A self-directed Ether IRA / Ethereum IRA is an individual retirement account held by trustees or custodians that permit investments in a broad array of assets, from virtual currencies, including Ether, gold and other precious metals to real estate, promissory notes, or private placement securities.
Earnings in an Ethereum IRA grow tax-deferred, which means you won’t pay capital gains taxes if you sell, but gains will be taxed at your normal income tax rate when funds are withdrawn in retirement.
What is Ethereum?
Ethereum is built differently than Bitcoin. Using blockchain technology, Ethereum was designed to run smart contracts on a decentralized platform. This enables Ethereum to ensure it runs precisely as programmed without risk of downtime, censorship, fraud, or third-party interference, according to Ethereum.org.
Blockchain programming is essential to Ethereum. Used globally, blockchain developers can generate cryptocurrency markets and transfer funds. Ethereum was developed in 2014 by the Ethereum Foundation, a nonprofit organization based in Switzerland and run by developers all around the world.
While Bitcoin was developed using blockchain technology, Ethereum is actually a series of binding ‘smart contracts’ between two users. Blockchain ensures the parties involved will not engage in fraudulent transactions without the need for a third-party intermediary to prove the contract.
The decentralized Ethereum network is what makes this cryptocurrency popular. Once a blockchain is created, it is coded specifically to carry out the wishes — or contract — between the parties involved. Users must pay for the blockchain with Ether (ETH), the cryptocurrency involved in the system.