Ethereum is the second-most valuable cryptocurrency in the world by market capitalization, currently valued at more than $370 billion.1 Starting from humble beginnings in 2015, Ethereum was born out of discussions in a meet-up group in Toronto, Ontario. Russian-Canadian Vitalik Buterin is often credited as the founder of the project, but there are actually seven other co-founders, many of whom are still innovating in the crypto space today. They include the founders of Cardano (Charles Hoskinson) and Polkadot (Gavin Wood), which are two direct competitors of Ethereum.2 Today, most of the trading volume that filters through the worlds of decentralized finance (DeFi), non-fungible tokens (NFTs), and the metaverse go through the Ethereum blockchain.3 This is true even though the project faces a long road toward achieving its full 2.0 upgrade. Some of Ethereum’s pain points, including costly smart contract transaction fees, may dissipate after the upgrade is complete.
What is Ethereum?
Ethereum4 was built to be the world’s largest and most powerful decentralized world computer. Although it’s a peer-to-peer payment system that lives on top of a blockchain just like Bitcoin, Ethereum is also the first-ever smart contract platform. It provides developers with a way to raise funds to build decentralized applications. This means a couple of things for developers. First, they no longer need to rely on centralized marketplaces like The Apple Store or Google Play to publish their applications. Secondly, developers can raise money for their ideas by launching initial coin offerings (ICOs) instead of going the traditional venture capital route.
Background on Ethereum
Ethereum is moving toward a more efficient and environmentally friendly consensus algorithm that differs from Bitcoin’s proof-of-work (PoW) approach. When the Ethereum 2.0 upgrade is complete, potentially in 2023, a proof-of-stake (PoS) consensus algorithm will validate transactions. In a proof-of-stake environment, transactions are confirmed by nodes (computers) that act as validators.5 Validators secure the Ethereum blockchain and earn tokens for doing so. The difference with Bitcoin’s proof-of-work approach is that in a PoW system, validators, known as miners, need more and more computing power to solve cryptographic puzzles to validate transactions. This uses an incredible amount of energy and electricity.
Ethereum’s proof-of-stake approach, on the other hand, allows any node to participate as a validator if they’re willing to stake tokens to the network as collateral. Validating transactions correctly means earning a reward. Incorrectly validating transactions means losing your stake. Once the Ethereum 2.0 upgrade is complete, validating transactions may become more environmentally friendly. Transaction fees will also likely get cheaper, and the blockchain’s ability to handle more transactions may increase.6 Add to that the fact that Ethereum already dominates many facets of the crypto world, and it’s easy to see why some people want to own it.
How to Buy Ethereum with TradeStation
It’s easy to figure out how to invest in Ethereum using TradeStation. [i] If you don’t have an account already, simply click here to open an account.
1. CoinMarketCap.com. Ethereum price and total market value as of April 13, 2022. https://coinmarketcap.com/currencies/ethereum/
2. Decrypt.co. Who are Ethereum’s Cofounders and where are they now? Accessed on April 18, 2022. https://decrypt.co/36641/who-are-ethereums-co-founders-and-where-are-they-now
3. StateofDApps.com. Ethereum. Accessed on April 18, 2022. https://www.stateofthedapps.com/platforms/ethereum
4. Ethereum Whitepaper. Accessed on April 18, 2022. https://ethereum.org/en/whitepaper/
5. Proof-of-Stake. Accessed on April 18, 2022. https://ethereum.org/en/developers/docs/consensus- mechanisms/pos/
6. Eth2 upgrades. Accessed on April 18, 2022. https://ethereum.org/en/eth2/
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