Trading With Crypto Currencies

The world of crypto currencies is becoming increasingly confusing. Almost all existing crypto currencies are listed on the www.coinmarketcap.com website. Altogether there are meanwhile far over 1,000 crypto currencies – tendency rising. The most important ones should be presented here: Bitcoin, Bitcoin Cash, Bitcoin Gold, Ethereum and Ethereum Classic, Ripple, Litecoin, DASH, Monero and Dogecoin.

Bitcoin – the “First Mover”, Bitcoin Cash and Bitcoin Gold

As the first known crypto currency (“First Mover”), the Bitcoin naturally enjoyed a certain advantage (“First Mover Advantage”). However, there has also been friction within the Bitcoin community for some time. Due to the increasing use of Bitcoin, the system has become quite slow and expensive (transaction costs), which one would like to change. By an update called SegWit2x, which will be activated shortly, these difficulties should be eliminated at least partly.

But a part of the community didn’t want to wait for this update. So in summer 2017 Bitcoin Cash was the first so called “hard fork” of Bitcoin. The main difference between Bitcoin and Bitcoin Cash is the block size. While the Bitcoin block size is fixed at 1 MB, Bitcoin Cash allows up to 8 MB. Soon there will be another such spin-off with Bitcoin Gold. Should there be a SegWit2x fork at the end of November, there would be three alternative bitcoins in addition to the original one: Bitcoin, Bitcoin Cash, Bitcoin Gold and Bitcoin SegWit2x.

The advantage of such spin-offs is that Bitcoin owners automatically receive the Bitcoin alternatives created by the spin-off. In the case of Bitcoin Cash, the value of the new, alternative Bitcoin (Bitcoin Cash) peaked at just under 900 US dollars. In this respect, each spin-off appears as if it were a money printing machine (“free money”). But of course such a spin-off does not only offer advantages.

If more and more such spin-offs occur in the future, the value of the original bit coin could ultimately fall – simply because investors lose confidence in alternative bit coins due to inflation. Of course, it would also be possible for one of these alternative Bitcoins to emerge as the best alternative – and for all investors to shift their money, i.e. concentrate on this one alternative. Then the original Bitcoin would probably go under and it would be replaced by an alternative Bitcoin.

Ethereum, Ethereum Classic and Ripple

Ethereum, Ethereum Classic and Ripple do not see themselves as crypto currencies in the classical sense. The company Ripple Labs (in which Google Ventures, Andreessen Horowitz and other venture capitalists are involved) is trying to set up a payment network and, ultimately, a quasi-private monetary system.

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Although the protocol for this payment network is open source, so that in principle anyone can participate in the development. In principle, however, Ripple Labs retains control here, as can be seen from the fact that the company itself retains half of all generated Ripples (XRP) in order to profit from their possible increase in value. A total of 100 billion XRP currently exist and the current status is not expected to be any more, so mining is not planned.

  • Ethereum on the other hand sees itself as a distributed system that offers a platform for the execution of Smart Contracts and is based on its own, publicly accessible blockchain.
  • The crypto currency ether is actually only used as a means of payment for computing power provided by network participants. At first it looked as if Ethereum could outstrip Bitcoin.
  • Due to an error in the smart contract of a so-called decentralized autonomous organization (The DAO), an unknown hacker managed to render 3.6 million ethers worth around 65 million euros unusable.
  • Finally, the Ethereum community decided to fend off this attack with the help of a hard split. However, there have been two Ethereum blockchains since then. The followers of the original blockchain simply continue these as Ethereum Classic.