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Ethereum

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What is Ethereum?

Ethereum is a software platform that is based on blockchain technology. It allows developers to create whatever operations they want (decentralized applications). Therefore, the developers can build thousands of different applications that are corruption and tamper proof.

The applications are well protected against fraudulent activities and hacking since they are secured using cryptography. A third party cannot make any changes to the data on these decentralized applications. These applications also never go down and cannot be switched off.

Ether is a cryptocurrency used to operate smart contracts on the Ethereum network. These tokens are not issued or controlled by any bank or government. It is an open network, managed solely by its users.

How does Ethereum work?

In the Ethereum blockchain, miners work to earn Ether. Ether is a type of crypto token that fuels the Ethereum network. Also, Ether is used by developers to pay for transaction fee on the Ethereum network.

There are two ways of running Ethereum. You can download it or write it yourself. The Ethereum client will then connect to the internet to other people’s computers running the same client software. They will then start downloading the Ethereum blockchain from them.

The Ethereum project validates whether each of the blocks conforms to the Ethereum rules independently. The client’s computer becomes a node on the network and operates like all the other nodes.

Who created Ethereum?

Ethereum was created by a 19-year programmer, Vitalik Buterin. In 2013, he released a white paper describing an alternative platform designed for any decentralized application developers would like to build. This system was called Ethereum.

After Vitalik Buterin released the Ethereum whitepaper, other developers who were interested joined rank. Dr. Gavin wood, who is a cofounder of Ethereum, wrote the Ethereum yellow paper which outlined the specification for the Ethereum virtual machine (EVM). The EVM handles the ledgers and runs the smart contracts.

Joseph Lublin, also a cofounder went ahead and found the Brooklyn-based Consensys, a start-up which focuses on generating decentralized apps. Vitalik and the other co-founders launched a crowdfunding campaign in July 2014 to get the project started. During this campaign, the participants purchased the Ethereum tokens (Ether) which work as shares in the project.

Ethereum vs. Bitcoin: What are the differences?

There are some significant differences between Ethereum and Bitcoin.

Ethereum blockchain focuses on running the programming codes of the decentralized apps while Bitcoin blockchain is used to track ownership of BTC.  The Ethereum blockchain is shorter than Bitcoin’s blockchain. The time between blocks in Ethereum is approximately 14 seconds compared to Bitcoin’s 10 minutes.

Therefore, Ethereum transactions are recorded on Ethereum’s blockchain faster than Bitcoin transaction getting recorded in Bitcoin’s blockchain. Also, Ethereum has smaller blocks. Instead of mining bitcoins in the Ethereum blockchain, miners work to earn Ether.

What is an ethereum wallet?

Technically, ethereum wallet is a gateway to decentralized applications existing on the Ethereum blockchain. Ethers which are essence of Ethereum are stored in a secure way using ethereum wallet.

Ethereum wallets not only safe guard your transactions and crypto assets, but also allow write, live deploy and use smart contracts. Alos, there are different types of wallets available including paper wallets.

Ethereum paper wallets are considered as one of the safest mechanisms to securing your cryptocurrencies. Paper wallet is a record of Ethereum public and private key which will be used to make transactions. Other commonly used wallets are hardware wallet, web wallet, desktop wallet.

What are the best ethereum wallets?

Key features to be considered while choosing an ethereum wallet include private key, security, community support, ease of use, compatibility and development community. It is important to evaluate these feature guidelines before choosing the ethereum wallet. If any one of these features do not exist, then using the ethereum wallet would be tedious.

Best hardware wallets include

  • Ledger Nano S
  • Trezor – It is the first hardware wallet introduced for Bitcoins and can be used for Ethereum as well.
  • KeepKey

Best desktop wallets include

  • Exodus
  • Mist
  • MetaMask

Best Mobile wallets include

  • Jaxx

Best Web wallets include

  • MyEtherWallet
  • Coinbase

Best Paper wallets include

  • ETHAdress
  • MyEtherWallet

What is ethereum mining?

Ethereum mining deals with two things:

  • Increase the volume of Ethers in circulation
  • Secure ethereum to create, verify, publish and propagate blocks in blockchain

Mining is a computationally intensive work that requires lot of processing power and time.

People or resources involved in mining activity are commonly referred as “miner.” Ethereum mining is the act of participating in a peer to peer decentralized, transactional cryptocurrency network in consensus.

A miner receives ethers as reward for solving and providing solutions to a complex math problem. By continuously being involved in ethereum mining, one can generate multiple ethers.

How to mine ethereum?

To start ethereum mining, two things are required:

  • Ethereum Wallet
  • Join a Ethereum mining pool

The mining process is similar to other cryptocurrencies. You can use same graphic cards used for bitcoins to mine ethereum. Simplest way is to download an ethereum client such as MinerGate and complete the installation and setup. Once installed, this will automatically try to use your machine resources to mine ethers.

Some clients also allow you to benchmark your machine to determine the hashrate of the processor and GPU. A dedicated miner can buy custom equipment for mining ethereum or use multiple dedicated graphic cards instead of plain CPU.

Is ethereum mining profitable?

Ethereum has gained immense popularity and is the second most mined cryptocurrency after bitcoins. The price of ethereum is increasing every year and jumps my multi folds. The current market cap for ethereum is around $800. The current circulation supply is 96.5 million coins.

While there are several benefits of ethereum mining, one can acquire ethers by one of the two ways – either through ryptocurrency exchanges or mining.

Cryptocurrency requires a huge budget and also accurate evaluation of the market trends for ethereum. Mining involved huge computational processing, power resource consumptions and ability to solve complex math.

Considering these complexities, ethereum mining can be profitable to a dedicated miner or someone familiar with other crypto currency trading.

Should I buy ethereum?

Ethereum, similar to other crypto currency is a volatile investment. Ethereum is relatively new to the market and is emerging in its own way. While ethereum has several advantages and benefits, it is essential to evaluate and understand ethereum concepts before buying ethereum.

Some of the key points to be considered while buying ethereum are current market cap value, number of ethers to invest, community support and understanding of the basics about cryptocurrencies such as mining, trading and ethereum transactions

While ether rates are rising currently, nothing can be predicted about future trends. However, one can start with buying smaller amounts of ethers, before making a really big investment.

 

Will ethereum rise in price?

The current market cap for ethereum is around $800. This is predicted to increase at a very fast rate and could hit around $1500 in the next 5 years. The price depends on the number of ethers in circulation and the number of transactions.

Ethereum was created three years back and from the time of initiation, ethereum has gained immense popularity across various cryptocurrency communities. Over the years, ethereum blocks have increased substantially.

Ethereum prices are predicted to rise exponentially and not linearly. While future of ethereum looks bright, nothing much can be predicted about far future trends of ethereum or any other cryptocurrency.

Where to buy ethereum?

The simplest way to buy ethereum is through any ethereum exchange sites. Once ethers have been purchased using domestic currencies, one can store the funds on the exchange itself or on a secure wallet.

For smaller purchases of ethereum, it is easier to store it in exchange for ease of use. However, for larger purchase of ethereum it is recommended to be transferred and stored to a secure wallet. Most of the ethereum exchanges have a minimum trading purchase ranging from $1 to $200.

Most of these exchanges use cash, credit card, debit card payments and bank transfers. While some even accept paypal and alternate cryptocurrencies such as bitcoins.

Where is ethereum accepted?

Though ethereum is the second most popular cryptocurrency, it is still not accepted in too many places as compared to bitcoins. However, there are some businesses and companies which deal with ethereum transactions.

Some of the well-known companies include:

  • Bacloud which deals with data centre services, providing dedicated servers, VPS
  • Maersk which is the largest shipping company
  • JPMorgan Chase
  • Microsoft
  • Intel
  • Accenture
  • Credit Suisse
  • Cisco Systems

Many companies are joining hands to form the ethereum alliance and the number of companies accepting ethereum will increase in the near future.

Is ethereum legal (illegal)?

Ethereum is 100% legal in most countries.

However, the credibility of usage of ethereum depends on the country governance. Most of the countries around the world do not impose any specific restrictions on ethereum mining or transactions.

However, certain countries are yet to decide on the fate of cryptocurrency by evaluating its benefits and risks. Some countries such as UK, Slovenia, US, Bulgaria, Germany have accepted ethereum as valid cryptocurrency from trading and transactions. While some countries such as Belgium, India, Portugal, Hungary, Croatia have a neutral approach towards ethereum and have no government rules imposed or any specific security for ethereum.

Is Ethereum Taxed?

Ethereum has multi-level acceptance across different countries around the world. Some governments accept this as a valid means of cryptocurrency and have defined specific tax rules. This depends on the country governance and acceptance of ethereum.

Germany issues sales tax and VAT on cryptocurrencies. Similarly, Bulgaria issued a 10% tax when it is used as a currency or sold to/from a fiat currency. There are multiple discussions around taxes to be levied on cryptocurrencies and this will undergo several changes before any finalized tax structure.

However, it is always best to understand the significance of ethereum or any cryptocurrency in the country you reside in and check the tax information in the country.