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Since 2017, Ethereum has been growing rapidly, threatening to overtake Bitcoin as the largest cryptocurrency in the world. If you're holding Bitcoin and you want to trade it for Ethereum, the easiest way to do so is through an online exchange. Before you buy Ethereum, you'll need to set up an Ethereum wallet, which is a little different from a Bitcoin wallet.[1]
Steps
Setting Up Your Ethereum Wallet
Choose the type of Ethereum account you want. There are 2 types of Ethereum accounts. The externally owned account (EOA) is most similar to a Bitcoin wallet. You can also have a contract account, which is an account that has code associated with it.[2]- Contract accounts don't have private keys that control them. Instead, you write conditions that trigger the account to send or receive Ethereum. These conditions are hard-coded into the account itself, and cannot be changed once they're set.
- Contract accounts are a bit more complex than EOA accounts. Unless you have a lot of experience with blockchain and cryptocurrency, you'll likely want an EOA account.
Sign up for an online wallet if you want easy access. Online wallets allow you to send and receive Ethereum nearly instantaneously. However, because they are online they are vulnerable to hackers.[3]- If you only plan on purchasing a small amount of Ethereum, and don't want to keep it as a longer-term investment, an online wallet may be a better option for you, even with the security vulnerabilities.
- Check the reputation and security of online wallets carefully before you open one.
Use a hardware wallet if you want greater security. You can buy hardware wallets online to use to store your cryptocurrency. Hardware wallets are more secure than online wallets because they are not connected to the internet.[4]- Hardware wallets are also designed so that nothing other than cryptocurrency can be downloaded to them. This makes them essentially immune to malware.
- Because you have to go through a few additional steps to get your cryptocurrency out of a hardware wallet to use it, they are better suited for holding cryptocurrency as a longer-term investment.
Tip: There are some hardware wallets that support both Ethereum and Bitcoin. If you plan on continuing to hold both cryptocurrencies, one of these wallets may be more convenient for you than a separate Ethereum wallet.
Write down your public and private keys. You'll need the public and private keys to your Ethereum wallet to deposit the Ethereum you buy into your wallet. You"ll use the public key to send your Ethereum from the exchange to your wallet, while the private key gives you control over your cryptocurrency and the ability to spend it or transfer it elsewhere.[5]- Keep your private key to yourself. Anyone who knows your private key has access to all the cryptocurrency you have in your wallet and can do whatever they want to with it. If you lose your private key, you've essentially lost your cryptocurrency.
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Making Your Trade
Find out if your Bitcoin exchange also has an Ethereum market. If you purchased your Bitcoin on an online exchange, that exchange likely also has an Ethereum market. Most online exchanges have both Bitcoin and Ethereum.[6]- From the home page of each online exchange, you can determine what cryptocurrencies that exchange supports.
- If you didn't purchase your Bitcoin using an online exchange, or if you no longer have an account on an online exchange, you'll have to set up an account before you can buy Ethereum with your Bitcoin.
Tip: Registering for a cryptocurrency exchange account is similar to opening up an account with an online investment platform. You'll need to verify your identity before your account will be confirmed and opened.
Transfer your Bitcoin to your exchange account. Get the address for your exchange account from your account information page. Just like wallets, exchange accounts have an address you use to send cryptocurrency. From your Bitcoin wallet, enter the address for your exchange account.- The amount of time it will take for your Bitcoin to appear in your exchange account depends on network traffic. Typically it won't take longer than an hour.
Tip: If you don't have Bitcoin, you can complete an order on the exchange using fiat currency (national currency). Once you get your Bitcoin, leave it in your exchange account if you want to use it to buy Ethereum.
Complete your order for Ethereum on the exchange. Open an order to buy Ethereum, setting the Bitcoin in your exchange account as your method of payment. You can either buy as much Ethereum as you can possibly buy with the Bitcoin you have or you can buy a set amount of Ethereum.[7]- You also have the option of limiting the price you'll pay for Ethereum. However, if you set a limit your order won't be processed if no one is willing to sell Ethereum to you at that price.
Move your Ethereum from your exchange account to your wallet. Once your order goes through, your Ethereum will appear in your exchange account. Because exchange accounts are vulnerable to hackers, move your cryptocurrency out of the exchange account as soon as possible.[8]- From your exchange account, send your Ethereum to your wallet using your wallet's address. Then open your wallet platform and confirm your Ethereum has been transferred properly.
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Expert Q&A
Warnings
- When you trade Bitcoin for Ethereum, you may owe capital gains taxes. If you have any questions, talk to a tax or financial advisor who is familiar with cryptocurrency trades.[9]Thanks
References
- ↑ https://www.investopedia.com/news/how-do-i-buy-ethereum/
- ↑ https://99bitcoins.com/ethereum-wallets/
- ↑ https://99bitcoins.com/ethereum-wallets/
- ↑ https://99bitcoins.com/ethereum-wallets/
- ↑ https://99bitcoins.com/ethereum-wallets/
- ↑ https://www.investopedia.com/tech/190-cryptocurrency-exchanges-so-how-choose/
- ↑ https://www.investopedia.com/news/how-do-i-buy-ethereum/
- ↑ https://blockgeeks.com/guides/cryptocurrency-wallet-guide/
- ↑ https://www.forbes.com/sites/greatspeculations/2017/08/15/cryptocurrency-traders-risk-irs-trouble-with-like-kind-exchanges/#6b303f9c26a8
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