You can’t talk about Bitcoin without mentioning Ethereum, even though they are two very different cryptocurrencies. Find out how the second largest coin works and what you can use it for in Singapore.
In the cryptocurrency landscape, two coins currently reign supreme. The first is naturally Bitcoin, created back in 2009 and now boasting a market capitalisation of over S$1.1 trillion. Coming in a close second would be Ethereum and its market capitalisation of over S$490 billion.
These two are always mentioned in the same breath, given how important they are to the industry.
However, what most people don’t realise is how different Ethereum and Bitcoin are. Like Bitcoin, Ethereum is currently used as a medium of exchange and store of value.
However, its creators have designed its network to be applied across many more areas, with several applications not being related to finance at all.
To really drive this point home, the Enterprise Ethereum Alliance was set up in 2017 by 30 organisations to promote its use in day-to-day business activities. Today, there are over a 100 members, including corporations like Microsoft and Standard Chartered.
Find out how this versatile cryptocurrency works, what you can use it for in Singapore, and how it can be earned.
- What is Ethereum?
- How does Ethereum work?
- What can Ethereum be used for in Singapore?
- How can I purchase Ethereum in Singapore?
- What are the investment prospects of Ethereum?
- How about the risks of investing in Ethereum?
What is Ethereum?
Like Bitcoin, Ethereum is simpler to understand than you think. It’s a digital currency launched in July 2015 by a group of eight co-founders while concurrently being an open-source platform that has a multitude of uses.
Like Bitcoin, you can make peer-to-peer transactions without having to go through a financial institution, preventing any fraud or disputes from occurring.
However, Ethereum’s true strength lies in the fact that it can be programmed for a multitude of uses because at its core, it’s just a ledger of digital transactions.
One interesting result would be new cryptocurrencies being spawned from the Ethereum blockchain, including Dai and USDC. And on the non-financial side of things lies non-fungible tokens (NFTs).
A third and crucial application of the Ethereum network is smart contracts. As you can imagine, these are contracts that can be executed automatically once the conditions are fulfilled.
No lawyers are needed here because these smart contracts act like a vending machine, i.e. the item you want is disbursed only when you insert the correct amount of money and select it.
How does Ethereum work?
It’s awesome that Ethereum is more than just a digital goldmine, but how does it function? Like Bitcoin, there are several steps involved here, from mining it to storing it safely. Unfortunately, this is where things get complicated because Ethereum is constantly being upgraded.
At this point in time, mining Ethereum is a lot like mining Bitcoin. Transactions on the Ethereum blockchain are processed and verified by miners in return for a transaction fee and new Ethereum tokens.
The only difference is that there is no limit to the amount of Ethereum that can be generated, unlike Bitcoin’s current 21 million cap.
The system that Bitcoin and Ethereum currently use is called Proof of Work. This is an algorithm that prevents fraudulent transactions, removing the need for a middleman to verify transactions on the network.
However, the Proof of Work algorithm is energy intensive and susceptible to a security breach if one miner or mining group gains enough influence.
Ethereum is in the process of shifting to a Proof of Stake system, where mining speed is determined by how much cryptocurrency a miner has. In this case, it’d be Ethereum.
The Proof of Stake system greatly reduces the amount of energy used as it’s no longer an arms race to hoard the most number of advanced cryptocurrency mining rigs.
Transacting with Ethereum
Because Ethereum is the second largest cryptocurrency in the world, it’s not hard to transact with it. Even when the Ethereum blockchain shifts over to a Proof of Stake algorithm, the coins themselves don’t change, so it’s business as usual.
Just sign up for an account with your preferred cryptocurrency exchange and you’ll be able to convert fiat currency to Ethereum.
When you’re making Ethereum transactions, ensure that you’re sharing your public key and not your private key. Remember, your public key is the equivalent of your bank account number or email address whereas a private key is like your PIN number or password.
This applies to all cryptocurrencies, so if you’ve sent or received Bitcoin before, Ethereum is a cakewalk.
If you’re using a hot wallet connected to a cryptocurrency exchange, you won’t really have to keep this in mind. These exchanges streamline the process for users, making sure that you’re sharing only your public key when receiving Ethereum or any other cryptocurrency.
On the other hand, you’d want to keep your public and private keys in mind when you’re using a cold wallet.
Storing Ethereum safely
Cryptocurrency exchanges are constantly upgrading their security to retain users and incentivise more people to hop on board. Additionally, the last thing they need is even more scrutiny from governments and regulatory boards.
Ethereum itself is largely immune to counterfeiting as well, with miners verifying transactions every single day of the week.
Unfortunately, that doesn’t mean that cryptocurrency exchanges and the hot wallets attached to them are watertight. Hacks can still occur because these platforms are always online.
If you’re planning to hold a large amount of Ethereum for the long run, you’d want to keep it under lock and key. That’s where cold wallets come into play.
Cold wallets let you store your cryptocurrency offline securely. This realistically prevents security breaches from occurring, keeping your Ethereum safe for as long as you need.
Cold wallets come in several forms, either as simple as a sheet of paper or a USB device that supports thousands of cryptocurrencies. Here are the best ones available right now.
Best cryptocurrency cold wallets
|Name and wallet type||Price||Benefits|
|Paper||Free||- Hassle free and low-cost|
- Multiple copies can be printed
- No risk of device malfunction
|Ledger Nano X (USB device)||S$189||- Approx. 1,800 cryptocurrencies supported|
- Small and light
- Connectivity over Bluetooth or USB
- Certified by France’s ANSSI
|Trezor Model T (USB device)||Approx. S$240||- Approx. 1,600 cryptocurrencies supported|
- Coins can be recovered if device is broken or lost
- Open-source software used, allowing for better community feedback
|KeepKey (USB device)||S$117||- Approximately 40 cryptocurrencies supported|
- Priced competitively
- Ability to convert cryptocurrencies that you own
What can Ethereum be used for in Singapore?
Ethereum faces the same issue as Bitcoin in Singapore when it comes to merchant acceptance. Not many have warmed up to the idea of accepting cryptocurrency as a form of payment.
The MAS has also stated on record that cryptocurrencies aren’t considered as legal tender in Singapore right now, so you won’t be able to get rid of your Singapore dollars anytime soon.
It’s not a lost cause, though. Kopitiam’s futuristic KOPItech branch at Funan allows diners to purchase food and beverages using Bitcoin or Ethereum. And Cryptocurrency ATMs located around the island let you cash out your Ethereum in an instant.
Shopify grants users the ability to accept cryptocurrency as payment too, so you’ll need to look for the right online store.
However, as mentioned earlier, Ethereum is more than a digital currency. The Ethereum blockchain can be used to spawn NFTs, which is the new hotness among digital artists and other content creators. These tokens are akin to a certificate of authenticity and have even been adopted by the likes of the NBA, Eminem, and more.
Finally, there are applications built on the Ethereum blockchain too, dubbed decentralised applications (dapps). Dapps run the gamut, where they’re personal finance tools, games, or music. And payment for using these dapps comes in the form of Ethereum, because what else?
Therefore, Ethereum might not be as useful as a currency, but the network has utility in spades.
How can I purchase Ethereum in Singapore?
Because Ethereum is the world’s second largest cryptocurrency, it’s almost effortless to purchase it. Almost every cryptocurrency exchange out there supports Ethereum, including Binance, Huobi Global, Coinbase Exchange, and FTX.
With a 12-digit market capitalisation, which exchange in their right mind wouldn’t support it?
Unfortunately, you’re out of luck when it comes to Ethereum ATMs in Singapore. Every cryptocurrency ATM here supports Bitcoin, but there’s only one at Raffles Place which allows you to buy and sell Ethereum.
Furthermore, there’s a limit on how much you can purchase in a single transaction. Your best bet would be to stick with a cryptocurrency exchange.
What are the investment prospects of Ethereum?
Although there’s no limit to how much Ethereum can be generated, its investment prospects haven’t been dampened in the slightest. Investors looking to go long have viewed it as a store of value and the numbers support it.
At the start of 2020, one Ethereum was worth approximately S$170. In January 2021, the price rose by tenfold. Eight months later, it’s a cool S$3,400.
If you’d like to invest in Ethereum, you could do the same. Make a lump sum or recurring investment and stash your holdings away in a cold wallet until the time is right.
Alternatively, you could hold your Ethereum in a cryptocurrency savings account to generate interest. This strategy works with several other cryptocurrencies too, including Bitcoin.
On the other hand, you could choose to trade Ethereum actively. Several factors work to your advantage: the cryptocurrency market is always active and prices are still volatile. If you have experience with trading stocks, Forex, CFDs, or other assets, this might be one investment strategy to consider.
Lastly, if you don’t fancy investing in Ethereum directly or plan to use it solely as a medium of exchange on the blockchain, there are alternatives you can consider. After all, given how versatile it is, Ethereum is not just an investment.
How about the risks of investing in Ethereum?
There are several risks associated with investing in Ethereum. Firstly, recall that there’s no limit to how much Ethereum can be produced. It isn’t like Bitcoin or precious metals where scarcity plays a role in driving prices higher.
And with the Ethereum blockchain moving to a Proof of Stake system, it’d be easier and less energy-intensive to obtain more coins in the future.
Secondly, there’s the volatility of Ethereum’s prices. Although experienced traders will appreciate the ability to snag profits at a faster pace, it means that losses come just as quickly.
Ethereum was launched only in 2015 and cryptocurrency is not a mature asset class just yet, hence the volatility in prices.
Then there are industry-wide regulatory concerns. China has been dominating headlines in recent years with regards to cryptocurrency crackdowns. The government has been moving swiftly as it stands to gain both economically and politically.
The USA has pushed for greater industry regulation as well, with Federal Reserve chairman Jerome Powell saying as much.
On the bright side, Ethereum has intrinsic value in spades. The cryptocurrency itself is one thing but the network as a whole is highly valuable. Remember, its founders intended for it to be a platform that has multiple uses, with Ethereum used as a way to pay for the various dapps and services provided.
It’s far from being a simple peer-to-peer payment system.
|Maximum supply||21 million||No limit|
|Algorithm||Proof of Work||Proof of Work, but transitioning to Proof of Stake|
|Utility||Peer-to-peer payments||Peer-to-peer payments, smart contracts, dapps, etc.|
Bring up Ethereum and the comparisons to Bitcoin are inevitable. However, the two cryptocurrencies differ wildly both in terms of vision and utility. Although the latter has proven to be a much more profitable asset through the years, Ethereum is hardly a slouch.
In fact, a survey conducted by Seedly, Gemini, and CoinMarketCap in 2021 among 4,348 adults in Singapore determined that over 50% of them held Ethereum. It proved to be more popular than the ubiquitous Bitcoin.
Furthermore, Ethereum isn’t just a cryptocurrency, but an open-source platform for dapps and services.
And as time goes by, Ethereum will distinguish itself further from Bitcoin. Case in point: Ethereum 2.0 is in the works, with the initial phase being launched in 2020. This major upgrade is set to make the network more user-friendly and secure, amongst other things.
Who knows, Ethereum might just become the most widely-adopted cryptocurrency one day.
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