Ethereum and other currencies that are transitioning to a new system called “proof of stake,” wherein people who agree to lock up a certain amount of their cryptocurrency are invited to activate so-called validator software that enables them to store data, process transactions, and add new blocks to the blockchain. Like miners, “validators” take on the role to earn more cryptocurrency, but they need far less sophisticated equipment, which opens up the opportunity to more people. Meanwhile, because more validators can participate in a network, consensus can be reached faster.

Yakovenko is enthusiastic about the shift. We talked with him yesterday, and he’s certainly not rooting against Ethereum, saying it would be “devastating for the entire industry” if Ethereum weren’t able to pull off its transition to proof of stake given its mindshare and its roughly $500 billion market cap.

Still, he argues that not even proof of stake is good enough. The reason, he says, is that even with proof of stake, miners — and bots — have advance access to transaction information that allows them to exploit users, or front run transactions, because they can control transaction ordering.

Enter Yakovenko’s big idea, which he calls “proof of history,” wherein the Solana blockchain has developed a kind of synchronized clock that, in essence, assigns a timestamp for each transaction and disables the ability for miners and bots to decide the order of which transactions get recorded onto the blockchain. Yakovenko says doing so allows for greater security and “censorship resistance.”

According to a new explainer of Solana in the outlet Decrypt, Solana has innovated other ways, too, including by forwarding transactions to validators even before the previous batch of transactions is finalized, which reportedly helps to “maximize confirmation speed and boost the number of transactions that can be handled both concurrently and in parallel.”

“Basically, the speed of light is how fast we can make this network go,” says Yakovenko.

Certainly, Solana — which has sold tokens to investors but never equity in the company — has many excited about its prospects. In recent interviews with both investor Garry Tan of Initialized Capital and CEO Joe Lallouz of the blockchain infrastructure company Bison Trails, both mentioned Solana as among the projects they find most interesting right now. (We assume both hold its tokens.)

Others say on background that while they understand the developer benefits and need for more scaleable blockchains than Ethereum, Solana still needs more developer mindshare to prove its long-term worth and it’s not there yet. According to Solana itself, there are currently 608 validators helping secure the Solana Network and 47 decentralized applications (or “dapps”) powered by Solana. Meanwhile, there were reportedly 33,700 active validators helping to secure “Eth 2.0” as of late December and 3,000 dapps running on the Ethereum blockchain as of February.

In fairness, the Ethereum network went live in 2015, so it has a three-year head start on Solana. In the meantime, Solana has a lead of its own, says Yakovenko, who is based in San Francisco and has assembled a distributed team of 50 employees, including numerous former Qualcomm colleagues. Asked about other projects that have embraced a proof-of-history approach, he says that while it’s “all open source” and “anybody can go do it,” there “isn’t a set of our biggest competitors saying they’re going to rework their system and use this.”

One likely reason is that it’s almost comically complicated. “It just takes a lot of work to build these systems,” Yakovenko says. “It takes two to three years to build a new layer one, and you can’t really take an idea for one and stuff it in the other one. If you try to do that, you’re going to set yourself back by six to nine months at the least and potentially introduce bugs and vulnerabilities.”

Either way, Solana, which itself has a $12 billion market cap, isn’t interested in competing with Ethereum and other cryptocurrencies on every front, suggests Yakovenko. All it really wants is to completely disrupt Wall Street and the rest of the global markets.

He knows it sounds crazy. But the way he sees it, what Solana is building is “an open, fair, censorship-resistant global marketplace” that’s better than anything inside of the New York Stock Exchange or any other means of settling trades. It’s certainly a much bigger opportunity than he imagined backed at that cafe.

“Everything that we do to make this thing faster and faster results in this better censorship resistance and therefore better markets,” he said yesterday. “And price discovery is what I imagine is the killer use case for decentralized public networks. Can we be the world’s price discovery engine? That’s an interesting question to ask.”

Yakovenko is far from alone in pondering the growing possibilities. Pointing to the wild swings in cryptocurrency prices right now, he says he suspects that “part of that is just developers and folks discovering the network and building cool applications on it.”

It’s exciting when people can “self serve and build stuff that they want to go to market,” he adds. “It’s the secret weapon of decentralized networks versus any incumbents like Bank of America or Visa or whatever. Those big companies can’t iterate and move as fast as a global set of engineers who can just come together and code whenever they want to.”

He saw very similar dynamics play at Qualcomm, in fact.

“Working in a big company, it seems like there’s a ton of resources and they can accomplish anything. But you saw us working on proprietary operating systems while the Linux guys were just working first for fun, right? And it seemed like it was just a weird hobby that people had; they were coding operating systems at night; they were coding over the weekend.”

At the time, to a lot of outsiders, the engineers focused on Linux seemed a lot like geeks with too much time on their hands. “Then all of a sudden,” Yakovenko says, “Linux is the de facto mobile iOS of Android.”

follow us