I have found that many people that are skeptical of ethereum and cryptocurrencies in general, wondering if they are scams or something worth investing in. Since you are reading this post then I’m guessing you are one of these skeptics, and I don’t blame you. I didn’t start to research and invest into cryptocurrencies until several years after I first heard of them because I too though that they were just scams.
So anyways… is Ethereum a scam? Simply put, no, is not a scam. However, I will address some of the “scammy” characteristics that I hear many talk about and try to explain them the best I can. The most notable argument that ethereum is a scam is probably that of it being a ponzi scheme that is designed to make early investors rich.
But before I get into all of this its best for me to first go over how Ethereum works and what it brings to the table.
An Overview of Ethereum
Ethereum works very similarly to bitcoin but features a few key differences. Just as bitcoin, Ethereum is based on a decentralized public blockchain, which is basically a ledger where everything is written down. There is no central authority that controls this blockchain. It is decentralized and is kept running by computer nodes all over the world, which makes it nearly impossible for the network to be hacked or compromised due to all the many computers that keep a file of this blockchain.
The main difference between ethereum and bitcoin is that ethereum gives developers the ability to run programs over the ethereum network. It has what are called “smart contracts” which basically gives the ability to create specific for how transactions work.
A good and simple example of how smart contracts work is this: Lets say someone is going to pay you to perform a task (ex: clean their house) but they don’t want to pay until they ensure the job was done. Smart contracts will allow them to put Ether, which is ethereums form of currency, in escrow on the blockchain and this payment will not be released until the final conditions are met. These final conditions can be anything. In this case they are that the house was actually cleaned.
So in a way these smart contracts can take place of a middleman to ensure safe and automatic transactions. The concept of these smart contracts has been compared to that of a vending machine, which is easier to understand. With a vending machine someone puts in money, presses a code for what snack they want, and the machine automatically spits out the desired snack. The money put in is held in escrow until you press the buttons and get your snack.
There is a lot more to smart contracts than what I’m mentioning here but these are the basics of it and this is what really seperates ethereum from bitcoin, which has the single purpose of being a currency.
If you are looking for a simple description of what Ethereum actually is then the creator of the whole thing puts it very simply as a “decentralised mining network and software development platform rolled into one”.
The Man Behind It All
Its always important to look a bit into the background of the person, or people behind technologies like this. In this case we actually know the creator, unlike Bitcoin who’s creator is completely unknown.
Vitalik Buterin is the co-creator along with the inventor of the Ethereum network and released Ethereum’s white paper to the world back in 2013. When Ethereum was initially released Vitalik was only 21 years of age. He has a history of being incredibly smart having been in gifted classes throughout his childhood education and actually dropped out of college at the University of Waterloo in order to focus on creating Ethereum.
Vitalik is very vocal and involved in the community. His transparency and willingness to acknowledge Ethereum’s problems and concerns show how trustworthy the man really is.
Addressing The Ponzi Scheme Conspiracy
There is a small group of disbelievers that claim Ethereum is nothing more than an elaborate ponzi scheme.
Why are people saying this? Well the reason is because of how the value of Ethereum grows as more people buy into it, similar to how you make money with ponzi schemes by getting new investors to buy in.
However, ponzi schemes provide no real value and are basically nothing more than a big transfer of money. Investors buy in and then get other investors to buy in. The newer members’ investments are then used to pay off the older members.
Only those with no real knowledge as to what Ethereum is and the technology it provides are making claims such as this. Sure there are many people that have made a ton of money from buying Ether early on but this doesn’t make it a ponzi in any way.
If there is any better arguments for it being a ponzi scheme I would love to hear them but as far as I know this is the basis of it.
Problems Ethereum Faces
Whether or not Ethereum will still be very valuable in the future is a question that is still very much up in the air. The major problem that we are seeing with both bitcoin, ethereum, and many other cryptocurrencies is the issue of scale-ablity. Ethereum is still such a new technology with really not all that many users. There really aren’t all that many transactions going on through the network when you think about its potential, yet the network is already bogging down and very slow.
Pretty much there is no way that Ethereum will last in the condition it is today. However, cryptocurrencies like this are continually developed and evolve over time. We have already seen big improvements and there is definitely a chance that the great team of developers behind this technology will be able to overcome this problem.
Should You Invest?
I’m really not going to give you a yes or no answer to this because there are many different opinions on the future of Ethereum. However, I will say that I am invested and plan on keeping some Ether for the foreseeable future.
There are problems that the development team will have to overcome but I have faith in them. Ethereum has turned out to be an amazing investment thus far and the road to this point hasn’t been easy.
How to Buy Ethereum
If you are looking to buy Ethereum there really aren’t any better places to buy it than GDAX and Coinbase. These two exchanges are based in the US which give some added security and they allow you to buy Ether with your bank account which makes things simple(Coinbase also allows you to buy with credit/debit card).
Both exchanges are owned by the parent company, Coinbase. So you will have to create an account with Coinbase to be able to use either. And if you are going to do this I would appreciate you using my referral link here: www.coinbase.com/join. You will get $10 worth of free bitcoin in your account and I will also for referring you.
If you have any questions or comments on anything that I just went over be sure to leave them in the comment section below and I’ll get back to you as soon as possible 🙂