Education, For Beginner Traders, Ethereum, ETH

What is Ethereum: Everything You Should Know | Binance.US

March 17, 2023 - 13 min read

As the second-largest cryptocurrency in the world, Ethereum plays an important role within the crypto ecosystem.

Ethereum is the world’s second-largest cryptocurrency and has enjoyed meteoric success since it first appeared less than a decade ago.

This article will explain what Ethereum is, why it is increasingly popular, and things to consider before adding this asset to your crypto portfolio.

What is Ethereum?

Ethereum is commonly described as a technology, a blockchain network, and a computing network. Ethereum describes itself as a “foundation for a digital future” and a community-run crypto technology.

Think of it as a platform that enables a series of decentralized applications. These can include smart contracts, decentralized finance (DeFi) apps, and non-fungible tokens (NFTs).

Since it is based on blockchain technology, participants who transact on the Ethereum blockchain have full visibility into transaction data. Ethereum relies on its own unique cryptocurrency — Ether (ETH) — to pay for all transactions on the platform.

Participants can make crypto transactions, earn rewards (via a technique called “staking”), access blockchain-based games, and more. Due to its decentralized nature, Ethereum has been touted as the next leap in the evolution of the Internet — a kind of “next-generation web.”

A Brief History of Ethereum

Initially conceived in a 2013 white paper published by Vitalik Buterin, Ethereum eventually launched in 2015. Its development was crowdfunded in a novel way: an online sale where purchasers bought Ether (ETH), Ethereum’s native token, with another existing digital coin: Bitcoin.

Ethereum has grown to become the second-largest blockchain network in the world and the second-largest cryptocurrency after Bitcoin. Its blockchain roots are essential to understanding its potential.

Understanding Blockchain

Blockchain is a distributed digital ledger. It records transactions and stores information about them in a “block.” This information is immutable — once written, it cannot be modified or overwritten, preserving a secure and permanent record.

Blockchain technology is changing the way major industries operate. Shipping companies, traditional banks, and all sorts of supply chains are relying on it to give them shared, verifiable, and trustworthy records of what went where and when.

But blockchain is also making new applications possible to build. Take smart contracts, for example.

Defining Smart Contracts

A smart contract is a way to automate an existing agreement between parties. It uses “if/then” logic coded into a computer program. When certain conditions specified in the contract are met, the program triggers the next action to be executed.

This means all parties to an agreement can be sure it will be carried out exactly as specified without involving a third party to oversee or enforce the details. Smart contracts also eliminate delays waiting for a response or action by a participant.

These contracts can be used for many digital financial interactions (trading, payments, etc.), supply chain management, insurance, real estate, and even government interactions.

At its core, Ethereum is a decentralized platform that runs smart contracts.

This means it is much more than just a cryptocurrency or platform on which to trade cryptocurrencies. Ethereum can be used for a wide range of functions.

Ethereum’s smart contract capabilities have also had a positive effect on the value of its digital currency, Ether (ETH). Because it’s arguably the most popular platform for creating and trading NFTs, demand for the currency has helped contribute to its value.

Understanding Ether (ETH)

As mentioned above, Ether is the name of Ethereum’s native token and is abbreviated as ETH — its ticker name. Ethereum is often used synonymously with Ether or ETH. In addition to being the second-largest cryptocurrency, a higher volume of crypto transactions happens on the Ethereum network than any other blockchain network (with some historical exceptions).

On the Ethereum platform, Ether (ETH) can be sent to another user, spent to power applications, or cover transaction fees. It can also function as a trading asset akin to most other cryptocurrencies.

When it was first issued, Ether was valued under $1 but has seen its value skyrocket to as high as $4,800.

Ether’s Pros and Cons

Pros

Ether (ETH) has real utility. As the native cryptocurrency of the Ethereum platform, Ether acts as a medium of exchange for dApps, NFTs, and other projects that are built on Ethereum.

While second to Bitcoin overall, Ether (ETH) enjoys a broad following from token holders whose interests go beyond just trading or speculating with ETH.

Ethereum also has a decided advantage in transaction processing speed compared to Bitcoin. Validation of new blocks on Bitcoin occurs every 10 minutes, while on Ethereum, the validation occurs every 12 seconds.

Cons

As with any other cryptocurrency — or digital asset, for that matter — Ether is relatively new and subject to extreme volatility.

There is no maximum limit to the number of Ether (ETH) coins that can be created. This means it can potentially be an inflationary currency, in that as its supply increases, it could outpace demand, eroding the purchasing power of each coin.

How Might Ethereum Fit into Your Crypto Plans?

Anyone looking to build a crypto portfolio should have a strategy in mind. Start there, and consider your unique needs, situation, objectives, and risk tolerance. Then, decide how Ethereum might fit into your strategy.

The Ethereum Network

Ether (ETH) maintains several important differences when compared to popular cryptocurrencies like Bitcoin (BTC). ETH's value is linked to its utility, which is derived from the Ethereum network. Consider a few of Ethereum's potential advantages and disadvantages.

Advantages

As a blockchain-based platform, Ethereum is decentralized, interoperable, and open source. No one person can likely dictate its direction, and its literal functioning is spread over a network of computers worldwide, making it next to impossible to go down.

It is also relatively performant platform, allowing for rapid deployment of applications and validation of new blocks added to its blockchain. This encourages a vibrant community of creators and developers to keep innovating on it, further reinforcing its value.

While Ethereum is a public, permissionless network, it also supports permissioned private blockchains, making it suitable for enterprise (large company) use.

Potential Disadvantages

Ethereum’s programming language has been described as complex and difficult to master. It has also been cited as having potential scaling issues because of its design.

Ethereum engineers are working on techniques to drastically boost transaction speeds — and therefore transaction scaling issues — in the platform’s next release, Ethereum 2.0.

How to Buy Ether (ETH) on Binance.US in 3 Steps

1) Create An Account

After researching which crypto platform is best for you, create an account. Platforms such as Binance.US enable you to convert fiat currency (e.g., money backed by a local government or bank, such as US dollars) into ETH.

Look for a platform that offers features that work for your overall strategy and any cryptocurrency you might be interested in.

Consider the platform’s:

Security
Range of tokens
Trading fees
Advanced features, such as recurring buy orders and Real-time order books

The platform you choose will become your partner. Make sure it offers the right features for all its tokens and provides future benefits when you want to diversify your portfolio.

2) Fund Your Account

To buy ETH, transfer funds from a traditional bank account to the account you created in step one.

Most platforms offer a variety of ways for you to fund your account, including:

Wire transfer
Debit card
ACH (from a bank account)
Credit card

Before you sign up, make sure the exchange offers the funding method you prefer.

3) Choose When To Buy

Finally, to complete your purchase of ETH, choose when to buy.

Monitor the market to determine when buy and sell orders may fit into your crypto strategy.

How to sell Ether (ETH) on Binance.US

1) Create an account

To sell Ether (ETH), start by opening an account on a crypto platform, such as Binance.US, if you haven’t already.

After you’ve opened an account, verify your identity to reinforce the security of the platform and keep your ETH safe.

2) Fund your account

Once you have access to the platform, fund the account with fiat currency (e.g., U.S. dollars) so that you can buy ETH.

If you already own ETH on another platform, you can choose to transfer it from its current location to the new crypto ecosystem as a way to fund your account.

3) Choose how and when to sell

Once you’ve got ETH in your account, it’s just a matter of specifying the amount you want to sell and when you want to sell it.

Binance.US gives you several options for doing this, including:

A market order at the current market price
A limit order at a future price you indicate
A stop-limit order (sometimes known as a stop-loss), where you can set a stop price to trigger the sale at market price

When the sale of your ETH is complete, the system will deposit the equivalent amount of fiat currency in your account for you to use to purchase other cryptocurrencies, withdraw, or pay for products and services.

How to trade Ether (ETH) on Binance.US

Trading Ether (ETH) follows the same steps as buying and selling it.

Here’s a quick run-down:

Open an account with a crypto platform that allows users to trade ETH
Fund your account with the fiat currency of your choice
Purchase ETH through this platform or transfer it from another platform
Use the tools, information, and resources provided by the platform to create and initiate a trade

Remember that the cryptocurrency market changes very quickly, and trading Ether (ETH) — or any cryptocurrency, for that matter — can be difficult to time and execute correctly.

Before you initiate any trade orders, research and analyze the market to develop a strategy to guide your decision-making process.

How to stake Ether (ETH) on Binance.US

If you’re looking for a way to earn rewards without buying, selling, or trading, try staking your Ether (ETH).

When you stake ETH, you dedicate some or all of your holdings so the platform can use them to secure the Ether (ETH) blockchain and the proof-of-stake network on which it operates.

After you stake your ETH, the crypto ecosystem generates rewards based on several different factors, including:

The amount of ETH staked
Transaction fees accumulated from circulating assets
Newly created block incentives

As with buying, selling, and trading, the right crypto platform — like Binance.US — will make staking ETH as simple, secure, and convenient as possible.

Tips for adding Ether (ETH) to your portfolio

1) Research the crypto market

The first step in successfully adding Ether (ETH) to your portfolio is research — and lots of it. Delve deep into topics such as:

The cryptocurrency market
How the market works
What factors affect its movement
How to read a candlestick chart
Dollar-cost averaging
How to spot scams
Private key vs. public key
How to perform a technical analysis
The difference between coins and tokens
HODLing
Proof-of-work vs. proof-of-stake

If this list feels a bit overwhelming, don’t panic. You don’t have to learn it all before you start buying ETH. However, do make it a point to continue researching various aspects of the market as you go.

2) Plan your strategy

One of the best things you can do when buying, selling, trading, or staking ETH — or any cryptocurrency, for that matter — is to formulate a plan of attack before initiating any transactions.

Rushing headlong into the market can be a risky endeavor, so it’s essential that you take things one step at a time.

Depending on your intentions for the cryptocurrency you own , you might make a plan to buy and stake. Or, perhaps, buying and then day trading is more in line with your goals.

Whatever strategy and plan you develop, do your best to stick to it as closely as possible. As you go, resist the urge to follow temporary hype into a losing situation.

Creating a strategy before you do anything else can also help you find a platform that satisfies all your needs. When you know what you’re going to do — or a close approximation thereof — you’ll have a better idea of the features, tools, and resources you’ll need to make it happen.

3) Investigate crypto platforms

As you’re developing your strategy and learning about the Ethereum blockchain, Ether (ETH), and the various technical aspects of the market, take the time to investigate the crypto platforms out there.

Don’t just settle for the first one you find. Instead, research each with a critical eye.

Make a list of questions you have about the platform, including:

What problems does the platform solve?
What benefits does the crypto ecosystem offer?
How many users does the platform have?
What do users have to say about the platform?
How cryptographically secure is the platform?
What are the fees involved in buying ETH and other cryptos?
Will this platform still be useful as my portfolio grows?

Investigating crypto platforms before you commit will help you choose the option that works best for your strategy.

4) Limit your losses

Another important step in buying, selling, trading, and staking Ether (ETH) is setting up a process to limit your losses.

Before you initiate a transaction, come up with a loss threshold below which you won’t go. This number will be different for everyone and depends, in large part, on what your portfolio can handle and the risks you’re willing to take.

With loss limits in place, you’ll know exactly when to get out of the market should it fall too far. And you’ll avoid getting swept away by the emotion, adrenaline, and excitement that can wind up leading you into a losing position.

5) Diversify

At the start, focusing on one cryptocurrency can help you learn about the market and how it moves. Shortly after buying Ether (ETH), though, it can be useful to diversify into other coins and tokens as well.

Buying a lot of one coin or token can expose you to more risk than you might be willing to handle. Diversifying can help mitigate that risk.

Consider adding a second or third option to some of your ETH buys to inject a bit of stability into your portfolio in case one of the cryptos in your wallet takes a dive.

6) Set up a crypto wallet

Once you have Ether (ETH) in your account, it’s vital that you store it in a secure location. That’s where a crypto wallet comes in. Crypto wallets come in two varieties: hot or cold.

A hot wallet is a secure storage space typically offered by the cryptocurrency platform through which you buy, sell, and trade your digital assets. The key thing to remember about a hot wallet is that it’s always online and accessible (with the right credentials, of course) through a web browser or mobile device.

A cold wallet is similar to a hot wallet but stores digital assets offline in a standalone space, such as an external hard drive or flash drive. Cold wallets typically offer better security for the simple fact that you can disconnect them from your computer after you’re done.

That said, cold wallets are often less convenient when it comes to initiating rapid transactions because the cold wallet has a finite communication speed that depends, in large part, on how it’s connected to your computer (e.g., USB cable, Cat6 cable, etc.).

If you’re new to the cryptocurrency market, consider trying them both to find the one that works best for you.

7) Automate your Ether (ETH) acquisition

Buying Ether (ETH) at exactly the right time can be difficult, stressful, and labor-intensive without the assistance of automation features offered by your crypto platform.

Such automation makes it possible to set up recurring buy orders that happen every month, regardless of the price. For example, you might set the system to purchase $100 worth of ETH on the first Friday of every month.

Sometimes, you’ll get more ETH because prices are lower. At other times, you’ll get less ETH because prices are higher.

Overall, automated recurring buy orders may net you more Ether (ETH) than you could bring in by trying to time the market and place orders manually. Auto-Buy on Binance.US was created with this tactic in mind.

Customers can easily set their schedule from the buy screen by toggling the Auto-Buy slider on and deciding how often they would like to make a purchase. To use this feature, download the latest version of the Binance.US mobile app.

Start your crypto journey with Binance.US

Register for a Binance.US account or download the Binance.US app. Once you have your account, you can buy cryptocurrencies on Binance.US using fiat via bank transfer, debit card, or wire transfer.

No matter what your crypto goals are, Binance.US can help you get there.

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Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice, we make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability, or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

Risk warning: Buying, selling, and holding cryptocurrencies are activities that are subject to high market risk. The volatile and unpredictable nature of the price of cryptocurrencies may result in a significant loss. Binance.US is not responsible for any loss that you may incur from price fluctuations when you buy, sell, or hold cryptocurrencies. Please refer to our Terms of Use for more information.

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