The future of Cryptocurrencies

Why cryptocurrencies?

Digital currencies such as bitcoin have been very cryptocurrencies among many investors for years: Means of payment of the future or just anonymous currencies for fraudsters?

Cryptocurrencies have become known worldwide mainly because of the Bitcoin. It appeared on the scene in 2009 and is now the best-known digital currency in the world.
In addition to Bitcoin, there are also countless other cryptocurrencies. They all have one thing in common: they are controversial.

  1. For some, cryptocurrencies are a risky investment and the internet currency of scammers, for others the means of payment of the future.
  2. Crypto fans in particular see the many electronic currencies as the future means of payment. Unlike conventional currencies such as the US dollar or the euro, cryptocurrencies are not printed. They exist exclusively in digital form. Traditional currencies, on the other hand, exist both digitally – Apple Pay or Paypal are examples of this – and physically in the form of cash as coins and bills.
  3. The best-known cryptocurrency by far is Bitcoin, which also ranks first in terms of market capitalization (the value of all Bitcoins currently in existence at the current price) with a current value of more than 163 billion euros.

Bitcoin – the mother of all cryptocurrencies

bitcoin userAccordingly, Bitcoin is also known as the world’s digital currency, as it was the first type of digital payment method known today as cryptocurrencies. In the meantime, numerous other cryptocurrencies, often the term digital currency is also used, have followed. The best known after Bitcoin are Ethereum or Ripple, among others, even though the latter two cannot hold a candle to Bitcoin in terms of market capitalization:

While Bitcoin shines with 163 billion euros, Ethereum comes to just 31 billion euros, followed by Tether, formerly Realcoin (13 billion euros), and Ripple (8.5 billion euros). The numbers clearly show: Bitcoin is the measure of all things among the currently more than 2100 different cryptocurrencies, which together have a market capitalization of more than 270 billion dollars worldwide.

These are the alternatives to Bitcoin

In addition to Bitcoin, the digital currency Ether is also very popular among crypto fans. It belongs to the group of so-called stable coins. This refers to cryptocurrencies that are covered by a common currency. Moreover, Ether is actually the cryptocurrency of an open platform based on blockchain technology, which enables developers to create and implement decentralized applications via so-called smart contracts. Smart contracts are computer protocols that can map and verify contracts and technically support their execution. Here also lies an important difference to Bitcoin: It is not just a digital currency, but part of its own closed network.

One of the oldest cryptocurrencies is the rather unknown Litecoin. It was developed by a former Google employee and came out two years after Bitcoin. It is also based on the original source code of Bitcoin, but it offers a faster transaction time compared to it. In terms of market capitalization, Litecoin is one of the current top ten cryptocurrencies, but it only has a volume of just under €2.5 billion.

How do I buy and sell Bitcoin

Since cryptocurrencies are not traditional physical means of payment, you can not get them at the bank counter or ATM. However, you can buy and trade all cryptocurrencies via Internet trading platforms, so-called crypto exchanges such as Binance, you can read a review on this site.

Popular exchanges for exchanging euros or US dollars for cryptocurrencies in the English-speaking world are also Kraken Bitcoin Exchange or Coinbase Pro. In order to be able to buy and sell at these internet exchanges at all, every user has to register. Most exchanges accept the purchase of Bitcoins via bank transfer or credit card payment.

If you want to trade as a beginner, a bitcoin bot can help. There are some good bots on the market, but be sure to compare them here before you buy one.

Ripple

A much better-known digital currency is Ripple (more here), which is based on blockchain technology by the company Ripple Labs. Again, there is a difference with Bitcoin. Ripple is not a pure cryptocurrency, but “only” a payment token, a separate currency within the Ripple network called Ripplenet. Ripplenet has been equipped as a digital payment network for banks, with the goal of making international payments between financial institutions cheaper and in real time. That is, Ripple is actually a digital currency for banks to work together.

Digital currencies like bitcoin have been very popular with many investors for years.
Every few hours, a small number of new Bitcoins are generated at an ever-decreasing rate. When 21 million have been created, that’s it. Experts believe that all Bitcoins are likely to be generated between the year 2130 and 2140. So while Bitcoin is the cryptocurrency for everyone, Ripple could be called the “banking Bitcoin.” Already, financial institutions such as Santander, UBS and SEB Bank are among Ripple’s customers.

Wallet – the digital purse

btc walletThen, similar to withdrawing money from an ATM, where you subsequently keep the cash safe in your wallet, you have a digital wallet for your own cryptocurrencies, such as bitcoin. This digital wallet can be obtained in the form of an app, in order to subsequently be able to receive and send one’s own cryptocurrencies such as Bitcoin via it.

However, buyers of cryptocurrencies should be careful to transfer their purchased digital money from their exchange wallets (the respective Internet exchange) to their private wallets for security reasons. The reason lies in the past, when there had been increased cyberattacks on major crypto exchanges and subsequently many Bitcoin investors were deprived of their shares.

How popular Bitcoin is among investors can be seen in the recent development of possible purchase options for the digital currency. In the last few years, special Bitcoin ATMs have emerged, check this page. While there are about 50 such machines in Germany, the number in Austria is 170 and in Switzerland there are about 70 crypto ATMs. At these, you can easily get your Bitcoin: You pay in at the machine by EC or credit card, scan the QR code of your own mobile wallet in the second step and then receive a direct credit in the respective value credited to the Bitcoin wallet. Ultimately, however, this method is only a very rare one to get Bitcoins.

How risky are cryptocurrencies as an investment?

Away from the great possibilities of cryptocurrencies being widely used as a means of payment in the future, many investors have jumped on Bitcoin in particular as a speculative investment in recent years. This has to do with the “finite nature” of Bitcoins. When 21 million pieces have been created, that’s it. This, in turn, attracts out many investors who uphold the old market principle: If demand increases but supply remains the same, the price of a Bitcoin should eventually rise. However, the long-term Bitcoin chart shows that the price of the most popular cryptocurrency is in a constant up and down. Anyone who buys Bitcoins at the wrong time will have to have good nerves afterwards.

From 10 euros in 2012, the value of a Bitcoin climbed above 16,000 euros in December, only to plummet again to below 3000 euros within a year. Currently, a Bitcoin costs 8800 euros. However, those who had bought in the summer had to pay more than 9600 euros for a Bitcoin and thus currently have to book losses. Bitcoin is therefore considered by most financial market experts to be an extremely volatile and risky investment.

The downside of Bitcoin

The popularity of bitcoin also has a downside. The digital currency is the favorite currency for scams on the Internet. The reason is precisely the anonymity of Bitcoin users. It is easier to carry out advance fee scams, so-called scams, with bitcoin than with other currencies. The most recent case has been a Twitter hack when unknown people managed to spread advertisements for dubious cryptocurrency deals through the profile of India’s Prime Minister Narendra Modi.

Using Bitcoins for such scams makes sense for hackers in that not only is anonymity granted, but a Bitcoin transaction is also irrevocable. Once you have transferred (incorrectly), you cannot reverse anything.

Politics and the attempt at regulation

The coming months will show to what extent the regulatory plans of the EU Commission will really change the Bitcoin world. The fact that acceptance on the part of governments towards cryptocurrencies is increasing noticeably is shown by the example of Switzerland: in the canton of Zug, it will also be possible to settle one’s tax debts with cryptocurrencies such as Bitcoin and Ether from next year.

However, the topic of digital currency has also long since arrived at the state level. China, for example, has been working on a kind of digital yuan for years. The project is in clear contrast to the original idea of a Bitcoin, namely to give state central banks no influence on a digital and anonymous currency. But it would make payment transactions faster in the future – and, above all, control them.