Simple Guide to Buying Ether

Buying Ether to use on the Ethereum network can be as simple as buying Bitcoin, or if you already own Bitcoin, it can be even simpler. But as with any cryptocurrency there is some special care that you need to take to keep your coins safe. If you are new to cryptocurrencies, go slow and get familiar with the software and services and how they work before buying a large amount.

If you already have some Bitcoin or other altcoins, Ether can be bought through these established exchanges. It is possible to buy Ether directly with US dollars, Euros, or other fiat currency by sending a bank wire to Kraken or Bitfinex.

  1. Poloniex.com (based in the U.S.)
  2. Kraken.com (based in the U.S. Can buy with USD, EUR, GBP, CAD and JPY. A useful graphical guide is here)
  3. Bitfinex.com (based in Hong Kong, interesting discussion here)

You can also buy Bitcoin through the following websites and then send it to one of the exchanges above to buy Ether. On these services you’ll need to link your bank account, send a wire transfer, or use a debit or credit card where indicated below.

  1. Coinbase.com (based in the U.S. – $1000 instant buy is handy)
  2. Circle.com (based in the U.S. – accepts debit & credit cards for small amounts)
  3. Bitstamp.net (licensed throughout the E.U., based in Slovenia. Wire transfers accepted in Euros or USD, or residents of United Kingdom, Slovenia, Germany, and Italy can use credit and debit cards.)
  4. There are lots of other places to buy Bitcoin but be sure you use a trustworthy site, and check the transaction fees before you buy.

On all of the above services you’ll need to verify your identity, which can take a few days.

Once you have purchased Ether, you can store it on the exchange or in a wallet. Many people advise not storing it on an exchange in case the exchange gets hacked or turns out to be dishonest. While this is good advice, also keep in mind that it is possible to lose the password to your wallet, which is just like losing the cash in your real wallet or purse. If you lose your password, the Ether is gone if you can’t find it again.

Most importantly – practice makes perfect. Before you send 100 Ether to your wallet, send 0.1 Ether and then be sure that you can send it back. That way you know you are entering your passwords correctly for both inbound and outbound transactions.

MyEtherWallet.com is a simple way to generate a wallet, but be sure to read the instructions and back up your password (keeping a paper copy is a good idea). The official Ethereum software is named Mist, and if you install it be sure to back up your wallet and your password. See also these advanced featuresJaxx.io offers desktop and mobile wallets that are in beta.

To keep your passwords safe, there are many programs on the market that will store them in an encrypted fashion. I like 1Password by AgileBits, which works on Windows, Mac, iOS and Android.

One final tip – be careful when copying and pasting your Ethereum address. While the Mist wallet will tell you if you haven’t entered a valid address, your password storage software and other websites and services probably won’t. I usually spot check the first 4 characters and the last 4 characters. Ethereum addresses start with 0x and can end with anything, so your address will look like 0xA2…F2Bc. If you check the first 4 and last 4 characters, you’ve probably copied everything in the middle OK.

This isn’t an exhaustive list of everything out there, and this page will be updated as new information comes along.

Ideas for Future DAOs

In the (ongoing) aftermath of the DAO hack, a few ideas sprang to mind for future DAOs, should there ever be any. These are just ideas that could be used in various circumstances, but aren’t intended to be internally consistent or all used in one DAO.

1. Crowdfund it Kickstarter style: A future DAO could be structured so that people can send ETH to support a specific proposal, meaning you vote with your wallet. If a funding threshold is reached, then funders receive tokens and the funds can be dispersed to a contractor according to an agreed-upon protocol (monthly, quarterly, if specific milestones are met, etc.). If the threshold is not reached within a certain time, then the ETH is returned to the addresses it was sent from. No splitting required.

2. Burnable tokens instead of child DAOs: Don’t like where your DAO is going? Send your tokens to it and have some appropriate ratio of ETH sent back to the address you sent from. This would work with individual accounts, and perhaps exchanges would be willing to support this kind of functionality in the future.

3. Voting should not prevent transfer of value: this could mean having separate voting tokens and trading tokens. The voting tokens could be locked, but the trading tokens not.

4. Delegated voting: besides splits, not one proposal to The DAO got more than about 10% of the 20% quorum needed to pass. My belief is that partly, voting required some technical savvy, and partly, many people were investing in the DAO hoping for returns but not really intending to vote. This stance paradoxically lowers the probability of returns, if few or no proposals get passed.

For those who don’t intend to vote, it would be beneficial to delegate your voting rights to a person who could evaluate proposals and vote intelligently on your behalf. This would go a long way towards reaching quorum, and it could always be possible rescind the delegation as desired. If being a delegate became a paid position, this would create a market for intelligent decision-makers. (This idea *may* be more than 200 years old :-)).

5. Man-traps: Out of luck rather than design, The DAO had a built-in ‘man-trap‘, in that any child DAO needed to go through the built-in 27-day creation period before funds from a split could be accessed. For future DAO’s, deliberately building in waiting periods before funds can be accessed might be desirable (although I imagine in the future the Ethereum developers and miners will not come riding to the rescue of errant smart contracts).

6. Shut-down protocol: Not simple to implement, but if a smart contract holding ETH comes under attack, it would be useful to have means of safeguarding the funds. This could be as simple as:

  • Have a procedure for halting all withdrawals, reversibly or irreversibly, either through a vote or using multiple signatures (multi-sig).
  •  A burn-and-refund protocol for tokens (see Burnable tokens above). It might work well if this could only be halted separately from other withdrawals, or not at all.

Some may complain that a couple of these ideas result in a degree of centralization of control. In my view, pure de-centralization may not be practical in the real world. The Curators of The DAO had some small centralized role to play, and probably where large amounts of funds are concerned, the protective oversight of a few individuals is desirable. As I see it, Winston Churchill’s words cut both ways: “Democracy is the worst form of government except all the others that have been tried.” DAOs have to be safe to work.