How to Buy Ethereum
Ethereum (ETH) was launched as one of the first ever ICOs back in July of 2015. Ethereum has held the number two spot, just below Bitcoin, in the crypto market cap rankings since early 2016.
However, in September of 2018, there were a couple of days in which Ripple’s XRP token briefly surpassed Ethereum for second place. Will the significant improvements planned for Ethereum arrive in time to stave off the competition and cement Ethereum’s dominance of blockchain-based distributed computing?
At the time of writing in early October, around $2 billion stands between XRP and Ethereum’s coveted second place position. It would appear that the market’s estimation of Ethereum’s potential has greatly diminished since the end of the ICO mania, when ETH hit an all-time high of $1,400.
For those with undimmed confidence in in Ethereum’s future, its current price represents a tremendous bargain. There seem to be several scenarios in which Ethereum may recover its previous value:
- If interest in ICOs as a funding mechanism is re-ignited, perhaps in the form of regulated security tokens representing equity in established, profitable companies.
- If various upgrades are successfully implemented, for example to better manage the scaling of Ethereum’s blockchain and reconfigure its mining algorithm.
- If a brand new killer dapp (“decentralized application”) is developed for Ethereum which proves widely popular.
- If Bitcoin’s price surges once again, that’s likely to boost interest and value across the entire crypto space. However, in this case, Ethereum still faces competition from competing for smart contract platforms, such as EOS and Cardano.
Ethereum is the brainchild of Vitalik Buterin, who put forth the concept in late 2013 whilst involved in Bitcoin coding and journalism. In mid-2014, 11.9 million Ethereum tokens, known as “Ether(s),” were pre-sold for bitcoins to fund Ethereum’s initial development process. The original development team consisted of Vitalik Buterin, Joseph Lubin, and Gavin Wood. Ethereum was launched in late July of 2015.
One of the most significant events following Ethereum’s launch was the failure of The DAO (“Decentralised Autonomous Organisation”). The DAO was an Ethereum smart contract which took in funding from the public, for the purpose of unregulated investment into numerous dapps. A vulnerability in The DAO’s code led to the theft of 3.6 million ETH; worth roughly $50 million at the time.
In order to reverse this serious and widespread loss, the Ethereum developers elected to hardfork Ethereum’s blockchain in order to reverse The DAO losses, restoring all misappropriated funds to the original investors. While this move was popular (and arguably necessary for reasons discussed later), it was also criticized for damaging immutability and decentralization, as it was demonstrated that a few individuals had the power to alter Ethereum’s blockchain.
The other side of the fork, on which transaction history was not rewritten, remains as an active project known as Ethereum Classic (ETC). Coinmama offers both Ethereum (ETH) and Ethereum Classic (ETC) for sale.
Whereas the scripting language on Bitcoin’s base layer blockchain is intentionally limited to code necessary for transactions, Ethereum offers the extensive programmability required for running decentralized applications on a blockchain platform.
If you’ve seen the phrase “Turing complete” bandied about, it refers to the Ethereum Virtual Machine’s (EVM) ability to run code stored on ETH’s blockchain. This allows for complex conditional payments, often referred to as “smart contracts,” to run in an open, decentralized way.
Ether (ETH) is needed to run code on the Ethereum network. This provides utility for the ETH token, puts a funding limit on infinite loops, and incentives the creation of efficient code.
For examples of the many interesting dapps which developers have built on top of Ethereum, check out the nearly 2,000 examples on the State of the Dapps site.
As Ethereum’s blockchain contains not only transactional but also computational data, it has already grown much larger than Bitcoin’s. Furthermore, there is no cap on the size of Ethereum blocks. This has led to high hardware requirements to run a full Ethereum node. Methods to scale Ethereum’s blockchain are therefore an important area of active research.
Ethereum has long been planning a switch from a pure Proof of Work (PoW) system – in other words, miners processing transactions and receiving ETH rewards for doing so – to a Proof of Stake (PoS) or PoW / PoS hybrid system. In PoS, energy is not expended on mining but rather all participants get a chance to process a block – and be rewarded for doing so – based on the number of coins they own. Leaving the DAO hacker with enough ETH to affect future staking operations in a potentially malicious manner was cited as a compelling reason for the Ethereum hard fork.
PoS systems have long been in use but suffer from several security drawbacks which detract from monetary suitability. The Ethereum team claims to have perfected PoS by requiring a deposit from stakers which can be confiscated if they behave maliciously.
A switchover from the current mining system to the new version is anticipated in the imminent “Constantinople” release. This significant change is likely to coincide with a reduction in the block reward from its current level of 3 ETH down to 2 ETH. This latter change may have the result of driving up scarcity, and so prove price-positive.
Choosing an Ethereum Wallet
If you already have a good Ethereum wallet you can skip this section.
Otherwise, you might be wondering why you even need an Ethereum wallet? Well, using our service is a bit like using a vending machine. You put your money in and Ethereum comes out – but you first need a way to receive your dispensed Ether. This is what an Ethereum wallet does – lets you receive and store ETH, as well as spend it.
There are 4 types of wallet to choose between, listed in order of decreasing security:
1) Hardware Wallets
This is a specialized electronic device you plug into your computer or phone. Hardware wallets greatly improve the security of your Ethereum (and any related ERC-20 tokens) storage but cost around $100, whereas other wallet types are free. Hardware wallets, like the Trezor, Ledger, or KeepKey all support Ethereum, Bitcoin, and other cryptos. They must be combined with compatible models from the other wallet types listed below:
2) Software Wallets
Also known as desktop wallets, these run on your laptop or desktop computer. With proper computer security practices and a good password, they’re quite secure. There are two main varieties of software wallet; full or light.
Full software wallets download and sync the entire blockchain, which may not be possible unless you have a rapid internet connection and ample system resources. Mist is the “official” Ethereum wallet and allows you to offload the demands of running a full node. MetaMask is another popular wallet which integrates with your browser and provides a lot of streamlined functionality, also without requiring you to run a full node.
3) Mobile Wallets
This kind of wallet runs on your smartphone or tablet. Such wallets are convenient for making in-person transactions but not very secure, due to the low-security nature of mobile operating environment. Jaxx Liberty is a good option for Android or iOS but does not support smart contracts, so it can only send, receive and store Ether.
4) Web wallets
Web wallets run on a third-party websites, which you log into for access. Web wallets are the riskiest type of wallet, as they depend on the site staying online and resisting the efforts of hackers or evil insiders to steal your coins. The better ones allow shared control over your coins. MyEtherWallet(MEW) is a very full-featured example but is best used in combination with a hardware wallet if you require high security.
Tip: choose your wallet type according to the level of security which you feel is appropriate to the amount of Ethereum you intend to purchase.
Once you’ve decided on your wallet type, it’s very important to choose a trustworthy wallet from that category. Any wallet listed in the official Ethereum documentation should be safe. Some research conducted into the proper use of your wallet would be a wise investment of your time.
Using Your Wallet to Receive ETH
Once your Ethereum wallet is running, it will generate a list of receiving addresses. These are long, random strings of characters which begin with “0x.” Here’s an example of an Ethereum address: 0xe79c3300773E8593fb332487E1EfdD8729b87445.
You should select any address from your personal Ethereum wallet to receive any ETH you purchase from Coinmama.
How to Buy Ethereum
Now that you have a wallet and address, you’re ready to purchase Ethereum. Coinmama lets people in most countries around the world buy Ethereum (ETH) with credit or debit cards issued by either VISA or MasterCard. This is probably the easiest and quickest way to buy Ether.
Additionally, EU and UK residents may use our new SEPA transfer method to buy Ethereum. The bank account you send Euros from must be registered in your name. Bank transfers have lower fees and higher limits than card purchases but take somewhat longer.
Here’s how to buy ETH from Coinmama, in 4 easy steps:
Step 1 – Create Your Coinmama Account:
- Head to the Coinmama website and select the blue “Sign Up” tab.
- You’ll need to enter your email, password, first name, last name and your country of residence.
- If you already have an account, just sign in via the “Log In” button with your existing login details.
- For more information on how to create an account with us, click here.
Step 2 – Verify Your Account:
- To purchase Ether (ETH), you first need to become verified.
- It’s necessary to upload your ID or passport, plus various other documents depending on which level of verification you wish to reach.
- For further help with account verification, please click here.
Step 3 – Purchase Your Ethereum:
- Once signed in and verified, click the “Buy” link on the top menu bar and select “Ethereum.”
- Next, you’ll be presented with several choices: either purchase a set amount of ETH, or enter in a custom amount of up to roughly $5,000 (as of the time of writing) for card purchases or $12,000 for SEPA purchases. You can also choose to price ETH against either USD or EUR.
- Supply your Ethereum wallet address (as discussed above under the heading “Using Your Wallet to Receive ETH”). This address is where we’ll send the coins which you buy. You can re-use this address for subsequent purchases or get a new one from your wallet.
- Next, select the “Proceed to checkout” button.
Step 4 – the Checkout Page
- Complete the form with your relevant details. Make sure that your card or banking details, such as your name, correspond with the details you supplied when creating your Coinmama account.
- Finally, proceed to payment by clicking on the “Pay now” button. For card purchases, kindly note that only cards issued by VISA or MasterCard are accepted.
Once your card payment has been made, the order status will read “In Process.” This means that your order is being processed by the bank or card company. Credit card orders will be processed within minutes but SEPA transfers may up to two business days.
If paying via SEPA, note that you will get the ETH/EUR rate at the time your money arrives at our account. This means that during times of high price volatility, you may get a rather different Ethereum amount (either more or less) than expected.
Once payment has been made, our ETH transaction to your wallet’s address then needs to be confirmed by the Ethereum network. In less than 1 minute, an Ethereum payment will be broadcast from Coinmama’s wallet to the Ethereum address you supplied in Step 3 point 3.
It’s unlikely that the Ethereum network will experience sufficient congestion to delay your transaction but that’s always a possibility. Ordinarily, your transaction will be confirmed within minutes.
For large amounts, it’s safest to wait for up to 40 more confirmations. You may then regard the transaction as final and spend your new coins.