Cryptocurrency is a digital currency encrypted through cryptography that prevents counterfeiting and solves the double-spending problem. Unlike the traditional monetary systems, it works with a decentralized system.
Cryptocurrency has no physical form and is neither issued by a central bank or government authority. It solely exists as data on the Internet that are created and managed through a blockchain.
Two of the most well- known cryptocurrencies (now dubbed as the blue-chip cryptocurrencies) are Bitcoin and Ethereum.
As a Singaporean who lives in one of the fast growing financial centres of the world, you may have heard to them. And are now wondering what Bitcoin and Ethereum is and whether you should be invested in them.
This article focuses on Ethereum and aims to give you an overview of what it is, let’s get into it:
What Is Ethereum?
Ethereum is a decentralized blockchain-based software platform. Ethereum.org shares the following definition:
“Ethereum is a decentralized platform for applications that run exactly as programmed without any chance of fraud, censorship, or third-party interference.”
The code written on the Ethereum blockchain can’t be altered, tempered, or hacked. This is secured by cryptography.
Another important thing that must be noted is that Ethereum is a decentralized programmable blockchain-based software platform. But, it has a tradable cryptocurrency coin called Ether (ETH).
What this means is that Ethereum the platform, allows developers to build and execute ‘smart contracts’ and ‘Decentralised Applications (dApps)’ through the inbuilt programming system language called Solidity.
All of these run without censorship, downtime, nor involves any third party. The cryptocurrency asset, Ether powers these apps and contracts.
That’s why Ethereum is also called programmable money. This is exactly what sets Ethereum apart from Bitcoin.
Where Bitcoin is strictly a digital currency designed to function as a means of payment transaction, Ethereum was built as a platform to create and run apps and smart contracts.
4 Things You Need To Know
#1 What is a Smart Contract?
We keep on dropping the term ‘smart contract’ when defining Ethereum. But what is it all about?
A smart contract is basically a contract written in code that is uploaded by the creators to the blockchain. When a contract is executed, a node on the network runs it, uploaded to the blockchain, then stored in the public ledger.
Smart contracts work only when certain conditions are met. Once the conditions are met, the program carries out the terms of the contract. The whole process and use of the contract is displayed on the blockchain for everyone to see.
And if you tamper with the contract, every copy of the digital ledger would know of it. In simpler terms, there is no way to get away with it.
The advantage of smart contracts is that they can be carried out without the need for “middlemen” like lawyers or notaries. There’s no need to file papers and long transactions on your end.
However, the downside is when a bug appears that may affect the code of the smart contract, the blockchain will still carry out the terms of the contracts. This can be problematic.
#2 History of Ethereum
Now let us take it back to where it all started.
Ethereum was created in late 2013 by a Russian programmer named Vitalik Buterin. He formally announced it in January 2014 at the North American Bitcoin Conference in Miami, USA.
As a student who previously founded Bitcoin Magazine in 2012, he invested in creating another form of cryptocurrency that can do what Bitcoin could not.
Ethereum is introduced as not simply another cryptocurrency. Instead, it is an effort to code, run, and execute smart contracts and DApps independently without human interaction.
By July 2014, Dr. Gavin Wood joined as the co-founder with the Ethereum Foundation that bootstrapped the development of Ethereum software. It raised $18 million during the presale of Ether tokens.
#3 How (Ether)eum is Produced
Most people tend to mistake Ethereum as the cryptocurrency to be produced. Technically, it is actually “Ether” that gets produced or mined.
To properly distinguish both terms, Ethereum is the network that is based on the blockchain technology; while Ether is the cryptocurrency that helps run the platform or network.
Ethereum is originally powered by Proof-of-Work where miners have provide computing power to solve mathematical equations in order to validate transactions and receive Ether as a reward. The supply of Ether is limited to 18 million per year. Every 12-14 seconds, there will be a new Ethereum block that is mined. The reward for this is 5 Ether, given to the computer who mined it.
However, Ethereum is moving towards a Proof-of-Stake (PoS) model where validators can stake their Ether to help process and secure the network. The shift to PoS, also known as “The Merge” has been a work in progress for years and at the point of update, is estimated to take place some time in August 2022.
#4 Investing and Trading Ethereum in Singapore
While cryptocurrencies are not considered legal tender in Singapore, the Monetary Authority of Singapore (MAS) has granted exemptions to selected crypto related exchanges and platforms for holding a licence under the Payment Services Act (PAS). As of 2019, although these entities are not licensed under the PAS, they are allowed to continue providing specific payment services.
These cryptocurrency platforms would have to abid to Singapore’s regulations on product offerings and approval processes. We have seen the limitation of stablecoins offerings, banning of exchanges like Binance.com and a more stringent KYC process during account set up.
Nevertheless, if you are interested in investing and trading Ethereum in Singapore, you can use any of the MAS exempted entities. We have listed the best cryptocurrency exchanges in Singapore here.
How to buy Ethereum in Singapore
Step 1: Choose a cryptocurrency exchange
The most convenient way to buy Ethereum is through a centralised cryptocurrency exchange which usually allows you to buy crypto using your fiat currency or credit card.
Hence, the first step is to choose a cryptocurrency exchange.
If you are not sure where to start, refer to our comparison of the best cryptocurrency exchanges in Singapore. There, we going deeper into their fees and features.
Step 2: Create an account on your choice of cryptocurrency exchange
This process would be similar to opening a brokerage account. You’ll need to verify your identity and address through the guided Know Your Customer (KYC) process. You’ll require a photo ID and a copy of your recent bank statement with your address on it.
The KYC process is a legal requirement for cryptocurrency exchanges serving Singaporean clients. These days, KYC are usually approved instantly, although it could take up to a week depending on the exchange.
Step 3: Fund your account
To buy Ethereum, you’ll first need to deposit money into your account. Instructions are usually provided and you often have the choice of doing a bank transfer or funding via a credit card, PayPal or even PayNow.
Step 4: Buy Ethereum
Now that your account is funded, you can go ahead to buy Ethereum on the exchange.
This process is pretty similar to putting in a stock trade – you’ll need to input your desired amount and price.
There’ll usually be a fee, so keep that in mind!
Do your own due diligence!
Ultimately, when you decide to start mining, investing, or trading cryptocurrencies like Ethereum. You should do your own due diligence – research about Ethereum and form a thesis on why you should be investing in it.
Going forward, the cryptocurrency space will continue to evolve. Regulations will be updated as the Singapore government decides how they should regulate and how the Singapore fiat currency should co-exist with cryptocurrencies.