Ethereum is the world’s number two cryptocurrency after Bitcoin. While it has held the second position in the crypto world for its entire lifetime, Ethereum’s explosive growth in a short time is quite spectacular.
Since its inception in July 2015, it went from trading from just $1 to more than $2,100 in April 2021. Currently, the global trade of Ethereum amounts to billions of dollars each day, delivering some of the highest ROI’s of any cryptocurrency.
There is much potential. As such, there is no other time to invest in Ethereum than now.
In most of our previous articles, we jump straight into making money or working with crypto. However, for the sake of beginners, I’ll start from scratch here. If you want to go straight to the ways to earn with Ethereum without reading the basics, use the table of contents below.
What Is Ethereum?
Ethereum is a cryptocurrency and a platform. Ethereum only refers to the platform; the virtual currency is known as Ether, just as Bitcoin (capitalized) is the platform, and bitcoin (no capitalization) the currency. However, today the most common way is to use only the first term: Ethereum.
A Little History
The Ethereum idea was proposed in 2013, crowdfunded in 2014, and went live in July 2015. The platform, developed by the Russian programmer Vitalik Buterin, was created as an improved version of Bitcoin.
Ethereum proposed to use blockchain technology to both operate a decentralized network and store computer codes. In other words, not only can users buy and sell the cryptocurrency, but they can also use Ether to write and run codes on the blockchain.
Developers can deploy decentralized applications (dApps) without third-party interference and control. These apps, which are defined by smart contracts, can be designed with endless possibilities and interact with each other on the blockchain.
Since other humans can’t easily mine smart contracts, they’re useful for applications that require safe and secure keeping. As such, you can use Ether (abbreviated ETH) for voting systems, games of chance, insurance, digital identities, auctions, and other record-keeping activities.
What’s more? Ethereums’s block time (transaction speed) only takes a few seconds, compared to generating a Bitcoin transaction that takes minutes.
Although Ethereum was initially designed to complement Bitcoin, its unique features have made it a major competitor.
Why the Speedy Rise in the Value of Ethereum?
As stated above, Ethereum is now worth over $2,100. Unimaginably, Ethereum’s rate is growing faster than Bitcoin’s rate.
It’s pretty evident that there are several reasons for the ongoing price rally, and here are a few points:
- A unit of Ether is significantly cheaper than a Bitcoin. That is an encouragement to access it earlier, especially for beginners.
- The number of institutional investors in Ethereum has risen higher continuously.
- Once there is an increase in demand on crypto exchanges, the supply on the exchanges becomes scarce. Simultaneously, the percentage of Ethereum units bound in so-called smart contracts rose from around 13% to just under 17%.
- Transition to Ethereum 2.0 is a significant reinvention in the cryptocurrency industry.
- Ethereum is also experiencing rapid growth birthed by DeFi (Decentralized Finance) sentiment. Defi tokens have been increasing rapidly of late, led by big companies like Aave and SushiSwap. The rally in DeFi tokens is driven in part by the rapid growth of the total locked value (TVL) of the Defi market, which estimates the amount of capital deployed in DeFi protocols.
- Speculation had also driven the Ethereum price, which resulted in the cryptocurrency not being classified as a security by the US stock exchange regulator – unlike Ripple / XRP. That would mean that Ethereum / Ether would escape the threat of stronger regulation.
Benefits of Ethereum
- The propensity for a working compound network: Ethereum comprises a verified network with a track record of reliability through many years of operation and billions of value trading hands. Also, it has a large dedicated global community and the largest renowned ecosystem in block-chain and the cryptocurrency industry.
- Wide range of functionality: Ethereum is said to possess a wide range of functionality. Besides the fact that it is used as a virtual currency, it can also be used for other types of financial transactions, execute smart contracts and store data for third-party applications.
- Constant reinvention and innovation: A large community of Ethereum developers is constantly reinventing themselves and looking for new pathways and strategies to improve the system’s inner working and develop new applications.
- With or without intermediaries: Ethereum’s decentralized network was designed to function with or without intermediaries; it promises to allow its users to exempt third-party intermediaries.
Best Ways to Profit from Ethereum
Now, we are at the section most of you are here for. How can you profit from Ethereum? Well, here it is:
Holding is the simplest and most effective example of how to make a profit with Ethereum and other cryptocurrencies. Here, you hold coins in your wallet, hoping that the coin’s value goes up before you sell, so you make a profit.
However, this is risky because the value could drop, and you will end up with a loss. In general, investing in cryptocurrency is risky. So, of course, risk management must be premium to you as you plan to invest and conduct your research before doing anything.
That said, Ethereum has a profitable side to its buildup, and holding ETH could be an easy, effective way to make a profit from Ethereum through dollar-cost averaging during a bear market.
However, it is important to choose reliable sites where you can operate in complete safety. Let’s review the most prominent ones.
In my opinion, Coinbase is the best platform to buy Ether with your country’s currency or dollars easily and safely. Also, by investing the first $100, you will receive $10 free in bitcoin.
Binance is one of the exchange platforms with the highest volume of daily operations in the world. It has a super complete platform with real-time charts and advanced trading tools. It supports hundreds of cryptocurrencies, and its commissions are among the lowest in the market.
If you intend to buy Ether to speculate with its price in the short term (trading), it is undoubtedly one of the best platforms today. Also, it provides easy work with other investment mechanisms such as lending and staking.
Bitpanda is a revolutionary platform. You can buy Ether on it and invest in precious metals and other services related to its token and ecosystem.
Which Ethereum Wallet to Choose?
Before buying Ethereum, I recommend that you spend a few minutes learning how the wallets of this cryptocurrency work. You’ll find a lot of information about it and the official wallets to download on the official website.
If you intend to carry out minor operations continuously, the online wallets we discussed above (Coinbase, Binance, or Bitpanda) are good choices.
However, if you intend to save your coins for the very long term, it’s best to have your wallet (MyEtherWallet, for example). That way, you will be in charge and have total control over your funds.
Finally, you can also go one step further and acquire a hardware wallet such as Trezor or Ledger Nano Wallet, undoubtedly the most robust and secure option of all. These devices generate and store private keys without connecting to the Internet, hence their invulnerability against hackers and hackers.
Likewise, you will have a recovery password provided by the manufacturer and a PIN code to access the device itself.
Invest in Ethereum with CFDs
If you do not like or are not comfortable with exchanges and other tools associated with cryptocurrencies, an exciting option to get Ethereum is to invest through contracts for difference (CFDs).
The advantages of these financial products are several, such as the possibility of using a wide variety of payment methods and the convenience of not being aware of where to save your coins.
On the other hand, the big drawback is that you are not buying the currency itself but a financial product directly associated with its price.
One good platform to invest in Ethereum through CFDs is eToro. On eToro, you can buy Ethereum with PayPal, Neteller, Skrill, bank transfer, and credit card.
You may have heard trading is not an easy method to profit from Ethereum; it can be learned and mastered. With a strong understanding of markets and trends, trading cryptocurrencies can be lucrative; it can also be risky to make money passively.
Trading is all about probabilities and market analysis. The bias of market traders is reflected in the price of a particular asset, while the likelihood of price changes is what leads many traders to hit the big green button.
To advance in crypto trading, it is crucial to master both fundamental analysis and technical analysis. TradingView is an excellent place to start learning and practicing technical analysis.
Manual vs. Algorithmic Trading
Manual trading requires time-sensitive decisions, reacting to market fluctuations and changing moods. For the disciplined investor with lots of time, this can be a great way to make money. However, if you don’t want to sit in front of the screen for hours every day, you could consider algorithmic trading.
Algorithmic or “bot” trading is one way of automating your trades. By implementing a well-deduced strategy, it is possible to carry out certain trades of certain coins at a certain programmed time with trading bots. It might seem overwhelming to a newbie in the industry, but it’s not something to be intimidated by.
Earning money with Ethereum through mining is only possible if the user has understood what exactly this work is about. The transactions in the blockchain must be validated. Proof of Work or Proof of Stake is used here. I explained what that is in our how to stake article.
Ethereum also relies on smart contracts. These small contracts are triggered and executed directly by a trigger. The miners are also responsible for this. The tasks are as follows:
- Miners combine several correctly entered transactions into one block
- Metadata is created
- A hash is also created, which is a checksum. The hash corresponds to a target that can be compared with a given form.
- The miners now have to confirm the transactions and face complex mathematical tasks.
- When they have solved the tasks, they receive a reward. If a miner’s block is selected, he will receive an amount of five tokens. The mining fees will also be replaced. If a block is not chosen, the miner gets a reward.
At first glance, mining sounds difficult, and those who have not yet gained any experience may need some time to find a good way for themselves. An alternative, however, is to rely on joining a mining pool.
That benefits beginners and also those that don’t have a lot of money, to begin with. The cost of buying hardware and electricity is high. Those who join a pool can share these costs.
The crypto world is sizzling with excitement with Proof of Stake (PoS) these days. Instead of solving equations with enormous computing power, validators can stake their coins to validate transitions.
Validators will be nominated and endorsed by other validators to solve the equation and process a transaction.
More projects are also being born from this. Various groups of people have come up with the development of different platforms that have created ETH staking pools for the 2.0 network. Projects like Ankr and RocketPool allow anyone to become an Ethereum validator by contributing as much or little ETH as they want.
The ETH is pooled with other users to a total of at least 32 ETH to receive staking rewards from the earned fees in relation to the staked amount. I have a detailed article on how to stake for beginners and experienced crypto enthusiasts.
Staking Rewards FromCentralized Exchanges and Interest-bearing Accounts
Many centralized exchanges offer in-app staking rewards, making it one of the easiest ways to make passive income using Ethereum and other cryptocurrencies. For example, if you keep BNB in your Binance wallet, you are automatically entitled to receive token rewards, which are often up-and-coming projects from the Binance Launchpad.
Alternatively, there are interest-bearing accounts on platforms like BlockFi or YouHodler, where you can earn up to 8.6% APY with compound interest. The funds are blocked in wallets via the Gemini Exchange, one of the most regulated exchanges in the crypto industry.
It’s all great to know how to make money with Ethereum, but you should also know the disadvantages before jumping in.
Rising Transaction Costs
Rising transaction costs is a significant disadvantage when transacting with Ethereum. The growing popularity of the coin has led to more frequent transactions on the platform, which has further led to inflated transaction costs.
Ethereum transaction fees hit a record 23USD per transaction in February 2021, which is great if you’re earning money as a miner but not so profitable if you’re trying to use the virtual platform.
Tendency For Crypto Inflation
There is also the tendency for crypto inflation; Ethereum has an annual limit of releasing 18 million Ether every year, so there’s no lifetime limit on the coin’s inherent potential number.
This simply means that an investment in Ethereum might behave more like dollars and may not appreciate as much as Bitcoin because it has a strict lifetime limit on the number of coins.
Nevertheless, the future of Ethereum is constantly evolving and improving. The development of Ethereum 2.0 is quite promising, painting the picture of hope of better functionality and greater efficiency in its delivery.
There are several ways to explore the Ethereum ecosystem. With DeFi and pools, the barriers to entry are almost zero as some projects allow users to stake or provide liquidity from as little as $10.
Although it is emerging from tough competitors (such as EOS or Cardano), Ethereum and its Ether currency will continue to be one of the primary references in the cryptocurrency sector in the coming years.
Large companies already have projects underway based on its blockchain, and there is no doubt that this will increase with time, especially since there is a lot of money at stake.
The key to making money with Ethereum is to buy Ether and not speculate on it, save it for the long term, or invest in one of the other strategies like staking or P2P lending.