Cryptocurrencies have recently gained in popularity and this trend shows no signs of slowing down. With all the talk about these digital assets, you might be wondering if now is the time to invest. But before you pull the trigger, it’s always a good idea to have an understanding of the underlying asset. Cryptocurrency is no exception and it’s quite different from investing in stocks or bonds.
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Therefore, we will cover a popular blockchain technology called Ethereum (ETH). Like many blockchains, Ethereum has a native coin called Ether. Let’s take a closer look at what Ethereum is and if you should consider investing.
Read: Dogecoin: is it a profitable investment?
What is Ethereum?
Ethereum is open source, decentralized blockchain technology. Ethereum’s native coin is called Ether. This coin is one of the largest cryptocurrencies by market cap, just behind Bitcoin (BTC). Although Ether has a smaller market cap than Bitcoin, Ethereum is the most widely used blockchain.
See: What is Chainlink and why is it important in the cryptocurrency world?
One thing that is important to understand about Ethereum is that it is not the same as Bitcoin. While the purpose of Bitcoin is primarily to be a digital currency, Ethereum is much broader. In fact, Ethereum is an open source operating system and computing platform. It also supports distributed applications (dApps) and smart contracts.
Another key aspect of Ethereum is that it enables decentralized finance, which is an important part of how the system works. Because the system is inherently decentralized, there is not a single entity that controls it or the value of the aether.
More: How the IRS Taxes Cryptocurrency – And The Loophole That Can Lower Your Tax Bill
What is Ethereum worth?
Like many cryptocurrencies, the price of ether has fluctuated a lot since its launch in 2015. At the time, its price was around $ 1 and stayed there for several months. The price hit $ 1,358 in January 2018, its highest price on record at the time. The price started to drop, as did the price of many cryptocurrencies; ether hit $ 83 in December 2018.
The price has fluctuated since then, but has generally increased. As of early April 2020, the price was around $ 140; and as of May 18, it was around $ 3,349, according to Coindesk. That’s a pretty big increase in just over a year.
Read: Breaking the Basics of Cryptocurrency
Should you invest in Ethereum?
If you decide to invest in Ether (and therefore Ethereum), you must first ask yourself why you are investing. Although the price of the coin has increased significantly over the past year, it can be extremely volatile. So if you buy ether just hoping the price will go up, you might get frustrated.
On the other hand, the Etherum blockchain can be used for many different applications, said Tally Greenberg, business development manager at Allnodes. “Ether is the cryptocurrency required for any transaction made on Ethereum, a network of blockchain applications. A blockchain, on the other hand, is a technology with unlimited potential. It doesn’t just rely on Ethereum and can be used to make a difference in our future with or without cryptocurrencies.
See: 10 Best Cryptocurrencies To Invest In For 2021
Sam Bretzmann, the owner of Blocklink, agrees with this sentiment. “The difference here is that instead of investing in individual projects that may or may not be successful, you can invest in infrastructure. You can think of it like this, go back to 1999, and instead of having to try to choose which emerging companies will survive, you just have to go “Internet” and invest in that.
This article is part of GOBankingRates’ “Economy Explained” series to help readers navigate the complexities of our financial system.
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Last updated: May 18, 2021
This article originally appeared on GOBankingRates.com: Ethereum: Everything You Need To Know To Decide If This Crypto Is Worth Investing