A simple introduction to a complex subject.
You've probably come across these two buzzwords (which, by the way, don't necessarily go hand in hand) here and there by now, but what exactly is behind them?
First of all, it's a huge topic and I don't think I'm an in-depth expert in this field, but I've gained a relatively good insight and overview and I'm very happy to share my findings with you.
We will cover three subpoints in this article:
My first encounters with crypto and co.
I had learned about Bitcoin (probably the best known cryptocurrency) early on. It was probably around 2011 when I had Skyped with a good friend's cousin. He lives in Florida and was just at some friends' house. Dozens of computers in the background, big question marks in my head. He briefly gave me a vague description of what was happening and it sounded something like this:
„Die schürfen Bitcoin. Ist eine Art elektronische Währung und ich glaube das wird noch ganz gross. Wir alle glauben das. Wenn du willst kannst ja ein paar kaufen. Kosten gerade 0.80 USD pro Stück.“
Ich fand das sehr spanned, aber: ich war gerade dabei ein wahnsinnig niedrig bezahltes duales Studium zu machen und hatte tatsächlich kein erspartes Geld auf der Seite – geradeso genug für den Alltag und um ehrlich zu sein wurde dieser mir nicht selten durch meinen tollen Freundeskreis mitfinanziert.
In addition, the acquisition of Bitcoin was far from being as convenient today.
Wie du also ahnst habe ich keine Bitcoin gekauft, welche zum Zeitpunkt dieses Schreibens pro Coin mit etwa 34’000.- USD gehandelt werden.
Well, that's how it can go. But I see it all quite realistically: if I had bought some Bitcoin back then, I probably would have sold when the price first rose above 100 USD or something in that order of magnitude.
Das Thema geriet für mich lange Zeit aufs Abstellgleis. Gründe gab es einige: anhaltende Liquiditätsprobleme bedingt durch Studium und später Ausbildung, andere Interessen und (z.B. wenn Kryptos aml wieder für Schlagzeilen gesorgt hatten) die Bitterkeit über die verpasste Gelegenheit, welche ich mir aber nicht eingestanden habe, sondern mich darauf beschränkte, bei Kurseinbrüchen in das typische „Eben doch nur eine Blase“-Getue zu verfallen um mir ein gutes Gefühl zu geben über den Umstand damals nicht eingestiegen zu sein.
This dragged on for years until the topic gained more and more attention and it slowly dawned on me: the topic is not going to go away.
I have always had a healthy curiosity and so I began to look deeper into the subject, which brings us to the next point in this article:
What are actually cryptos and blockchain (simplified view).
Ich werde die Beschreibung möglichst allgemein und nicht wirklich technisch zu halten – dafür gibt es deutlich kompetentere Menschen als mich.
Cryptocurrencies:
This term stands for electronic / digital alternatives to the well-known FIAT (so to speak the national currencies, which are not linked to the gold and/or silver price). These alternatives are usually based on highly complex cryptographic principles to make them secure. These are essentially:
– Schutz vor Manipulation
– Schutz vor Fälschung
– Schutz vor Inflation
One of the main features of most (but not all) cryptocurrencies is that they are designed to be decentralized and the amount is often fixed. This means that they are not regulated by a few institutions, as, for example, country governments do for their national currencies.
Further, banks are largely superfluous in the basic idea of cryptocurrencies. This is due, for example, to the
Blockchain:
The revolutionary principle that has been causing more and more of a stir since the early 2000s. You've probably heard this term a lot, but attempts to explain it quickly become quite complex.
So here's a simple attempt to explain how blockchain is making traditional banking obsolete:
In the rarest cases today, the money is still transferred directly and without intermediaries (banks):
– Der Arbeitgeber gibt dem Arbeitnehmer keine Lohntüte mehr, sondern er veranlasst, dass seine Bank den Banken der Angestellten das Geld überweist, von welcher das Geld dann genutzt werden kann.
– Wenn du mit EC oder Kreditkarte deinen Wocheneinkauf zahlst, wird deine Bank der Bank des Lebensmittelgeschäfts den Betrag für deine Leckerein transferieren.
With cryptocurrencies, this intermediate step is not necessary:
– Die Währung wird unmittelbar von dir oder zu dir an die andere Partei überwiesen. Keine Banken dazwischen. Die Konten werden selbstverwaltet.
This is even more exciting when international transfers are pending. Nowadays, it can take far more than two banks involved to move the money. And every bank involved wants/needs to earn money from the transfer. The end of the story is often high transfer fees. Especially for smaller amounts of money, this can be extremely unprofitable (for you, not the banks).
Wie kann das sicher sein, wenn „niemand“ reguliert?
While there are no banks regulating and auditing, there are highly complicated mathematical rules and mechanisms.
Blockchain ermöglicht es, Informationen über eine dezentrale, von vielen Teilnehmern gemeinsam genutzte Datenbank fälschungssicher zu übermitteln. Sie ist auf vielen Computern in einem Netzwerk abgelegt, wobei jeder neue dieser Knoten mit seinem Beitritt eine vollständige Kopie der Blockchain übernimmt und ab sofort die Aufgabe hat, Transaktionen zu überprüfen und zu dokumentieren. Es kann also im Prinzip jeder mitmachen, wodurch eine dezentrale Verwaltung erreicht wird. Daher die Anführungszeichen („niemand“) weiter oben: es ist eher so das alle Teilnehmer regulierend fungieren.
Each record, i.e. transaction, has its own identifier, which uniquely distinguishes it from other records. The transactions from each block are combined into one block. In addition, each node may add a new block to the blockchain by bundling current transactions and performing a task (proof of work, proof of stake, proof of storage, etc.).
These blocks are chained together almost inseparably, which means that each block also reconfirms the previous transactions, which always increases the trustworthiness.
Almost inseparable? Yes, it would be theoretically possible in most cases but:
A) it would be conspicuous because it would break the chain
B) it would be so expensive that the benefit would virtually evaporate (cost > benefit)
Summarized:
We have transcations that are grouped into blocks. By solving a task, it is determined who may chain the newest block to the previous block. This new block is again recognized and adopted by all participants.
Das Spiel geht von vorne los und wiederholt sich. Die vorherigen Blöcke werden so immer „bestätigter“.
My estimates for the future
Wir am Beginn des Aritkel erwähnt denke ich es handelt sich hier um ein Thema, das nicht mehr weggehen wird und noch mehr Fahrt aufnehmen wird (trotz immer wieder aufkommen Kritik wegen des hohen Energiebedarfs von Kryptowährungen – here you can find an article about why this is not always true).
You may wonder why I think that. The answer is simple:
The idea behind it and the need for such solution is too high.
In addition, a new trend has recently become apparent:
Institutions are jumping on the bandwagon, national banks are in some cases already working on their own cryptocurrencies, immense amounts of money are being brought into the market, and governments are drafting laws to regulate the market (which is an unmistakable endorsement that the crypto market is being given great importance).
I would like to encourage you to get involved with this topic, because I believe that nothing is worse than missing the technological boat.
I hope you enjoyed the article and I would love to hear from you when you first learned about this theme and what your initial thoughts were.
In the next article, I will discuss which crypto exchanges I have come across and which ones I can recommend (as a layman, mind you).
If you don't feel like reading the next article right now and maybe want to get started right away with a small amount of money, here are links to my top 3:
- Binance – Der wohl grösste und namenhafteste Anbieter. Definitiv mein Favorit.
- BitPanda – Ansässig in Europa (Österreich), für alle die gerne einen Anbieter mit deutschem Support suchen.
- Coinbase – Ebenfalls ein sehr etablierter Anbieter (spannend sind hier die kleinen Lern-Kurse mit denen man gratis verschiedene Kryptowährungen verdienen kann).
(The above links are all affiliate links, nothing changes for you price-wise, but the operator gives me a compensation if you sign up. So you would support me by your registration and give me the opportunity to write more articles like this).
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