I’m ready to invest — how do I buy Ethereum?

A beginners guide

So, you’ve heard the news and are seeing the hype grow.

You’ve decided — you are going to get into crypto.

But its a big field, filled with dangers and confusing too — where are you supposed to begin!?

Well, this article will answer that.

Right now, you have money in fiat value (fiat means its a government money — USD, ZAR or others like it). Before you can acquire crypto, you will need to move it to a place where you can exchange fiat for crypto — this is called an exchange.

Crypto, btw, is a form of private money (as opposed to fiat and it’s government association)

Anyways, when it comes to exchanges, there are two types — centralized and decentralized. You will first need to move your money to a centralized exchange.

The Centralized Exchange (CEX)

If you are in South Africa, a reputable CEX would be Luno or Valr. If you are in the US, you might want to choose Coinbase. If you’re in Europe, you might go with Kraken, and if you’re somewhere else Binance is usually a good choice.

When you go to these website, you need to register an account. This is done normally through an email and password combo or using Single-Sign-On (SSO) like Google Login.

Once in, you have an account where you can deposit fiat into. You are also assigned crypto accounts if you want to receive crypto money into your exchange account as well.

Follow the instructions for “Funding your account” — which would involve sending money via EFT to the exchange account, where it will be shown in your individual account. This will take a day or two to reflect.

Once its in, you can swap your fiat into crypto!

Go to the exchange or swap features. The exchange can be technically complex, and if you are not familiar with it I suggest using the simple swap interface. Just enter the token you want and how much you want to buy (in Rand or Dollar or other fiat amount).

Congrats — you now own crypto!

At this point, you should secure your CEX account using 2-factor authentication. This keeps your funds secure by making it harder to hack your account.

Now, many people stop at this step, and for most of them it’s fine. However, if you are going to do so you should first consider the trade-offs.

The Pros and Cons of CEX’s

Pros:

• Simple interface
• Mobile friendly app
• Large selection of tokens
• Low fees and slippage on trades
• Account insurance (in some cases)

Cons:

• Changes in exchange rules can cause loss or freezing of funds. As the maxim goes “Not your keys, not your crypto”.
• Coins that are available to buy are already at large market caps. This means less potential upside compared to newly launched coins.
• Trade against users — In some cases, I’ve heard of exchanges that are trading against their users and frequently wipe out positions (called “stop-hunting”).
• Potential refusal to payout earnings if they decide to for arbitrary reasons.

If CEX’s are the primary school of crypto, then DEX’s are the high school. Once you are comfortable moving funds and trading them — you might want to graduate to the next level.

You get to do more, and closer to the blockchain technology that this space is built upon.

But you also need to be more responsible for your own path, decisions and safety.

The Decentralized Exchange (DEX)

The DEX is an innovation from the crypto blockchain space that happened 4+ years ago with the creation of Uniswap — an onchain swapping protocol.

What is a blockchain?

A blockchain is a decentralized database. In essence, the data is recorded into packages called blocks and are added to the chain of blocks (blockchain) to represent the history of transactions on that blockchain. All crypto coins and tokens are stored on the blockchain.

To interface with it, you will need an onchain wallet. This is a crypto native feature and involves using a wallet application.

Here I would recommend Metamask or Frontier. Metamask is an Ethereum wallet will generate you an account on the Ethereum blockchain. Frontier is a megawallet and will generate you accounts on other blockchains as well like Bitcoin and Solana.

They both work in the same way. It starts by creating a random “seed phrase”. This is a collection of 12 or 24 words. From these words your blockchain account is created. These words can be used repeatedly to create more wallets over time, so you can have multiple accounts associated with 1 seed phrase.

Like a seed grows into a tree with many branches, a seed phrase is used to generate multiple on-chain accounts each with their own private and public key combos.

Every blockchain account has a public key and a private key. You will see the public key as follows:

Your wallet address is your public key

This is equivalent to your email address. You share this with anyone that wants to send you money.

To control the account and move money out of it, you need the private key. This is kinda like the password — but just by knowing this someone can access your money and take it.

This is stored in the wallet application so you don’t need to remember it.

However, it is extremely critical that you keep the seed phrase safe and do not share it with anyone! Anyone with the seed phrase can restore your wallet on another device and spend the funds in your wallet.

Okay, so you have created an on-chain wallet and written down your seed phrase in a safe place.

Now, you should move your crypto to it.

Let’s say you want to withdraw some ETH to your wallet. You will initiate a withdrawal on your CEX account. When asked for an address, you paste your public key from your Metamask account. You also note your Metamask is connected to Ethereum network.

This ensures you are sending ETH over the Ethereum network to your on-chain Ethereum wallet (Metamask).

BEST PRACTICE: Whenever you are sending money, especially for the first time, it is recommended to send a little money first, in case you make a mistake. Once confirmed, you can send the rest.

You can also send ETH over other networks (if the CEX allows it). The Ethereum network is quite expensive, so withdrawing might already cost you $10–20. You can instead withdraw ETH to a “Layer-2” — a specific blockchain that is built to increase transactions and reduce fees for the main Ethereum chain.

Try withdrawing your ETH on the Arbitrum, Polygon, Optimism or Base chain.

Btw, to change your wallet to a different blockchain (network) — use a tool called chainlist. Search for the network you want and then click the buttons to add it to your wallet and switch to it.

Make a swap

Now its time to make a swap. To do so you should use a DEX like Uniswap or 1inch.

There is a lot to understand here to do things well.

Finding crypto — Can be found using aggregators like Coinmarketcap or onchain trading tools like Dextools or Dexscreener.

Evaluating crypto — Do some sanity checks to ensure the token is not a scam and that you found the right one (sometimes there’s more than one with the same or similar name)

Executing the swap — Ensure your funds are on the right chain. If not, you will need to use “Bridges” which are on-chain applications that let you move funds from one blockchain to another.

Once swap is complete, you can examine the transaction using Etherscan.

The Pros and Cons of using DEXs

Pros

• Fully owned and controlled by you — funds cannot be confiscated or frozen
• Trade with full transparency
• Fully on-chain — every transaction is recorded
• Access to newer crypto tokens — These have yet to be made available on CEX’s, and as such have lower market caps and more potential upside.

Cons

• Security is your responsibility — if you fail to secure your money there are very few ways of getting it back (if any).
• Complexity of on-chain accounts — Signing, security pitfalls and scams increase the amount of potential risks when transacting on-chain
• Maximum extractable value (MEV) — Other players can front-run your transactions to take a slice of your trade and reduce what your receive.

What next?

By now, you should have bought some crypto (ETH is a good place to start) and maybe moved it on-chain to your own wallet.

You can now use the various types of dApps (decentralized applications) available. The most popular are DEX’s for swapping and money markets such as Aave and Maker for borrowing and lending.

Yes — you can now deposit your crypto into an on-chain vault, earn interest on it and also take a loan against it.

Fully decentralized and fully automated, 24/7.

This is the future of finance that crypto promises.

While a bit clunky now, the industry is making great strides towards a better financial word everyday.

I’m backing crypto.

And I think soon you might be too.

P.S. If you want to learn how to make $1,000 -$10,000 in crypto with airdrops — grab a copy of my free ebook (The Ultimate Guide to Crypto Airdrops) here.