What is Ethereum, and how good an investment is it?

Ethereum moved to proof of stake in September 2022, so the mining method described here is no longer possible. This article is from July 2019 and is kept as written.

Ethereum is a digital currency attracting a great deal of attention at the moment — watched every bit as closely as its older sibling Bitcoin. A lot of people still ask what makes Ethereum special, how it differs from other digital currencies, and why it is talked about so widely. Today, let us get to know Ethereum a little better.

How is Ethereum similar to or different from Bitcoin?

In reality Ethereum and Bitcoin are digital currencies with a fair amount in common, because both use blockchain technology: you can mine them, and you can buy and sell them to speculate. Some shops will also let you buy goods with Bitcoin in place of cash. Where Ethereum differs is that it is not merely an ordinary currency — it is open source, letting anyone come and develop things on it, so applications can be built on top of it. That means Ethereum can be put to many uses, whereas Bitcoin can only carry out financial transactions.

Investing in Ethereum divides into two main methods

1. Mining

Mining Ethereum is done the ordinary way, with miners solving problems continuously. Using a high-specification computer, and the more power it has, means mining that much more.

2. Trading with another currency

For investors who dislike the hassle of mining coins, there is the option of investing as a trader instead. This means taking another currency and exchanging it for Ethereum to hold, and then speculating on it later.

Why are so many people interested in investing in Ethereum?

Because over the recent period, quite apart from the value of Ethereum rising enormously in a short space of time, Ethereum's own capabilities are what attract a lot of people beyond the question of value — which is why its popularity keeps increasing. You are the one who analyses what kind of investment you want. Say you want to pay for something, or a car rental business using the smart contract system that is a capability unique to Ethereum, rather similar to Uber or Grab Taxi, but differing in that paying for the service through Ethereum does not have to go through a middleman. This is why so many investors are overwhelmingly interested in Ethereum. Even so, you need to understand first that every investment carries risk, so a great deal of care is needed.

For anyone wanting to invest in Ethereum, you need to study it properly first in order to analyse it before investing, so as to make as much profit as possible — or, if you take a loss, a loss you can accept. It is best to analyse it yourself as much as you can, because drawing on your own experience is what will let you decide to invest at the right time, and as effectively as possible.