How Do I Buy Ethereum?

If you've never purchased cryptocurrency but have thought about it, you've likely heard that blockchains are too complex, wallets get hacked, keys are stolen, and corrupt exchanges take your money and run.

While blockchains are complicated and there have been many bad actors, you don't really need to understand how blockchains work internally to buy and use cryptocurrency. It is also much safer and easier to buy and protect them than it used to be if you take certain precautions.

Here are some steps you can take to safely buy and store your ether.

1. Identify a Platform for Trading

As the basis for buying Ethereum, it is important to identify the best trading platform for your needs. There are a few options when it comes to cryptocurrencies, including some of the top platforms, such as Coinbase, Kraken, Bitstamp, Gemini, Binance, and Bitfinex. All of these exchanges offer Ethereum.

One of the biggest considerations when choosing a cryptocurrency trading platform is the type of exchange. Cryptocurrency trading platforms are generally centralized or decentralized.

Decentralized exchanges (DEXs) rely on smart contracts to execute trades, and users maintain control of their keys and wallets. Centralized exchanges (CEXs) store users's keys for them, provide order-matching services, and charge fees for using their services. Centralized exchanges usually are businesses, and decentralized exchanges are platforms that connect users. Which you choose depends on your preferences and risk tolerance.

Keep in mind that cryptocurrencies are highly unregulated with rapid innovation. This can create a great market opportunity but also increase the risks of fraud, so it is important to be sure you are confident in the credibility of the trading platform exchange that you choose. A few key questions to ask when considering an exchange include:

• Where is the headquarters?
• Do they have a license?
• How secure is their website?
• How secure are your funds?
• Who are the managing executives?

Worldwide, Binance is the leading exchange in terms of trading volume. In the United States, Coinbase tops the list.

2. Create an Account

Once you have decided on a trading platform that fits your needs, the next step in buying Ethereum is to open an account. This process is similar to opening an account with a brokerage platform. You will need to provide your name, address, social security number, specified forms of identification, and more. Once you are confident with a site, the account opening process can usually be done pretty quickly.

Verifying the account is usually the final step in the account opening process. Most exchanges will require that you verify your account in one or more ways. This is where you will likely need to upload documents to verify your identity and ensure that your account passes regulatory muster. Verification can take anywhere from one hour to a day or two, depending on the exchange.

3. Deposit Currency

You'll next need to deposit currency into your account to make an Ethereum purchase. For centralized platforms, this can be relatively easy after verifying your payment information. Simply add money through your bank account or debit card. Cryptocurrency exchanges do not generally have high minimum investments, so you can invest as little as $5 or as much as $1,000 or more. Most exchanges have fees per trade, so it can be best to trade large amounts at once.

Depositing currency in DEXs can be slightly more difficult. These exchanges require you to send cryptocurrency from your wallet to another. Ethereum and USDT are popular depositing currencies for many DEX platforms so holding large amounts can be beneficial if you're going to be doing a lot of trading.

4. Purchase or Trade

With a verified account and money deposited, you'll be able to begin purchasing Ethereum and other cryptocurrencies via the exchange. Each exchange has an interface that works somewhat differently, but be prepared to confirm transactions and allow for processing time, which can also depend on the total number of transactions requested.

5. Withdraw and Store Your ETH

Once you have purchased ETH through the exchange, you can withdraw the cryptocurrency a wallet you control. CEXs make it easy to withdraw ETH by simply selling and depositing the proceeds in your bank account.

DEX platforms may take a longer amount of time. On a DEX platform, you would need to transfer your ETH to a CEX and then sell to cash out.

On all platforms, you also generally have the option to send ETH to a wallet. Withdrawing cryptocurrency differs from withdrawing money from an account. Cryptocurrency private keys are what gives you access to your crypto, and this is what you're withdrawing from a centralized exchange. The keys are transferred from its storage to yours.

To store your keys safely, they must be transferred from your internet connected wallet to a wallet without a connection, called a cold wallet.

The Bottom Line

With all of the options available, it is much easier to purchase Ethereum than it used to be. You can choose from hundreds of exchanges if your jurisdiction allows you to.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author owns BTC and XRP.