How to buy Ethereum: A beginners guide to buying ETH

How to buy Ethereum: A beginners guide to buying ETH

Ethereum is an open-source blockchain available for people to construct solutions upon. The network enables basically anyone to build decentralized apps (DApps) and generally use the network, with Ether (ETH) being a key part of the process. 

Ether is Ethereum’s native cryptocurrency that enables all operations on the Ethereum blockchain. A variety of methods exist for obtaining Ether, many of which are detailed in this guide.

Exchanges to buy Ethereum

Perhaps the easiest and most popular way of buying ETH is through a crypto exchange. Ether is the second largest cryptocurrency by market cap behind Bitcoin (BTC), so finding an online crypto exchange that operates within your jurisdiction and trades in ETH should not be too difficult.

First of all, you will need to pick an exchange that allows customers from your region and then register with that exchange. Make sure to research your chosen exchange. Check its validity and whether or not it accepts the currency with which you wish to trade. The registration process may vary depending on the exchange and your region. Some exchanges require significant personal information and identification documents, while others require much less. Exchanges that initially require less information for account creation, however, will often require additional information to unlock certain activities, such expanded withdrawal limits. This information is gathered in compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

After passing all the necessary checks, you will need to choose a deposit method. Various methods exist, depending on the exchange, including bank wire transfers, credit and debit card payments, and Single Euro Payments Area (SEPA) transfers. Deposit and withdrawal fees may vary depending on the type of transfer and the exchange used. Fee details can often be found in the footer of an exchange’s website. Googling an exchange’s name in combination with the word “fees” may also prove helpful in finding exchange fee details. 

Exchanges vary as far as which currencies they allow for transfer. Some exchanges facilitate fiat currency transfers, such as United States dollar and euro transfers, as well as crypto asset transfers, while other platforms may only allow crypto asset transfers. Deposit and withdrawal times vary depending on the method used and the asset transferred. 

As soon as the funds are in your exchange account, you can start trading. The user-friendliness of this process depends on the particular exchange, with many of them striving to make the process as easy as possible. You can see various amounts of valuable information, such as current value and related news, on your exchange’s website. Once you’ve obtained Ether, you may wish to withdraw it to a wallet of your choosing off the exchange.

Buy Ethereum with cash

For various reasons, purchasing Ether directly from another party may be preferable. Regulations pertaining to such transactions, however, may vary depending on geographic region. Online peer-to-peer (P2P) exchanges typically still involve KYC and AML processes.

P2P exchanges aim to facilitate over-the-counter (OTC) trading of local currencies for crypto assets such as BTC or ETH. Based on the Ethereum blockchain’s structure, OTC trading of ETH benefits from Ethereum smart contracts in helping the process.

P2P crypto services essentially function as marketplaces that enable users to pay local currencies to individual entities in exchange for varying amounts of crypto assets such as Ether. Such P2P platforms or services generally utilize escrow features. Money transfer methods can include bank transfers, payment platforms, etc.

Meeting with someone in person, in a public place, may also be an option for buying Ether directly. Such transactions come with risks, however, so take every precaution necessary, similar to when conducting a traditional financial transaction with a stranger. You will also need active internet access for the transaction.

Trading Ether peer-to-peer can be more private than using centralized exchanges. This method of trading, however, can require a certain level of trust between the two involved parties, especially if meeting in person. On top of that, if you decide to engage in P2P trades, it is your responsibility to ensure you are complying with your local regulations.

Related: How to sell Bitcoin: 5 ways to 'cash out' your cryptocurrency

Ethereum ATM

An alternative way of purchasing Ether is doing so through an Ethereum ATM, which typically will require providing certain personal details. 

Using a cryptocurrency ATM also requires an Ethereum wallet — a place for the machine to transfer your purchased ETH. Ethereum wallets will be covered later in this guide.

Once you have a wallet, you will need to locate your nearest ATM that facilitates Ether transactions. A Google search should suffice for finding an Ether-friendly ATM. 

After locating your nearest ATM, find a QR code in your wallet and hold it up to the machine’s camera so it can scan it. Then, insert your cash into the ATM and confirm the amount of Ether to complete your purchase. The Ether you purchased will be sent to the provided address. The process is similar to using a Bitcoin ATM.

For more on buying Bitcoin, including details on purchasing BTC with an ATM, check out: How to buy Bitcoin: A step-by-step guide

Mainstream alternatives

A number of mainstream alternatives exist when it comes to gaining price exposure to ETH. The Chicago Mercantile Exchange, or CME, offers Ethereum futures trading. Although they settle into cash and not actual Ethereum, the CME’s Ether futures still provide ETH price exposure for those interested in using traditional financial systems. 

Grayscale offers trading of Ether in stock share form. Called the Grayscale Ethereum Trust, each share represents a fraction of one ETH coin, tradable via mainstream trading platforms. 

Ethereum is available on most platforms where crypto is accepted. ETH is one of the most popular cryptocurrencies, so it is generally one of the first crypto assets added to platforms. A number of Ethereum exchange-traded funds (ETFs) have also been given the regulatory go-ahead outside of the U.S.

Ethereum wallets

A good understanding of crypto wallets and how Ethereum transactions work in general may be beneficial information for potential Ether buyers. There are multiple different types of wallets, including local and hardware wallets. You can also use a wallet provided by a cryptocurrency exchange. 

Another thing to consider is whether you want to use a so-called “full node” wallet, which requires you to download the entire Ethereum blockchain (very large in terms of computer storage size) or a “light client,” which doesn’t require a full copy of the blockchain to operate. Of course, if you’re new to Ethereum, a light client would be a preferred option. Some crypto wallets offer the ability to buy or exchange crypto assets within their related wallet apps. 

If you’re buying Ether from an exchange, using a wallet on the same platform is the easiest option, but there are pros and cons to that approach. Unfortunately, the cryptocurrency world is filled with instances of exchange hacks. An exchange hack might occur on a broader scale, during which the overall exchange loses funds to the hack, or you might be hacked individually. Some exchanges have insurance measures in place, although details vary, and a hack might still result in lost funds or delays associated with the return of the funds. 

Thus, using a wallet that is controlled by the asset holder away from exchanges can serve as a more secure option as it provides more control over asset holdings, as well as varying levels of security, based on users’ measures and practices. Using such wallets, however, puts more responsibility on the asset holder. 

Holding ETH on an exchange calls on a number of best practices for account and asset safety, including use of two-factor authentication (2FA). Crypto exchanges, however, generally have customer service and do not require private key management by the user.  

Off-exchange wallets, also called self-hosted crypto wallets, on the other hand, put responsibility entirely on the user to care for his or her passwords, private keys and asset storage. What is a private key? At its simplest, a private key gives the holder access to funds stored in that key’s related wallet. 

Read more about private keys here: Secure Encryption Key Management Modules, Explained

If your wallet becomes inaccessible and you lose your backup seed phrase, there will be no way of accessing your wallet ever again, and whatever funds you held there will be essentially lost. Each Ethereum wallet comes with a public wallet address. Use this address to send funds to that wallet from an exchange or elsewhere, if you so desire. 

Related: Crypto wallets in 2021: From hot to cold, here are the options

Is it too late to invest in Ethereum?

Ethereum as a project is still very much in development. A significant number of solutions have been built on the Ethereum blockchain, although scaling for such widespread usage has been an issue, as seen with CryptoKitties in 2017 and decentralized finance (DeFi) in 2020 and 2021. 

The ETH blockchain is transitioning to Ethereum 2.0, which includes changing consensus algorithms from proof-of-work (PoW) to proof-of-stake (PoS). The move is expected to help the network scale. 

Ether is established as the second most well-known cryptocurrency to date, valued with the second-largest market cap among all crypto assets, with BTC holding the number one spot. 

Ethereum’s price has sustained a number of significant pushes upward over the years, at times trading above $4,000 per coin. It’s difficult to predict any crypto asset’s long-term value, however. In 10 years’ time, Ether might be worth nothing or its value might continue rising. Scaling ability also remains to be seen. 

Transacting Ethereum safely

One of the most important aspects of the Ethereum network is that transactions are irreversible. Therefore, be sure to never type an address by hand, as it is essentially a very long case-sensitive string of random letters and numbers. A single mistake can lead to your funds disappearing forever. Make sure to double-check all the details before confirming a transaction.

Avoid storing a large amount of Ether in wallets provided by exchanges. As an exchange is essentially in charge of your wallet, loss of funds is not impossible, and this may occur due to a hack or even an exchange’s fraudulent activity. Self-hosted wallets provide more control over stored funds. If you’re intending on storing large amounts of Ether, consider investing in a hardware wallet.

Implement extra safety steps where possible, such as two-factor authentication and so on. Finally, always remember to guard your backup seed phrase, and remember that, although self-hosted wallets provide greater freedom, they also come with added responsibility and required knowledge.