How To Manage Cryptocurrencies
Hold on and do nothing?
When Bitcoin picked up speed around 2010, the cryptocurrency was best known to the public as a means of payment. The first platforms and online initiatives accepted the coins in return. From 2012 cafes and bars were added “in real life”. However, it is now clear: Hardly anyone actually uses crypto currencies as a means of payment. The price fluctuations are too high for that. And why should bitcoins go into circulation now if one is hoping that their value will rise tomorrow?
The vast majority of all beginners are not interested in crypto currencies out of ideological conviction. She is still particularly satisfied with the currently available payment methods. For them, cryptocurrencies are simply an investment opportunity. In this respect, the question of the purpose of crypto currencies arises only to a few. That should change in the long term. Because the current mainly speculative value must have a real benefit at some point in order to remain a serious asset class.
Basically everything can be done with Bitcoin & Co. that can be done with money. The difference with cryptocurrencies is that each currency has its own, often very active, community. In addition, there are special forms of cryptocurrencies, such as the initial coin offering.
What is the difference between cryptocurrencies and cash?
In general, cryptocurrencies hardly differ from cash in their application. Anyone who has a mobile wallet can use it to pay on site, exchange money with friends and receive contributions. Only all transactions are seamlessly stored in the blockchain.
Therefore, contrary to popular belief, cryptocurrencies are hardly anonymous. Significantly more crooked transactions (weapons, drugs, etc.) are carried out with cash than with Bitcoin. Often, specific users can even be identified by tracking wallet addresses.
There are a few cryptocurrencies that use new technologies to create complete anonymity for their users. These include Monero and Zcash, among others.
Do you have to pay tax on cryptocurrencies?
In Germany, almost all types of business are subject to sales tax, even if they are in crypto currencies. In addition, there is income tax and withholding tax on profits. These are tax-free as long as the corresponding coins and tokens have been held for more than a year or have been used to purchase other cryptocurrencies.
Pay with cryptocurrencies
In principle, products and services can be paid for in any cryptocurrency. In practical terms, however, you can’t really use Bitcoin & Co. in real life.
Online things look a bit more positive, but here too you have to look very carefully.
Crypto-based credit cards are playing an increasingly important role in regular payment transactions. The principle is based on the fact that the card works in euros or dollars in everyday life, but payments are made from the wallet.
Some crypto initiatives and companies have also started paying salaries and bills in cryptocurrencies. Many freelancers, crypto lawyers and owners of information portals on blockchain ask for donations in crypto currencies, as well as non-profits. If you have coins left over and want to support a good cause, you can certainly contribute to more relevance of cryptocurrencies in this way.
Invest in cryptocurrencies and projects
If a user wants to participate in a certain project, there are several options available to him. If it is purely a matter of “payment transactions”, he will acquire tokens for this purpose or earn them through activities in the respective ecosystem. The acquisition of such stakes can also have an investment background. This is one of the reasons why tokens are freely tradable on many exchanges.
The main route of a token to the user, however, takes place in initial coin offerings. These token distributions usually take place at the beginning of a new project. The consortium programs tokens, issues them to the public against fiat or crypto currencies for a predefined period of time and in return receives funds for further expansion and expansion. Several large projects have become established like Telegram, Augur or EOS.
As soon as the project is consolidated and generating a return, token holders have the chance to get “interest”. Whether and how this takes place is programmed into the respective token. In quite a few cases, however, investors also decide to buy because they are speculating on a strong increase in the value of the token in the future. If that happens, the profits can mainly be realized through the sale. A state guarantee or regulation of such payments does not (yet) exist.
Whether and to what extent an ICO is of interest depends on its cornerstones. Countless portals on the Internet analyze and evaluate ICOs according to previously defined criteria. There are also extensive lists of current and upcoming ICOs. The “big” ICOs also receive considerable media coverage.
Airdrops represent another purchase option. The project consortium distributes tokens free of charge to users, often before an ICO. In return, recipients must share the project on social media, join the project group, or otherwise express their support. There are also information portals on the Internet for this type of output. The value of these free tokens depends heavily on their scarcity and accessibility.
Make money with cryptocurrencies
When the boom hit the crypto community at the end of 2017, there was one message to be read in the media: Those who trade crypto currencies skillfully can get rich. In reality, this does not apply to very few. To trade, you first need extensive knowledge of the subject. In addition, there is the time and resources to watch courses and act quickly. Once that is done, tax aspects and complicated accounting are the last hurdles for the trader.
A quick back and forth seems tempting. For crypto beginners, staying power is usually the better choice. Without government guarantees, investing in Bitcoin is and will remain a risk, especially in the area of short-term investments.
So-called mining was also on everyone’s lips in 2017. Miners hang blocks on the continuous blockchain and receive a consideration of currently 12.5 Bitcoin per block. From the outside it looks simple: get the necessary technology, set up a node, solve puzzles, earn Bitcoin. But that, too, is easier said than done. While Bitcoin was initially based on a computer and later a graphics card, you now need extensive energy resources for mining. So it’s a question of inputs versus outputs.
The activity of the miners is linked to the proof-of-work consensus. In other consensus procedures, such as proof of stake, there is often little or no need for technology. With some cryptocurrencies, the number of coins held alone decides on the selection of the staker. But here, too, basic knowledge is first required in order to establish a node. That excludes a large part of the crypto newbies.
In this respect, the opportunity to earn cryptocurrencies is certainly there. For most of them, it only becomes practical when they have acquired a certain level of knowledge.
Programmers with knowledge of Bitcoin & Co. and their programming languages currently benefit most from cryptocurrencies. Her knowledge is in great demand, especially in the global epicentres of blockchain applications such as Berlin and Zug. For many developers, blockchain opens up a completely new career path. Most of them are active in the numerous crypto communities, often free of charge.
Participate in communities
The “common” user also benefits from being involved in a community. Regardless of whether the grouping is project-related or of a general nature — the mutual support increases the knowledge of the users. Interesting communities can be found on topics related to the numerous blockchain applications, but also in Telegram groups, on Reddit, in forums such as Bitcointalk or at the growing round tables, conferences and events. For example, Meetup lists several groups on cryptocurrencies in Berlin alone.
Those who familiarize themselves with Bitcoin usually quickly come to one or more favorite projects. This is where the commitment is particularly worthwhile, also with regard to current or future earning opportunities.
The proportion of women is very low across all mergers. Only the positions in community management are increasingly being filled by women. In this respect, women are called upon to improve the diversity of voices from the community.
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice. The content of this article is solely the opinions of the writer who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies/commodities/foreign exchange/equity market poses a considerable risk of loss. The speaker does not guarantee any particular outcome.