Bitcoin, Ethereum, Dogecoin: Cryptocurrencies are booming at a rapid speed. Many average users of digital currency know a lot about this online currency market, however, the crypto world is still a closed book for many people including some new people coming into this market. That’s why we clarify the most important terms from the world of cryptocurrency.
What is the blockchain, what’s there is know about Dogecoin, why is the tax office interested in cryptocurrencies and why is the climate so burdened by Bitcoin? These and other questions are explained in the first part of the important and big basic things of cryptocurrency.
Altcoin
Everyone knows Bitcoin, Ethereum, Dogecoin, Monero or Litecoin but many coins are not very well known. And very few have ever heard of Boolberry, Electroneum or Primacoin. There are thousands of so-called Altcoins and this ultimately includes all coins that are not Bitcoin.
Blockchain
Blockchain is the technological basis of all cryptocurrencies. Unlike conventional currencies, Bitcoin and other coins like it do not have a central authority such as a bank. For the system to work, every participant in the network must have access to the transaction history. The blockchain can be imagined as a decentralized cash book that is distributed over millions of computers. This principle does not make counterfeiting and manipulation impossible, but it makes it very difficult.
Coinbase
Coinbase is probably the most famous crypto exchange in the world. When Coinbase celebrates its stock market debut in mid-April, investors scramble for the company’s shares. Other well-known crypto exchanges are Kraken, BSDX or Bitcoin.de. In the past, however, such crypto evils have already been hacked. Experts, therefore, recommend storing the coins on your computer in a wallet.
Dogecoin
Doge is a meme based around a Japanese Shiba dog that has become the internet’s secret mascot over the past few years. Doge Coin was created by two software developers in 2013.
The whole thing is meant as a joke, but it happens as it so often happens on the Internet: the joke takes on a life of its own and the two programmers are very rich today. Now Dogecoin should even conquer space. Elon Musk, who also owns the space company Space X, has announced that it will launch a space satellite called Dogecoin 1 into space.
Ethereum
Ethereum, amongst many coins in the market, is the second-largest cyber currency with Bitcoin leading in terms of market capitalization. However, Ethereum, being a crypto coin, is much more than that. Ethereum is an infrastructure, a blockchain on which your applications can run, such as smart contracts or special apps. Like Bitcoin, Ethereum is based on the “Proof of Work” principle but is to be switched to the more resource-saving “Proof of Stake” process in 2021/2022.
Tax Office
The tax office is also interested in cryptocurrencies, especially if they are sold at a profit. However, if you hold the crypto for more than a year, the profits become tax-free. The question of how the so-called “staking” is to be assessed for tax purposes is controversial because new income is constantly being generated here. Some experts assume that the speculation period will then increase to ten years.
In April, a Bitcoin millionaire from Greifswald donated one million to the Greens. This is the largest single donation to a party since 2005. The software developer had the feeling that he had gotten his fortune undeservedly, and the high energy consumption of the Bitcoin system caused him headaches.
ICO
ICO stands for “Initial Coin Offering” and is based on the term “IPO”, which is used to describe initial public offerings. Unlike an IPO, is a fairly unregulated form of raising money. No shares are placed on the market either, but so-called “tokens”.
Jackpot
Not only with Bitcoin but also with Ethereum, Dogecoin and other cryptocurrencies: If you were there early, you hit the jackpot. However, very few saw the incredible increase in the value of cryptocurrencies coming. In 2010, a programmer bought a pizza for 10,000 bitcoins. One can only hope that he liked it. As of today, 10,000 bitcoins would be around 450 million euros.
Climate
More than New Zealand, more than the Netherlands, more than Italy: To document how high the electricity consumption of Bitcoin is, new countries have to be used as a benchmark again and again. This is mainly due to the energy-hungry Proof of Work process. In comparison, the Proof of Stake process is said to be much more energy-efficient and reduce power consumption by more than 99 per cent. Some cryptocurrencies, such as Cardano, already run on Proof of Stake and are therefore considered environmentally friendly.