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If you talk about cryptocurrencies, you can hardly avoid the topic of Bitcoin. As of 20.10.21, Bitcoin (BTC for short) has a market size of around 1 trillion francs (that's more than Facebook) and is the undisputed leader of all cryptocurrencies.
For many, however, the subject is still a book with seven seals, which we would like to open up for you today. We have taken the trouble to simplify technical language and hopefully we have explained Bitcoin in a simple way!
If you have any more questions on the topic, we look forward to an exchange in the comments!
Before we dive into the details, please take a look at the following graphic. Not everything there makes direct sense for Bitcoin newbies, but we will take up the individual topics later.
What is Bitcoin: Bitcoin is a digital currency that is traded between private individuals. No bank or service provider is in the middle, as is the case with our conventional monetary system. This is why Bitcoin is called a decentralized currency. No one can freeze your account, charge interest or impose a withdrawal limit on you.
Who invented Bitcoin? Perhaps this is the most exciting question about Bitcoin. Because the Bitcoin founder naturally has an enormous amount of Bitcoins in his possession. Until today he is known only under the pseudonym Satoshi Nakamoto. His true identity remains uncertain. All that is known is that the person is certainly highly intelligent and is well versed in the world of cryptography. The Bitcoin white paper is open to everyone and therefore absolutely transparent or open source. In 2008 Satoshi put the idea of Bitcoin on paper and brought it to life in 2009. Back then, the value of a Bitcoin was so low that Bitcoin newcomers spent many hundreds of Bitcoins on a pizza. Today these would be incredibly large sums of money.
If you simply explain Bitcoin to make it easier for beginners, there is no getting around the topic of the wallet:
How do you store and secure Bitcoin? Bitcoins are stored in a so-called wallet, a digital purse. There are various forms of wallets. We could write a multi-part article about this, but we would like to give the title Bitcoin simply explained remain faithful. So just a quick word about the wallet:
You should keep the password (also called key) for your wallet in a safe place. It goes without saying that this should not necessarily be on your laptop. Maybe it should be in paper form, or engraved in a piece of metal. (No, this is not a joke. You can find such sets on the net, because such a key is not destroyed in case of fire. Whoever buys 0.0001 BTC today will laugh about it. But if you entered the market around 2010 and are now sitting on a small fortune, you have probably already thought about it.
Bitcoins are limited: Bitcoins are produced by so-called mining. Complex computational tasks are solved by special computers. This is done to such an extent that it is virtually impossible for hackers to attack or manipulate such a network. This brings a high level of security to the Bitcoin system, for which the founder Satoshi Nakamoto is highly respected today. In the Bitcoin founder's white paper, he has limited the maximum number of Bitcoins to 21 million. By the end of 2020, about 18 million BTC will have been produced, which means that all Bitcoins will soon be produced. After that, no more Bitcoins will be able to be put into circulation. Supply and demand regulate the price and there can be no inflation.
In our Fiat money system, as we use it today, the state can print money as it sees fit. We lose about 2-3% of the value of our money annually with inflation. With Bitcoin, there is no such thing. Many therefore refer to Bitcoin as digital gold.
We have explained and demonstrated the functionality of Bitcoin in a simple way, even if the whole topic of block chaining has been left out for the time being. Bitcoin is a topic that we have on the screen for the long term and want to take up again and again. The topic is of course also controversial, because there are very divided opinions about the digital currency.
If you hold cryptocurrencies and are wondering how to easily report them on your tax return, you'll want to check out this Tax Guide found.
You have more questions or suggestions about Bitcoin?
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6 Responses
Take a look at the products of 21shares. There is for example an ETP (ABBA) with which one participates at 84% in Bitcoin and 16% Etherum. For me a great thing
P.S. These products are listed on the CH stock exchange
Hey Richi
ETPs are an exciting topic that we have on our agenda.
What bothers me a bit personally are the high fees of the products you mention. 1.5% to 2.5% per year in ongoing charges....
Personally, I prefer to buy Bitcoin and Ether directly (example) and pay maybe 0.5 - 1% fee at an exchange. once and then hold them for no ongoing annual fee.
Hi there
Maybe you have information on which pension fund in Switzerland- if any - provides bitcoin based pension funds?
I need to transfer my 2nd pillar, and all pension funds' yield is around 0.05%, i am looking for a bitcoin based fund.
Thanks in advance, Joe
Hi Joe
I just read that products from Bank Vontobel around cryptos are used by pension funds often. But don't know which funds are using them at the moment. If I find something, I will let you know!
Rather concise overview, especially about Swissquote: there I have to buy with USD or EUR, so first convert my CHF (which is also not free). Advantage: a very large number of CryptoCurrencies, compared to Mt Pelerin or Relai.
Thanks for the addition Gianni. The article Bitcoin simply also explained should remain simple and brief.
Dear greetings