When looking for cryptocurrencies to invest in, Ethereum’s native token Ether is very desirable. Investors can buy Ether on the vast majority of cryptocurrency exchanges, as it is a strong currency. Ether can be purchased using centralized exchanges, decentralized exchanges, Ethereum wallets, and even from other online Canadian exchanges, like Wealthsimple.
At the time of this article, the Ethereum price in Canada is around $2700 CAD. Like Bitcoin, ETH has been on an uptrend for the last six months because it is a highly desirable cryptocurrency.
Unlike Bitcoin, ETH is a utility token and is often referred to as “the gas.” This is because Ether is the token that funds the Ethereum network, which was established in 2014.
Like Bitcoin, Ethereum is a blockchain. However, unlike Bitcoin, Ethereum is a blockchain designed for others to build applications on top of.
Conversely, Bitcoin is just a cryptocurrency. There is nothing that backs or ensures its value. The value of Bitcoin is determined by the market demand. It is for this reason that Bitcoin tends to be more volatile than other cryptocurrencies.
Owning Ether is a lot like owning shares in a company. The value of Ether is largely dependent on the success of the blockchain projects that are currently operating on the Ethereum blockchain.
DAOs: Ethereum Projects and Applications
Ethereum’s preview is to make blockchain more accessible to make decentralized internet proliferation a reality. Currently, the internet is centralized, which means it is controlled and managed by large companies like Google and Rogers.
Decentralized Autonomous Organizations (DAOs) are individual projects that are built on Ethereum’s blockchain. These DAOs range from financial projects (DeFi: decentralized finance), other cryptocurrencies and games.
The potential for blockchain seems to be limitless. So, while there are limited applications now, there is are many who believe that blockchain is the future of network connectivity or Web 3.0. Web 3.0 is an internet that is governed and automated by code rather than runs by companies.
Most popular exchanges in Canada, like CoinSmart, or Kraken, are centralized exchanges. This means that they are businesses that buy and exchange cryptocurrencies from users. They also make cashing out for fiat currencies, like CAD or USD very easy. It also means that there are fees for services.
These exchanges offer all kinds of services and customer supports for their products, as well as trading advice. Centralized exchanges are not anonymous, however. As of April 2021, all cryptocurrency exchanges with Canadian operations must comply with new regulations.
With a centralized exchange, traders are not transacting peer-to-peer. Instead, much like a traditional exchange, users transact with the platform, and the company brokers trades, as well as sets the price of each cryptocurrency.
Centralized exchanges in Canada also need to prove their identity to centralized exchanges in compliance with Canadian anti-money laundering regulations.
Decentralized exchanges (DEXs)
Decentralized exchanges (DEXs) operate peer-to-peer. A DEX is not run by any one company, rather they are platforms that connect traders. With a DEX, a user has more control over the details of the trade, as they set the price and the transaction fees. There is also no need to share personal information. The only information shared is wallet addresses and the amount of the trade.
Some will prefer to buy Ether with a DEX because they are anonymous and give each investor total control over the trade.
Investors can also use Ethereum wallets, such as MetaMask. These are much like online banking apps that allow users to trade with one another, make payments, as well as access the Ethereum blockchain applications (DAOs). Digital wallets are funded with wire transfers, e-transfers, credit cards, or other cryptocurrencies.
Although Ethereum is not as valuable as Bitcoin right now, it is a steadily growing cryptocurrency. This is primarily because of the current and potential success of blockchain technology.
How an investor chooses to buy Ethereum is individual. Centralized exchanges are often the most user-friendly and offer the most customer support. New investors may also want to use centralized exchanges to get their feet wet. And once they are more comfortable, they move on to an Ethereum wallet or decentralized account. Finally, there is also no real reason not to use all three methods.