What is Ethereum (ETH)?
Ethereum, also known as ‘Ether’ is one of the world’s largest cryptocurrencies founded in 2013 by Vitalik Buterin among others. The digital currency was the first to implement smart contracts, one of the major discoveries within the digital asset industry. In fact, some think that the discovery of Ethereum is more important than that of Bitcoin, although it is a frequently discussed topic within the space.
Similarly to Bitcoin, Ethereum can be mined – a process which involves using a miner to compute mathematical equations and verify blocks. Ethereum is a Proof of Work digital currency, but there are plans to make it Proof of Stake in the future – a different blockchain consensus mechanism.
When Ethereum launched in 2013, ETH coins sold for $0.31 each. A few years later, in January 2018, Ethereum hit its all-time high of $1,448 – an incredible 466,997% (4670x) ROI in under 5 years which is unquestionably one of the best-performing assets in the history of the world. For context here, if you bought $100 of Ethereum in 2013 for $0.31 each and sold at $1,448 – you would have made an incredible $466,996. Even though it may look like the bubble has burst, many people enjoy trading Ethereum as they believe that it will once again go to new all-time-highs or alternatively, to 0. It’s volatile history and potential future in a blockchain-centric world make it a very interesting asset to trade.
What is an Ethereum Exchange?
An Ethereum exchange is an online trading platform which one can use to buy, sell and trade the cryptocurrency Ethereum, also referred to as ‘ETH’ or ‘Ether’. Ethereum exchanges let you deposit and withdraw Ethereum coins on the Ethereum blockchain and buy/sell them for either other cryptocurrencies or fiat (regular) currencies. Ethereum exchanges vary in terms of functionality, features, supported payment methods and other factors.
Types of Ethereum Exchanges
As mentioned above, there are different types of Ethereum trading platforms which you can use that appeal to different people for different reasons. Let’s now take a look at the different type of exchanges for ETH.
Fiat exchanges let you buy/sell Ethereum with debit/credit card and bank transfers in your local currency (e.g USD, EUR & GBP). These platforms are good for those looking to purchase real Ethereum coins that can be withdrawn to an external address and held in a wallet of your choice. Ethereum fiat exchanges are regulated and follow strict AML & KYC policies. ETH/USD is the most frequently traded fiat pair for Ethereum. Our favourite Ethereum – fiat exchange is Coinbase.
If you already have cryptocurrencies, you can use a crypto exchange to trade Ethereum with other coins like Bitcoin. Crypto exchanges like Binance let you deposit a wide range of cryptocurrencies (including Ethereum) and trade them against other coins such as Bitcoin. Trading Ethereum (ETH) against Bitcoin (BTC) is great for those that want to profit on the correlation between the two digital assets rather than between Ethereum and fiat currencies like USD.
Finally, the last type of Ethereum exchange we are going to mention in this guide is Ethereum margin trading exchanges. Ethereum margin trading platforms let you trade Ethereum against either Bitcoin or USD with leverage meaning that you can trade with more than the funds in your account. Ethereum margin trading is popular at exchanges like Bybit as users can make more profit in times of less volatility due to the leverage factor which multiplies profits, but also losses.
How do Ethereum Exchanges Work?
Exchanges for trade Ethereum work by providing a platform on which people can place orders to buy (long) and sell (short) Ether. The platform then works to match your order with someone else’s and transfers the assets between the two traders. That’s the case for fiat and crypto ETH exchanges, however, when it comes to margin/derivatives Ethereum trading it works a little differently. In this case, instead of assets being transferred, the exchange swaps contracts between the two traders instead of real Ethereum.
How to Use an Ethereum Exchange
Using an Ethereum trading platform is easy. All you have to do is register, make a deposit and start trading. Most Ether exchanges don’t require any KYC (identity) checks, so you should be able to get started trading immediately. Here are step-by-step instructions on how to use an Ethereum exchange.
- Register on an exchange
- Make a deposit
- Open a trade
What to Look For in an Ethereum Exchange
There are several different factors you need to consider when looking for the best exchange for Ethereum. Below, we will highlight the main things you should look out for before signing up on an Ethereum exchange.
Most exchanges charge fees when you make a trade on the platform, this is how they generate revenue. Check to see what fees the exchange charges and try to find any hidden fees that they might not be telling you about. In all of our crypto exchange reviews, we tell you exactly what the fees are for each exchange and tell you whether or not they are high/low compared to the alternatives. There are usually two main types of trading fee on an Ethereum exchange; ‘Maker’ and ‘Taker’. When you do a ‘Maker’ order you say the price you want to buy/sell at and then wait until someone takes the order and when you do a ‘Taker’, you instantly take someone else’s ‘Maker’ order. In short, ‘Maker’ orders usually have lower fees than ‘Taker’ orders.
Even though cryptocurrencies are traded globally, it’s not to say that you can use any exchange in any country. Before you register on an exchange, make sure that it isn’t prohibited in your country by the exchange or your local laws. This is another thing that we cover in our comprehensive crypto exchange reviews.
Design & User Experience
There’s no point using an exchange which is difficult to navigate and trade on. You need to make sure that the design makes trading enjoyable on the exchange, otherwise, you’ll want to move trading venues pretty quickly. On the other hand, you’ve also got to weigh up other features like functionality, there’s no point using a well-designed exchange which doesn’t do the job properly.
At an initial glance, you would think that all an Ethereum exchange has to do is let you trade crypto right? Well, it’s a little more complex than that. There are tons of other functions an exchange can serve. Things to check out for things like the order types offered and whether or not they have a referral program.
Another important aspect to consider when looking for an Ethereum exchange is the payment methods it offers. Most exchanges let you deposit with cryptocurrencies like Bitcoin & Ethereum and some even let you trade with credit/debit cards and bank transfers.
I would say that this is the most important thing to analyse before using any Ethereum exchange – what the security and safety is like. Here are some tips on assessing the safety of an Ethereum exchange.
- Do they provide company information?
- Is 2FA supported?
- Are they transparent about their team members?
- Are customer’s funds insured/stored in cold wallets?
The support offered by an Ethereum exchange can make or break it’s popularity and place within the market. Exchanges which offer 24/7 rapid support are the ones you want to sign up for. Also, bonus points for exchanges which have a live chat function.
Are Ethereum Exchanges Safe?
Yes, the majority of Ethereum exchanges are safe to use, however, like with anything else, there are some exchanges out there which you should steer clear of as they may be scams. There have been several cases of Ethereum theft in the past, so you need to be sure that the exchange you are using is a safe one. This is one of the main things we focus on in our cryptocurrency exchange reviews.