What is ethereum? The essential guide for UK investors

Ethereum is the second most popular cryptocurrency after bitcoin. Ethereum offers unique features and opportunities that set it apart from bitcoin.

This article aims to provide you with a comprehensive understanding of what ethereum is, its practical uses, and why ether might be a valuable addition to your investment portfolio. We will also guide you on how to purchase ether in the UK.

Ethereum is a decentralised, open-source blockchain system that features smart contract functionality. It was proposed in late 2013 by programmer Vitalik Buterin and development was crowdfunded in 2014, with the network going live on 30 July 2015. Ethereum allows developers to build and deploy decentralised applications (dApps) on its platform, making it more than just a digital currency.

The native cryptocurrency of the ethereum platform is called ether (ETH), which is used to compensate participants who perform computations and validate transactions. Ethereum's blockchain is similar to bitcoin's in that it is a distributed ledger maintained by a network of nodes. However, ethereum's capability to execute smart contracts — self-executing contracts with the terms directly written into code — sets it apart and opens up a wide range of applications.

1. Smart contracts and dApps: Ethereum supports smart contracts, which are self-executing contracts with terms directly written into code. These automatically enforce agreements without intermediaries. This feature allows developers to build various decentralised applications (dApps) on ethereum, ranging from finance to gaming.
2. Turing-complete programming language: Ethereum uses a flexible programming language called Solidity, enabling developers to create complex and versatile applications, unlike bitcoin’s limited scripting capabilities.
3. Decentralised finance (DeFi): Ethereum is the foundation of the DeFi movement, offering financial services like lending, borrowing, trading, and earning interest without traditional banks. This has led to a thriving ecosystem of DeFi projects.
4. Faster block times: Ethereum has a block time of about 15 seconds, compared to bitcoin’s 10 minutes. This means quicker transaction confirmations, making it more suitable for real-time applications.
5. Future upgrades (Ethereum 2.0): Ethereum is upgrading to Ethereum 2.0 to improve scalability, security, and sustainability. This involves shifting from proof-of-work to proof-of-stake, reducing energy consumption and increasing transaction throughput.
6. Interoperability and token standards: Ethereum introduced standards like ERC-20 and ERC-721 for creating tokens on its blockchain, leading to a variety of tokens and assets. This allows seamless interaction between different projects and tokens within the ethereum ecosystem.
7. Active development community: Ethereum has a large and active development community continuously improving the platform and developing new applications, driving rapid innovation and evolution.
8. More diverse use cases: Ethereum’s versatility supports a wide range of applications beyond just a digital store of value or medium of exchange. These include decentralised finance, supply chain management, gaming, and digital identity.
9. Decentralised autonomous organisations (DAOs): Ethereum enables the creation of DAOs, which are organisations governed by smart contracts instead of traditional management. DAOs allow transparent and decentralised decision-making, giving stakeholders direct control.

Investing in ethereum can offer several potential benefits for your portfolio:

1. Innovative technology: Ethereum's smart contract and dApp capabilities set it apart from other cryptocurrencies. Its continuous development and upgrades, such as the transition to Ethereum 2.0, enhance its scalability, security, and sustainability.
2. High returns: Ethereum has delivered substantial returns since its inception, attracting investors looking for high-growth opportunities. While past performance does not guarantee future results, ethereum's potential for innovation and adoption makes it an appealing investment.
3. Diversification: Adding ethereum to your investment portfolio can provide diversification beyond traditional assets like stocks and bonds. Its unique value proposition and use cases offer exposure to the rapidly growing blockchain and cryptocurrency sectors.
4. Institutional interest: Increasingly, institutional investors and large corporations are exploring and adopting ethereum-based solutions. This growing interest adds credibility to ethereum and may drive its future value.

You can get up and running and buy ethereum quickly and easily, especially with a trusted, on-shore UK-based cryptocurrency exchange. Follow these steps to get set up and to biome an ethereum owner.

1. Choose the right exchange: Compare and contrast leading cryptocurrency exchanges, including UK-based providers such as OANDA Crypto, which offers a secure and user-friendly experience for UK investors.
2. Create an account: Set up your cryptocurrency account. You will have to provide identification and some personal details, which the exchange must verify in line with UK regulations.
3. Deposit your funds: Once ID verification is complete, transfer money to buy ethereum, using your preferred payment method, such as a bank transfer or credit/debit card.
4. Buy ethereum: Navigate to the trading section of the exchange and place an order to buy ether. You can usually choose between a market order (buy at the current price) or a limit order (buy at a specific price).
5. Secure your ethereum: After purchasing ether, transfer it to a secure wallet to protect your investment. OANDA Crypto provides a highly secure crypto storage solution as part of an all-in-one bitcoin investment experience.

As you consider adding ethereum to your investment portfolio, it's important to stay informed about its evolving landscape. Ethereum has made significant strides since its launch, and its future looks promising with ongoing upgrades and increased adoption.

The transition to Ethereum 2.0, which aims to improve scalability, security, and energy efficiency, is expected to bolster ethereum's position as a leading blockchain platform. Additionally, the growing interest in DeFi and institutional adoption further supports ethereum's long-term potential.

Ethereum offers exciting opportunities for UK investors seeking to diversify their portfolios and tap into the innovative world of blockchain technology. By understanding its practical uses, investment potential, and how to securely buy and store it, you can make informed decisions that align with your financial goals. Explore trusted exchanges like OANDA Crypto to begin your ethereum investment journey today.