FAQ: The most important questions and answers about cryptocurrencies and blockchain
Below we answer the most important questions about crypto and blockchain. If you do not find the answer to your question here, we are also happy to help you personally. The easiest way to reach us is via our contact form.
Blockchain & Cryptocurrencies
Cryptocurrencies are not uniformly regulated. Some countries are very open to cryptocurrencies and others prohibit their possession or trading. Regulatory risks and uncertainties remain. Switzerland is one of the most crypto-friendly countries, but the development must be monitored further.
Cryptocurrencies must be taxed. In principle, they are taxed as assets at the rate on 31.12. In the canton of Zug, taxes of up to CHF 100,000 can be paid with Bitcoin or Ethereum. Find out about the applicable regulations from your tax office.
Don't just invest in any coin just because it is making headlines with great profits. There are always black sheep among the cryptocurrencies, which want to enrich themselves, for example, with Ponzi schemes. Inform yourself in advance about the project and their coin.
FearOf Missing Out - Fear of missing something. Imagine a train pulling into the station, stopping, and then slowly starting. That's the best time to get on. But with FOMO, someone is trying to jump on the train when it is already speeding towards its destination. The same is true for cryptocurrencies. If you buy them during a rapid price rise, you run the risk of getting in at exactly the worst possible time. Those who have a little patience usually get another favorable entry point.
Fear, Uncertainty, Doubt - fear, uncertainty, doubt. FUD always spreads as soon as bad news hits the crypto scene. Sometimes this only affects individual coins and sometimes the entire market. Often this news leads to drastic price drops.
Mining is an algorithmic computing process in which so-called miners generate blocks and attach them to a generally valid protocol of the blockchain. This process is called mining in analogy to gold mining.
The miners and nodes control the network and verify transactions. This makes it almost impossible for a central authority to control the network, as the miners keep the network running independently of each other. In return for the computing power and electricity costs that the miners spend on this, they receive a proportionate reward in the form of a coin (e.g. Bitcoin -> Bitcoin mining) credited to a wallet.
A coin is a type of currency that has its own blockchain and accordingly operates independently of other platforms. Until now, the majority of coins have been based on the same open-source platform as Bitcoin. By changing fundamental codes, a completely new coin is created. These coins include, for example, IOTA, Litecoin, Dogecoin.
Of course, there are also coins that do not originate from the idea of the Bitcoin open source platform. These have created their own blockchain and their own open source protocol. These include, for example, Ethereum, Ripple, NEO.
Tokens, unlike coins, cannot exist without a preceding cryptocurrency. They are tied to a pre-existing blockchain, e.g. the Ethereum blockchain, and cannot exist without it. A big advantage of this is that you don't need your own nodes and miners, but use the ones emanating from the cryptocurrency.
Cryptocurrencies are digital means of payment with which money can be sent anonymously over the internet in a short time. Behind this are decentralized, encrypted computer networks that serve the secure processing of data, the so-called blockchain technology.
Bitcoin is the first digital currency whose whitepaper was published in 2009 by the pseudonym Satoshi Nakamoto. Since the amount of all Bitcoins is limited to 21 million, only supply and demand determine the price of a Bitcoin.
Bitcoin is based on blockchain technology, which means it is independent of all central banks. All transactions are anonymous, but visible to every participant.
Bitcoin can be bought, sold, or even mined itself. In this case, it is called mining.
Basically, a hash value is meant by hash. A hash value combines many pieces of information that are assigned via a hash function, whereby the hash function can transmit a character sequence of any length. Identical data always leads to the same hash, but if only a single bit of the data is changed, the hash looks completely different.
In the blockchain, a hash is therefore a uniquely created character string that encrypts the data of a transaction and thus maintains its security.
Since, unlike in banks, the money is only virtually available, there is no longer any need for money printing equipment. Thus, counterfeiting and devaluation of the money by printing banknotes are as good as impossible.
As a rule, the maximum number of coins that can be distributed is set in the whitepaper. This number cannot be changed subsequently. In the case of bitcoin, the total is 21,000,000 coins. The miners mine for new coins, whereby the following coin always consumes more computing power than the previous one. Thus, it becomes increasingly difficult to generate a coin.
On the one hand, different cryptocurrencies also have different goals that they want to achieve. On the other hand, the success of Bitcoin has given many imitators the idea to rake in heaps of money through their own cryptocurrencies. Many of the digital currencies have no payment or data exchange function at all and serve solely as a speculative object.
Coins are stored in so-called exchange wallets. Here you can trade with them, but also simply leave them as with a bank account. Since there are different wallets, you also have the possibility to transfer your coins from one wallet to another. Only you have access to the wallet with an electronic key, the private key.
Most wallets are on the internet, but there are also some hardware wallets. You can think of them as a kind of USB stick. These have the advantage that the coins on them are protected from any hacking attacks.
The easiest way to think of an exchange wallet is as a digital wallet. This wallet allows you to access your Bitcoins. Here you can trade similar to online banking, but also leave your Bitcoins. Another overlap can be found in security, similar to banking, your Bitcoins in the wallet are protected with a password. One of the differences is that each wallet is anonymous and no personal data is stored, which is a huge advantage. Each "digital wallet" consists of a unique set of characters, this represents your ID. However, if you lose your password, you cannot reset it and will never have access to that wallet again.
Smart contracts are digital contracts that are anchored on the blockchain. This means that a payment has to be made as soon as the condition preceding it is fulfilled.
A smart contract could therefore take over your salary payment at the end of the month without the bank having access to it as a third party.
Furthermore, a Smart Contract could be used for insurances. Here, the insured person reports a claim and provides all the relevant data. The computer network checks whether the conditions for payment have been met and whether the insurance takes effect. If all conditions are met, a payment is made and this is done completely without employees or increased bureaucracy.
The application possibilities of smart contracts are huge and definitely have potential in the future, as a lot of money and working time can be saved.
Most crypto exchanges are backed by private companies.
Since most crypto exchanges are not subject to any supervision or regulation, it is important to pay attention to the seriousness of the exchange when choosing one. We recommend reputable exchanges such as Kraken, Bitfinex or Bittrex. If a public institution is behind the exchange, it is usually also reputable.
Hold On for Dear Life - hold on and by no means let go
Actually, the term is due to a typo made by a user on the well-known Bitcoin forum"bitcointalk" back in 2013. At the time, the price of bitcoin had risen from under $15 in January to a high of over $1,100 in early December 2013. On December 18, 2013 - possibly in response to reports of a Chinese crackdown - the price of bitcoin then fell nearly 40% in 24 hours, from $716 to $438. This prompted a forum member with the nickname "GameKyuubi" to post in which he stated that he had no plans to sell his Bitcoins but continued to hold them, knowing that his trading skills were very limited and that he would never catch the right entry and exit anyway. Since he had already had a few glasses of whiskey when writing the text and was therefore already very drunk, he made a small typo in the headline that would later go down in the history of cryptocurrencies. I AM HOLDING" became the famous "I AM HODLING".
Market capitalization is a way to determine the relative size of a cryptocurrency. It is calculated by multiplying the price by the circulating supply.
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We use the USDT rates from Binance for our portfolio.
Basically, the correlation in cryptos is very high, which is why we cover as many different areas of application as possible with our portfolio. We recommend, just as with shares, not to put all your eggs in one basket. Spread the investment over several cryptocurrencies. Smaller coins (measured by market capitalization) represent a greater risk and this should be factored into the decision.
Cryptos are traded 24/7 and are very volatile. Daily movements in the double-digit percentage range are not uncommon. Accordingly, updates are only sent out if there is a fundamental change in our outlook for the individual projects or the overall crypto market.
The crypto universe is incredibly large and new coins are constantly being added. There are currently around 7,000 cryptocurrencies. Since we commit ourselves to a maximum of 10 projects, the selection is correspondingly difficult. Many projects try to solve the same problem with different approaches. We choose the project that we believe has the best chances and try to cover as many use cases as possible.
First of all, keep calm and take a deep breath, because cryptocurrencies are very volatile. The portfolio is long-term and can be subject to very strong fluctuations. Invest a small portion of your portfolio according to your risk appetite so that you can withstand such fluctuations and not lose your nerve at the low and sell at a loss.
Unfortunately, we cannot offer technical support.