Ethereum Guide

From beginner to expert

Introduction

Because of the enormous growth of Bitcoin, the confidence and interest in cryptocurrencies has increased enormously. More networks appeared that implement Blockchain technology.

One of the most promising cryptocurrencies that have appeared is undoubtedly Ethereum. Which can not only be used as a “digital currency” but also as the first programmable Blockchain.

This has made it a very attractive blockchain to invest in. This is not only due to the revolutionary use of a blockchain, but also because this crypto shows the same pattern in terms of value as Bitcoin has. As a result, more and more people want to take advantage of the growth and popularity of the blockchain, and they want to buy as much Ether as possible now that it is still available at a relatively cheap price.

But where do you start if you are interested in investing or buying Ether? Where do you store them and what is the best place to buy them?

Who is this guide for?

This guide is aimed at people who want to invest in Ethereum or simply want to know more about the inner workings of this Blockchain. In this guide, we discuss everything you need to know to take part in this digital revolution!

Why did we make this manual?

Ethereum has been around since 2015 and has since made huge leaps in popularity, functionality, and value. More and more people are therefore choosing to transfer part of their income to Ethereum.

Yet there is a lot of confusion around Ethereum and Cryptocurrency in general. Many people have no idea how to use the network and where to start. While others just do not understand the difference between Ethereum and Bitcoin. The common misconception is that investing, buying and working with Ethereum requires a huge technical background.

The good news is that many of these concerns and questions have been answered and/or misplaced. You will soon find that working, paying and receiving money within the Ethereum network is not only simple but easier and faster than at your own bank! Once you have taken the first step, you will realize how intuitive the network actually is!

In addition, you will also understand what makes Ethereum so popular and you will become more familiar with all the ins and outs of this cryptocurrency.

The purpose of this manual is to help you with that first step! We can relate that when you first set out to buy Ethereum (Ether), it’s easy to get overloaded with information. We have created this manual to guide you through your first purchase of Ether, the currency of Ethereum, and help you with the choices you can make on your way. We discuss aspects of Ethereum such as:

  • Ethereum wallet, what types are there and how do you choose the best?
  • How you can invest in Ethereum. Which brokers are reliable?
  • How do you ensure that you use your Ether safely?
  • What the differences are between Ethereum and Bitcoin.

How should you use this manual?

Firstly, we strongly recommend that you bookmark this page in your browser so that you can always come back if you have any questions.

This guide is subdivided into a number of chapters that each describe an aspect of Ethereum. In other words, each chapter is a mini guide in itself!

We strongly recommend that you read our guide on Blockchains first, as it teaches you the basic fundamentals you need to know to understand Ethereum.

For this reason, you can choose how exactly you go through the manual. If you are completely new to the world of cryptocurrencies, we strongly advise you to go through the entire manual once.

Do you already have a strong idea of ​​how and what an Ethereum is and you are not completely new to the world of crypto. Then you can safely jump to the chapter that is most relevant to your need.

Important: If you are looking for the best place to buy Ethereum, you can go straight to chapter 3.

What is Ethereum?

Vitalik Buterin, the inventor of Ethereum, described the blockchain as a platform for the construction of decentralized applications (DApps). The goal of Ethereum for Vitalik is to become a platform of innovation and the first programmable blockchain.

In the left a centralized system, on the right a decentralized system.

‘Open software platform based on blockchain technology’ is how Ethereum was described in Ethereum’s original whitepaper of 2009; with the aim of creating an alternative protocol for building decentralized applications. Ethereum was created as the foundation on which this idea will be built. Ethereum is also a blockchain that has been created with the help of crowdfunding!

Ethereum and Bitcoin: two different blockchains

When people hear about Ethereum for the first time, they usually ask the following question first; What is the difference between Ethereum and Bitcoin?

The general picture is that Ethereum and Bitcoin both do the same, but that is untrue. Ethereum is much more than a digital currency.

Ether

Ether (ETH) – is the fuel of the Ethereum network. Ether is used to run the application platform Ethereum. Within the network, it is a form of payment between the customers of the platform to the machines that perform the operations within the platform. In other words, Ether is for Ethereum as bitcoins for Bitcoin; a decentralized currency.

Like Bitcoin, Ethereum does not need a central server to carry out its transactions. All transactions are carried out by computers and are completed within 14-15 seconds. A big difference in speed if you compare this with a traditional bank debit that can cost 1 to 2 days, but even faster than Bitcoin that takes 10 minutes. 

Ethereum is a Blockchain and that means that everyone in the network has its own ‘ledger’. Usually, you would need an entity like a bank to keep track of all transactions and to double check that money didn’t just appear out of nothing. With a Blockchain, an intermediary as a bank is not necessary. Every user in the Ethereum network has a list of all transactions, and because of this, nobody can simply withdraw money from or into the system.

The miners of Ethereum have an important role here, their task is to check every block (all transactions done in the previous 14-15 seconds). This requires that they carry out a lot of computational calculations on their computer. The first to solve the block and check the correctness of the transactions this will receive a fixed reward of 5 Ether. This reward, known as a block reward, is never halved; in contrast to Bitcoin, where the block reward is halved every 4 years.

An initial stock of 60 million Ether was issued as a presale, additionally 12 million was kept for further development of the Blockchain. Every year, 18 million Ether is added and rewarded to the miners who check the transactions. In contrast to Bitcoin, Ethereum is not “premined”. Premining means that the initial miners owned all the currency in circulation. With Ether, it is expected that within 5 years miners will own 50% of the entire supply. In addition, Ether has no maximum supply.

Smart Contracts

A revolutionary aspect of Ethereum’s network is the use of “smart contracts”. These smart contracts help you with the exchange of money, estate, shares and much more. All of this without the need for a lawyer or other intermediary. Completely conflict-free!

The easiest way to understand how a smart contract works, is to compare it to a vending machine. Normally you would pay a lawyer, notary, etc. and then wait until they deliver you the required document. But with smart contracts, you simply pay the machine, which delivers the document to your account at a certain agreed upon date.

Imagine that you want to rent an apartment that I own. We decide to use a smart contract and you make the payment of the rent with Ether. The Ethereum network will give you a voucher that will be kept inside the virtual contract. The contract states that I have to deliver a digital key on a certain date.
If I do not deliver the key in time, the system will automatically return your Ether. If I deliver the key earlier, the network will hold the key and your Ether until the agreed date; only then do you and I get our money and key respectively.

As the example above hopefully has made clear. The function of a smart contract is to make sure that the supplier gets rewarded if he/she delivers and is assured of payment. While at the same time making sure the recipient pays for the server only when he or she receives it. The document automatically turns itself off after the agreed date. So what happens if either party doesn’t keep their end of the transaction? In that case, the smart contract won’t trigger and the recipient simply gets his or her money back.

Smart contracts are expected to have applications in many sectors such as estate, credit, financial services, legislation, and even crowdfunding!

Frequently Asked Questions

Ether is the currency of Ethereum’s network. It is the gas that the network runs, as it were, and is comparable to bitcoin.

Contrary to popular belief, you are not completely anonymous in the Ethereum network! Each wallet is publicly visible and traceable, but is not linked to one person, so it is very difficult to trace.

Ether (ETH) can you buy from a broker like BTCDirect. No idea how it works? Then read the chapter about buying and selling Ethereum in our manual.

A blockchain is the underlying technology that Ethereum uses.

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