How will crypto currency affect the world

Bitcoin and Co on the downswing

Once again, what critics warn about again and again: The much hyped digital currencies such as Bitcoin lose massively in value within a very short time. On Friday alone, Bitcoin, the largest cryptocurrency, fell 15 percent. If you look at the course of the whole week, the minus adds up to almost 25 percent. Something similar happens with Ether, Binance, Tether, XRP or Dogecoin. What happened?

The reason for the sell-off appears to be a planned increase in capital gains taxes in the US. According to insiders, US President Joe Biden even wants to double these taxes. For many investors, this is probably a reason to withdraw their capital from Bitcoin and Co. The math is simple - more tax means less return. Some funds had responded to the news with aggressive sales, said Avi Felman, chief trader at cryptocurrency specialist Blocktower.

New money laundering measures?

But other reasons are also sending the controversial digital currency downhill. There are also rumors of the US Treasury Department's tougher pace when it comes to using digital currency for money laundering. Bitcoin and Co are repeatedly suspected of making illegal money transactions possible. The co-inventor of the cryptocurrency Ethereum, Charles Hoskinson, assumes in his video blog that the US government will try to regulate the market this year. "I don't think it will be positive," said Hoskinson. "One advantage, however, would be that, for the first time in history, some clarity would be created for our industry in the USA," says the mathematician.

Some experts also see the reason for the crash in China. After an accident in a coal mine, the government announced stronger safety standards. Various mines then stopped production and coal-fired power plants for the time being, the world reports. The price decline started with it, according to the news portal. The creation of cryptocurrencies (mining) consumes large amounts of energy. Many of these gigantic server parks are located in China.

The bad carbon footprint

It remains to be seen whether this relationship will actually affect the course. According to a recent study, 70 percent of the energy for mining comes from China. The main energy sources are hydrogen and coal, which accounts for 40 percent of energy consumption. Experts and environmental groups therefore repeatedly criticize Bitcoin as a dirty investment. Researchers estimate that the C02 consumption of bitcoins in China in 2024 will be as high as the total consumption of Qatar or the Czech Republic.

Investors are probably less interested in the carbon footprint. Because despite the current price losses, the Bitcoin is still clearly in the medium and long term in the plus. Since the end of 2020, the increase has been 70 percent. If you go back a whole year, the increase is even 500 percent. For some time, however, a shift from Bitcoin to other Internet currencies has been observed among the many cryptocurrencies.

  • How does Bitcoin work?

    Pretty cryptic

    Bitcoin is a cryptocurrency. The means of payment therefore works digitally, without physical coins and notes, and is based on cryptographic processes. Bitcoin is organized on a decentralized basis and does not require banks or central banks. The currency can therefore be used worldwide and across borders under the same conditions and cannot be compared with any previous monetary system.

  • How does Bitcoin work?

    The "father" as a mystery

    In January 2009, open source software for Bitcoin was published under the developer pseudonym Satoshi Nakamoto. A few months earlier, this person or group had first publicly described how the digital currency works in a text.

  • How does Bitcoin work?

    How do you get bitcoins?

    There are different ways to get Bitcoins: You buy them on an internet platform (and pay for them with euros, for example). Or you accept Bitcoin as a means of payment for goods or services that you offer. Or you can become a "miner" and mine for bitcoins yourself.

  • How does Bitcoin work?

    Also digital: without a wallet, everything is nothing

    Cryptocurrencies are stored in a virtual wallet. It contains keys. Only with them can you find out who owns a Bitcoin. You also need them for transactions. A wallet can be saved on a smartphone, a computer, a USB stick, specially secured storage media and in a web cloud. Without a wallet, you have no access to your bitcoins.

  • How does Bitcoin work?

    Hats off to the Kypto currency

    Let's say Mr. X wants to buy a hat from Ms. Y and pay with Bitcoin. Both must have a public key (comparable to an account number) and a private key (comparable to a TAN) for a Bitcoin transaction.

  • How does Bitcoin work?

    Block building blocks

    Ms. Y sends her public key to Mr. X. He confirms with his private key and uses it to request a transaction. This is collected in a block with a few hundred other transactions (hence the term blockchain, but more on that later).

  • How does Bitcoin work?

    Arithmetic servants

    The block is distributed to all computers in the decentralized Bitcoin network. These computers are also called miners. They check the transactions going from one wallet to another and confirm them. In theory, everyone can let their computer work on the network. But now most of the work is done by professional server farms.

  • How does Bitcoin work?

    In the sweat of their graphics cards

    Before the transaction is actually carried out, the miners have to solve cryptographic computing tasks for each block. This requires computing power and strong graphics cards. Mining works like a competition: several miners try to decrypt a block from the blockchain at the same time. Whoever manages this first receives new - that is, "freshly mined" - Bitcoins as payment.

  • How does Bitcoin work?

    A kind of pearl necklace

    The block of Mr. X and Mrs. Y is part of a long chain, the so-called blockchain. All Bitcoin activities are stored in this decentralized database. The blockchain thus serves as the payment book (ledger) of the cryptocurrency: it contains all transactions and wallet information of the parties involved. Although all of this is recorded and visible, users remain anonymous.

  • How does Bitcoin work?

    Mining is done here

    China has by far the largest share of the computing power of the Bitcoin network (hashrate) and thus of its electricity consumption. Other important countries are the USA, Russia, Kazakhstan, Iran and Malaysia, according to the Bitcoin Electricity Consumption Index from the University of Cambridge. Mining is only worthwhile where electricity prices are cheap.

  • How does Bitcoin work?

    Huge hunger for energy

    The energy-intensive process for calculating the Bitcoin transactions (mining) requires around 120 terawatt hours (TWh) per year, according to the Bitcoin Electricity Consumption Index of the University of Cambridge. That is more electricity than any of the blue-colored countries consumes in a year. Graphics: Per Sander Texts: Gudrun Haupt


 

nm / dpa, Die Welt, Nature