What is Ethereum?
Ethereum is software running on a network of computers that ensures that data and small computer programs called smart contracts are replicated and processed on all the computers on the network, without a central authority or coordinator. It recently came under the spotlight as price of the Ether, the cryptocurrency required to operate the Ethereum network, shot up in price from $10 to $300-$350 in the last 1 year.
We have a lot of computerised contracts currently but the major advantages of using Ethereum to run them is that there is no middleman due to which it is more secure and reliable. These computerised contracts require ‘Ether’ as the fuel to run.
Ethereum Price Chart
How Is It Different From Bitcoin? Will It Overtake Bitcoin?
A common metaphor in the cryptocurrency industry is that ‘ Ethereum is digital oil whereas Bitcoin is digital gold’. While Bitcoin’s application revolves more around being a store of value and payments rail, Ethereum seems to be the best suited platform for blockchain applications.
Although there are some key technical differences between Bitcoin and Ethereum, in theory, Ethereum can do everything Bitcoin can and actually is far more flexible that Bitcoin. In fact, there are several companies experimenting with creating complete cryptocurrencies on the Ethereum blockchain.
However, it is difficult to say whether Ethereum will overtake Bitcoin as it is still fairly early for Ethereum or the cryptocurrency industry in general. Two key factors which currently work in favour of Bitcoin over Ethereum are:
- Bitcoin is deflationary in nature: the fact that there is only a fixed supply of Bitcoin definitely works in its favour for its use as ‘digital gold’ or ‘store of value’ whereas Ether will not have a fixed supply.
- Bitcoin has ‘first mover’ advantage’ which allows the network effect to kick in. It has the adoption and ecosystem built around it which ensure to a large extent that Ethereum might not overtake it anytime soon
- Bitcoin has been aroun for longer and has been tested on a much larger scale than Ethereum- hence there may still be quite a few drastic improvements
Hence, it might be possible that both cryptocurrencies grow without rivalling each other on account of their technical and other in-principle differences.
How to buy Ether with Bitcoin in Malaysia
Below is a simple step-by-step guide in how you could purchase Ether from Malaysia.
1. STEP ONE: GET A LUNO ACCOUNT: Get your free Luno account. You will be asked for some identity information, which we need to verify.
2. STEP TWO: DEPOSIT MONEY INTO YOUR LUNO WALLET AND BUY SOME BITCOIN: Log into your Luno account and navigate to Accounts. Click on ‘Deposit’ shown under your local currency account. After you’ve added money to your Luno wallet, you’ll be able to buy some Bitcoin with it.
3. STEP THREE: FIND A BITCOIN-TO-ETHER EXCHANGE:You can buy a lot of things with Bitcoin, including other digital currencies!
CoinMarketCap has an extensive list of exchanges that allow you to buy and sell Ether. Look for the the ETH/BTC currency pair; they’re ranked by 24h volume.
Another popular solution is an “instant exchange” like ShapeShift or Changelly, both which will require you to send Bitcoin (from Luno) and it will convert it to Ether, which it will send to your Ether wallet. Watch the video below for more info:
Risks Involved In Ethereum and Precautions to Be Taken
A large no of precautions for investors investing in Ether are common to investors of all cryptocurrencies:
Do substantial research before investing in it on your own rather than taking the word of someone
Be prepared for a large amount of volatility as it is still the earlier days of the technology
Be wary of scams and ponzis which involve Ether- anything that promises extremely high return without significant risk is most probably something you should be extremely wary of.
Also, the technology behind Ether is still evolving in terms of scalability, robustness and scale. Whether the technology can overcome these problems or not, might determine the fate of Ether in general. It has already gone through some drastic incidents such as the DAO attack on Ethereum and the Ethereum hard fork. There may be several other such incidents in the future as the cryptocurrency evolves and investors should be fully aware of it.
This article is contributed by Mriganka Pattnaik. He is the Countries Lead- Southeast Asia, for Luno, Asia and Africa’s largest Bitcoin exchange and operates out of Singapore. Mriganka has worked on Bitcoin markets in Singapore, Malaysia, Nigeria and India. He had previously worked for Bank of America in Mumbai in the Global Investment Banking Division. He has also co-founded a start-up in the medical technology space.
