What is mining?

What is cryptocurrency mining?

In today’s blog, we are talking about mining and mining. If you are an investor, it is possible that you have not encountered mining, but this process is no less interesting than investing in cryptocurrencies. Indeed.

Mining je the process by which networks of specialized computers generate and release new cryptocurrencies, while verifying new transactions. The mining process involves large, decentralized global computer networks that verify and ensure the validity of blockchain or blockchain. We can also talk about blockhain as a virtual book that documents cryptocurrency transactions.

As a reward to miners for their contributions to the processing power of the global network of computers – miners were rewarded with new crypto coins. This “exchange” somehow secures the network, forming a circle in which:

  • Miners maintain and secure blockchain.
  • blockchain rewards miners with coins,
  • coins as a reward further encourage miners to maintain blockchain.

How can you acquire cryptocurrencies?

There are four primary ways through which you can acquire Bitcoin, but also other cryptocurrencies. You can:
  • Buy at Kriptomat ATM at our two locations in Zagreb
  • Buy on the stock exchange such as Coinbase, Binance, Kraken and the like
  • Receive as payment for goods or services you have sold
  • “Mining” means “mining”
Today we’re talking about the last

Mining on the example of Bitcoin

By 2009, anyone with an average home computer, either a CPU, or a GPU – could participate in the mining process. Today, this is impossible and, more complex, ASIC miners are used. Application-specific integrated circuit). As blockchain has grown over the years , the computing power required to maintain it has also increased proportionately. So it is in October 2019. It took 12 trillion times more computing power to mine a single bitcoin than in 2009. the year when the first blocks were mined. Also, as rewards for miners have decreased – this has called into question the cost-effectiveness of mining for amateurs and hobbyists. All this further resulted in the fact that today almost all mining is in the hands of specialized companies or groups of people who pool their resources. However, there are still miners who mined as natural persons.

How long does it take to mine 1 Bitcoin?

It usually takes approximately 10 minutes to create one bitcoin, and one block is 6.25 btc. The hardware used for mining, greatly affects the speed of mining. Bitcoins are mined on average every 10 minutes. With the increase in computer power, it is certain that miners will find hashes easier. To ensure that Bitcoin and continues to be mined every 10 minutes – the level of difficulty mining must be adjusted, in such a way that if the speed of computer hardware and the number of miners increases, that this does not affect the time it takes to validate new blocks.

Let’s remember Bitcoin Having : There will always be only 21 million bitcoins in circulation. The last block should theoretically be “mined” in 2140. Age. The assumption is that from that point forward, miners will no longer rely on the newly issued bitcoin as a reward, but will instead rely on fees they charge “in return” to carry out transactions

HASH, NONCE, DIFFICULTY

Learning about the mining process, you will surely come across new concepts one of which is indispensable, and that is “hash”.

“Hash” Is an alphanumeric code used to represent a word, message, or data. In the process of mining bitcoin based on the Proof-of-Work consensus mechanism – the valid hash must meet certain criteria – respectively, it must start with a certain string of zeros. Bitcoin is based on a “sha256” hash algorithm that, once executed, is always 64 digits, that is, 256 bits, respectively. What miners are looking for, that is, trying to guess is “nonce” .

“Nonce” is the only piece of information that miners can add, and it looks like a disposable array. Miners enter it, to change the hash output, so that it has a value equal to the mining goal. So we can say that “nonce” is the way to achieve mining goals. The level of difficulty, or “mining difficulty” determines how much minimum zero is required in order for a block to be considered valid. This means that the miners are constantly changing “nonce” until they meet a certain condition, that is, until they reach a certain number of zeros at the beginning of the hash. “Mining difficulties” depends on the global hash rate, that is, on the unit that indicates the strength of the “minner”, that is, how many hashes a pojeid miner can check per second. When global has hrate grows difficulty grows, and this is corrected every 2016 blocks or approximately every two weeks. Likewise, when the global hash rate falls – then the difficulty also falls.

Miners take a block of transactions and a certain amount of data, and as a resultget a certain hash that may look like this: “89s950gdtxa3849tjd7471bcff1e96e53fbcd602c7438a38d8e4257bbe78bddd”

Such a hash is not good because it does not contain a certain number of zeros at the beginning that are necessary in order for a block to be considered valid and to be added to the blockchain.

Here’s an example of a valid hash: “00000000000000002cf16881a7cd5312ec584ca17147f63292544780d10ee”

The process of crypto mining

Specialized computers perform the calculations that are necessary in verifying and recording each new bitcoin transaction. This achieves high blockchain security. Blockchain verification requires a huge amount of computing power, which is voluntarily contributed by miners. Bitcoin mining can be compared with running a large data center.

Miners – were natural, legal entities, buy hardware, and pay for electricity needed for its work, but also for cooling. In order for this to be profitable at all, the value of the coins earned must be higher than the cost of mining these coins.

Miners or miners race to find hash and nonce that match each other. Matching hash and nonceaa is a prerequisite for a block in the chain to become valid. Every computer, or miner, “races” on the network to guess first the 64-digit hexadecimal number known as the “hash”. The faster the computer throws out guesswork, the more likely the miner is to earn a reward. Miner “winner” updates the block chain book (eng. Blockchain ledger) with all the newly confirmed transactions – adding to the chain such a newly confirmed “block” containing all these transactions – and gets a predetermined amount of newly minted bitcoins. On average, this process occurs every ten minutes.

Reducing mining rewards

The reduction of rewards is directly correlated with the process of BitcoinHalving, i.e. halving. In short, the end of 2020. The prize was 6.25 bitcoins, and before that it was twice as high. In 2024. the prize will be reduced by half, and so every four years thereafter. In fact, as the difficulty of mining increases, rewards will decrease until there is no more bitcoin left to mine.

Why is mining important?

In addition to mining “releasing” new crypto coins that then enter circulation, mining is also crucial for the security of Bitcoin, as well as many other cryptocurrencies. This process “checks” and secures blockchain, which further allows:

  • Cryptocurrencies to function as a peer-to-peer decentralized network that has no need for third-party surveillance;
  • Miners to contribute to the blockchain network with their computing power, in exchange for a reward;
  • Miners are the most important to users because they type transactions into the Blockchain network, i.e. they “execute” transactions between senders and recipients of cryptocurrencies.

Is Bitcoin mining legal?

If you’re wondering if Bitcoin mining is legal — the answer is yes, but not everywhere. While in some countries of the world, such as El Salvador, a new “Bitcoin city” is planned to be built, and decisions are being made about the future of geothermal energy-based mining – there are also locations in the world where mining is strictly prohibited. Examples of countries are China, Algeria, Nepal, Russia, Bolivia, Egypt, Morocco, Ecuador and P akistan . In the Republic of Croatia, mining is not prohibited, but also, there is no clear jurisdictional framework. The general position on cryptocurrencies in The Republic of Croatia is such that earnings generated through cryptocurrencies are defined as income. Therefore, although the possession of cryptocurrencies is not taxed, earnings from trading or selling are considered earnings. In other words, if you mine bitcoin and sell capital gains – it will be taxed. If you’re interested in more about cryptocurrency taxes, stop by our previously published blog on this topic.

Announcement of the following blog: We hope you enjoyed today’s topic, and a new topic awaits you next week. In case of questions or topics that you would like to know more about – write to us, either through social networks, or via email. We are excited to prepare an article for next Wednesday.

Until next blog,

Your Kriptomat.hr Team

Ethics and Blockchain

Why is it time to start talking about blockchain ethics?

While Blockchain technology is changing the nature of money and organizations – we are witnessing a global situation that indicates the need that as a society we should start thinking about the positive and negative impacts of new technology, but also work on improving existing regulations.

How does blockchain contribute to improving ethical performance?

Key attributes of blockchain such as

transparency, immutability and trust

 – allow this technology to greatly contribute to countering unethical action. It is precisely the nature of blockchain that implies that we can trust each other, because trust is not a problem here. It is like information – distributed and secured, because it depends on all participants in the blockchain.
Due to all these characteristics, blockhain technology has a promising effect in numerous activities and areas such as finance, property rights, personal data, donations, humanitarian actions. In one of our previous blogs, we told all about blockchain, and singled out several different applications, such as: political elections, health and sciences, buying and selling real estate.

Risk assessment of new technologies

When there is a development of new technologies, as it was in the case of blockchain during the 80s – a risk assessment is needed to set up a lawful and ethical model at the outset. If we want a certain economic benefit to be realized from new technology – it must be usable and applicable. In doing so, it must not violate the laws of the market to which it wants to place itself, and must establish a relationship of trust with users of technology.

All supervisory authorities in the EU have already taken decisions on when such assessments are mandatory. This decision covers all new smart technologies, such as smart devices, smart cities, tracking, GPS devices and the like. In fact, this ensures that risks to fundamental rights and freedoms are anticipated in advance, and that safeguards are incorporated in a timely manner that are necessary to reduce the risks. Such assessments should not be a secret document, but should be made public to ensure the transparency of a particular technology or project.

Ethics and Blockchain - together!

Although the world of cryptocurrencies is often mentioned in the context of fraud, according to academia and scientific institutes – not only does it make sense to discuss “blockchain ethics”, but it is also necessary. If blockchain technology can reasonably be expected to make a significant difference in society, then it deserves its own area of ethics.

How can we positively shape the development of this technology?

At the Cryptoeconomic Systems group summit – a gathering of blockchain developers, economists, financial engineers, lawyers, whose academic disciplines are relevant to technology – an open question for a new academic field focused on many interdisciplinary aspects of blockchain development. The ethics of blockchain could be considered under the category of this.

Recent events that we can refer to, which support the need for and importance of ethics in the context of blockchain:

  • The recent collapse of the FTX exchange and shaken customer confidence;
  • The emergence of different currents within the crypto world, the crypto market;
  • Development of different consensus mechanisms, and different approaches to mining;
  • Cases of hacker attacks and the question of security.
  • Energy consumption and the impact of carbon dioxide on the environment.

Increased awareness of the impact of mining on the environment was triggered by the event in May 2021. One of the most important “opinion-makers” in the crypto industry, Elon Musk decided to withdraw the decision to allow tesla cars to buy with Bitcoin. With this move, he, as well as Tesla, as a company oriented towards sustainable development, positioned himself as a fighter against increasing energy consumption and carbon dioxide emissions. Take a look below at the statement Elon shared on Twitter to publicly communicate his decision.

What followed was bitcoin’s more than $1,000 drop in less than an hour. Furthermore, his message set off an avalanche of countless articles about bitcoin’s environmental impact.

Recently, the situation has changed somewhat from the original statement, when Elon stated that Tesla will continue to accept Bitcoin payments at the moment when mining becomes more sustainable by at least 50%. According to the Bitcoin Mining Council, Bitcoin mining is currently at 58.9% of the sustainability level, relying on sustainable energy sources in that percentage.

Why is Bitcoin mining not environmentally friendly?

Most cryptocurrencies rest on the so-called proof-of-work (PoW) consensus mechanism. This mechanism ensures the security of the blockchain by requiring that all transactions on the network be validated by computers that are part of the network. As a reward for transactions that have been confirmed, the miner receives a reward – which is also his main motivator for mining. Due to the complexity of mathematical operations carried out on hardware, and the constant desire of miners to find the next piece of hardware that will be faster, more powerful and more efficient than the previous one – it has come to the point that today mining processors are used that are several thousand times stronger than those of the first processors of 2009. This also increases the amount of energy required for the process. Given that coal is still the main source of energy globally, it is evident that mining indirectly affects the consumption of non-renewable sources and the increase in CO2 emissions.

How much energy are we talking about?
In fact, it is not at all easy to estimate the exact amount of CO2 emissions caused by Bitcoin mining. The parameters that need to be taken into account are: exactly how much electricity is consumed, how many mining platforms there are in the world, how much coal is needed to produce this amount of electricity, and how much CO2 is produced by burning that coal. However, estimates are not optimistic, with reports estimating that Bitcoin has contributed to emissions of about 40 million kilotons of CO2 over the past two years.

Let’s also look at energy consumption and the environmental impact of a particular cryptocurrency


If we put everything in perspective to better understand the relationships in total consumption, we will see that Bitcoin mining produces more CO2 from:

  • American Airlines – one of the largest airlines globally;
  • Coca-Cola and Nike together.
  • 20 million cars;
  • Total greek spending.

According to other estimates – nearly 50% of Bitcoin’s energy comes from other energy sources that are more sustainable, so these statistics are not entirely accurate.

What's in favor of cryptocurrencies and mining?

From the aforementioned parallels, we have seen that the crypto industry, as well as other industries engaged in the production of commodities, inevitably leave the so-called . “carbon footprint” (eng. Carbon footprint). In comparison, let us ask ourselves what is the impact of traditional financial institutions on the environment: banks, treasuries and funds use millions of computers, telephones, devices and even air conditioners in branches, etc. Who knows how much spending this is about; The world banks are too big a lobby that is not interested in moving to a decentralized monetary system. According to other estimates, the company of another crypto “promoter”- Square, Jack Dorsey, has released a memo stating that Bitcoin will be key to a cleaner future. How are they

solar and wind energy more favorable, it is likely that the miners of the future will switch to these alternative sources, thus contributing to the energy efficiency of mining. In China, the shift could occur to hydropower as the energy of miners given the huge potential of water as a resource in the area of individual regions in China.

Solution to the consumption problem

The solution to the problem of consumption lies in:

  • Moving towards new sources of energy
  • Switching to alternative mining methods
  • Switching to new cryptocurrencies that are mined differently

With Bitcoin, higher energy consumption occurs due to the “Proof-of-Work” consensus mechanism, which, although the safest and most decentralized , because of the way it works – still consumes the most energy. We can talk about the fact that the Proof of Share (PoS) mechanism to which Ethereum has switched through the process “MERGEA” eliminates this problem because in the PoS approach, miners do not confirm transactions, and the blocks are not mined based on the processing power of the hardware – but on the basis of the amount of coins they own and that they “acquire”.

In other words, the PoS mechanism does not rely on the hadrver you use, but “asks” that you own the cryptocurrency and invest it in a set of stakes. Proportional to how many coins you own – you also get new coins.

There are other more innovative mechanisms such as Proof of Capacity (PoC) and Proof of Space-Time (PoST),and whose environmental footprint is much smaller because they rely on hard drives and storage space. Although they consume significantly less electricity, they are criticized for increased demand and consumption of hard drives, which also poses an environmental problem. These mechanisms are definitely not without flaws, and raise a long line of other issues, but in the context of sustainability – they are much more promising than PoW.

We’ll see what the future holds, but one thing is certain – change is inevitable.

Until the next blog,

Your Kriptomat.hr Team

Difference between Coin and Token

What is the difference between Coin and Token?

Welcome to our today’s blog. After asking the question in the title, let’s see how we would call a coin in Croatian, and how a token. For a crypto token, we would say token, while for coin they would use the word coin or coin. Although at first we all think that there is no difference, we are still wrong. In this blog, we explain how to distinguish a coin from a chip and learn about their different uses.


Terminology: Although many alternately use the terms ‘crypto coin’, ‘crypto token’ and ‘cryptocurrency‘, i.e. in English ‘ crypto coin’, ‘crypto token’, and ‘cryptocurrency’
 – it should be emphasized that it is not the same, but there are technical differences in the way they are made.

Authenticity: While crypto coins are a form of digital currency that is most often native to some blockchain network (e.g., Ether on the Ethereum Blockchain), crypto tokens are digital assets built on an existing blockchain using smart contracts.

Function: Coins for the main purpose have a store of value, but also act as a medium of exchange. Here we see a similarity with traditional fiat currencies which is why crypto coins are also called cryptocurrencies. Tokens, on the other hand, have a number of functions such as representing a physical object, or granting access to the services/features of a platform.

More About Coins And Crypto Coins

A basic example of a coin is Bitcoin, BTC. It is powered by its own eponymous blockchain, and is used to pay transaction fees online. Many blockchain networks have been created from scratch as alternative or improved versions of Bitcoin. Since it is impossible to create a coin without building a new blockchain, we can conclude that this is a rather complex process. In theShort – crypto coin is a form of digital currency that is usually native to its blockchain Miners being on Pow, and earning on the PoS mechanism. Some examples of coins are: Bitcoin (BTC) – PoW, Ether 2.0 (ETHS) – PoS and Ethereum (ETHW) – PoW.

Features of coins

Own blockchain: They do everything on their own blockchain. For example, after Bitcoin split into two blockchains, Bitcoin and Bitcoin Cash, BTC nevertheless remained the original coin of the chain, while a completely separate new coin for the separate chain — BCH — emerged.

It is the independent blockchain that allows the creation of new functions, and offers unique technical solutions. The efficiency and security of the underlying blockchain technology are one of the factors that affect the value of the coin itself.

They function as traditional money: They act as fiat currencies due to their characteristics such as security, quantity limitation, durability, portability and storage of value. Some crypto coins have already been accepted as a medium of exchange for network companies such as:
Microsoft, PayPal, Starbucks, Virgin Airlines and others.

In most blockchain networks, new coins are issued by a process called mining. All network participants who confirm transactions – miners or “miners”, are rewarded with freshly minted coins. At the same time, every time users make transactions online, such as
sending or receiving funds
– they pay an online fee that is further spent on rewards.

Now, before we move on to a crypto token, “take a look” at the extracted cryptocurrencies that qualify as coins:

  • Bitcoin
  • Ethereum
  • BNB
  • Cardano
  • XRP
  • Solana
  • Polkadot
  • Dogecoin
  • TRON
  • Avalanche

What is Crypto Token and how is it created?

A token is a digital unit of value that represents an asset or utility. Tokens, contrary to coins
, do not have their own blockchain
, and are issued independently of existing networks. Also, tokens can’t be done.”miners” in the process of validating crypto transactions. Instead, tokens were forged. The amount of tokens minted varies from token to token, with the number depending on the different conditions set by the issuance project. Tokens are used for a variety of purposes, such as raising funds or accessing certain services. Some tokens may even represent coins on another network. Such tokens are called “wrapped tokens” , and they track the price of the underlying asset. Another very popular type of token among investors is stablecoin – a token that tracks the price of the US dollar. In one of our past blogs, we wrote in
Tether (USDT)
 is the first and most famous stablecoin. Here’s a list of the most famous tokens in the crypto market:

  • Tether
  • 10000000
  • Bitcoin USD
  • Dai
  • Wrapped Bitcoin
  • LEO Token
  • Shiba Inu
  • Lido Staked Ether
  • Chainlink

Tokens are always created on the existing blockchain. In order to create a token, it is not necessary to know how to code – there are already ready-made solutions for generating tokens. This could be compared to creating a website on one of the platforms that is “friendly” to use. However, in order to “build” a token with more advanced features, it is still necessary to be a little more technically shod considering that the process itself requires – the implementation of a smart contract, that is, digital contracts that are executed themselves according to the terms and conditions that are written in the code on the blockchain.

What is a token standard?

The token standard represents a kind of framework in the process of creating tokens. Specifically, it is the standard that defines a smart contract, and thus the features of token features. With different blockchains, we also come across different token standards. The most commonly used blockchain to run tokens is Ethereum, and it comes “bundled” with its standards that have been introduced as
Ethereum Requests for Comments (ERC)
. Let’s look at 3 different types of token standards:

ERC-20

  • Characteristic of fungible tokens in which all tokens are of exactly the same type and value, and are thus interchangeable;
  • Application: elections and voting, payments, and the like;
  • Example: Chainlink is a software platform also known as “oracle,” which in crypto jargon refers to technology that brings real-time data from online sources to blockchain. Its original currency is the Link – ERC20 token on the Ethereum network, and serves as the currency to pay for its operations. Each LINK token is always the same as any other ISSUED LINK token.

ERC-721

  • Characteristic of non-fungible tokens (NfTs), unique and cannot be exchanged for other tokens of the same type.
  • Application: digital collectibles, digital art, creation of access crypto keys, crypto wallets, but also “items” for games (eng. In-game items) such as earth, avatars, tools, armor, etc.
  • Unique property: allow nft to be associated with an image stored on an external server, which allows the token to have a visual representation.

ERC-1155

  • This token standard allows the creation of a number of different types of tokens: interchangeable, irreplaceable, semi-fungible tokens, but also other configurations;
  • Application: Let’s say that the “game developer” wants to design a game in which there are two types of tokens – one that is intended for in-game payments (exchangeable token) and the other that is intended for in-game items (NfTs) – it would be more efficient for him to use the ERC-1155 standard standard, allowing both tokens to be created with just one smart contract. If this standard did not exist, the alternative would be to create two separate treaties with the ERC-20 and ERC-721 standards.

What is the purpose, What are the advantages of the tokens?

Among crypto startups, it is popular to use tokens to raise funds for development. The way startups do this is to go out on the stock market with an initial coin offering (IcO), where they sell them to investors. The tokens sold serve them on new projects as their currency, which gives users access to various features. It is here that the main benefit of the token is “hidden”, which is to avoid the need to create a completely new blockchain, but individual crypto startups can devote themselves to the development of the platform and functionalists, instead of “spending” resources on the development of the public ledger of the new Blockchain (eng. public ledger). In addition to financing crypto projects, another advantage that tokens bring to the crypto world is asset tokenization …. Asset tokenization) because it is precisely tokens that can represent any coins or digital assets in chains of blocks.

How does it work and what types of tokens are there?

Tokens allow users to interactively use a specific platform and services of a project.


Here’s an example
: Brave is a web browser where the BAT token allows users to pay for various marketing services. For example, users can pay for ads with BAT tokens. This ensures that ad publishers and advertisers make money without intermediaries.

There are three types of tokens, and each of them may fall into more than one of the categories listed below. All types of tokens have in common that they can be issued to finance the development of a project, and we classify them into:

  • Security tokens (eng. Security Token) which are essentially a digital and tokenized form of a traditional securities .
  • Capital tokens (eng. Equity Token) that fall under the security but function as a traditional asset of shares, and provide the holder with ownership and voting rights.
  • Utility tokens (Eng. Utility tokens) that allow owners to access an application or specific services of a blockchain-based project. These tokens are usually issued through an initial coin offering (IcO)
  • Payment tokens (eng. Payment tokens used to pay for goods and services.

Let's look at the learned...

COINS VS TOKEN IN SHORT LINES

  • Coins and tokens are often misinterpreted as the same thing.
  • Coins are native to their blockchains.
  • Tokens are created on existing block chains.
  • The functionalities of coins and tokens often overlap.

The main difference is based on purpose and function. Here, the coin is considered a financial asset with the only payment function. As such, it shows most of the following characteristics:


  • Interchangeability
    , which means that one unit is equal to another;

  • Divisibility
    , which means that each unit can be divided into smaller units;

  • Acceptability
     , which means that cryptocurrency is widely accepted as a medium of exchange;

  • Limited supply
    , which means that the total number of units is limited and constant;

  • Uniformity,
    which means that all versions of a given name have the same value;

  • Portability
    , which means that units can be transferred and exchanged;

  • Durability
    , which means that units can be used repeatedly without losing value.

In contrast, tokens have extended functionality that goes beyond money.

We hope that our blog today helped you master the differences between coins and tokens. In the following blog, we talk about downloading Wallet to a smart device.

Until next blog,

Your Kriptomat.hr Team

What is hot and what is cold wallet? How and when to use which?

What do we already know about Crypto Wallets?

When we first wrote about Crypto Wallets, we learned that it was a place to store cryptocurrencies. Those wallets, or crypto wallets that have evolved to date – can be completely digital or physical. Receiving and sending or trading cryptocurrencies are one aspect of a wallet, while proper storage and security keeping of cryptocurrencies are no less important.

In a previous blog post on this topic, we also addressed sad stories about lost hardware, missing passwords, and successful hacking attempts. We emphasize even today – your cryptocurrency must be stored in a way that provides a high level of security, but also, it must fit with your ‘still’ dealing with cryptocurrencies. In what way, at what point and where you will choose to store your cryptocurrencies, are the questions answered by you. It is very likely that you will create and use both. Of course, think carefully about your needs and capabilities, but also about the security levels of the wallet.

How to use Wallet?

Crypto Wallet is a place where you securely store your cryptocurrencies, but also store private keys. Using wallet, you store cryptocurrencies safely, while ensuring their availability for sending and receiving, i.e. trading. Wallets come in many forms, so we have hardware wallets or cold wallets, which look like a USB stick. Also, we have mobile applications or online versions of them, which make the use of cryptocurrencies as simple as buying a credit card online. Wallets like this are found in a completely digital environment, we call them Hot Wallets, and although easy to use, they are questionable security given the Internet connection they rely on when storing and exchanging.

Be that as it may, in order to send or receive cryptocurrencies – you have to connect to the Internet, and rely on a hot wallet. Furthermore, it is your choice whether to move cryptocurrencies back to cold storage after you make transactions, or leave them in a hot wallet.

Let's get to know Hot Wallet in more detail: What's good and what's not?

Good…

  • Allows fast, online, real-time exchanges;
  • Facilitates the transfer of cryptocurrency to crypto exchange where users trade, that is, sell and buy cryptocurrencies;
  • A digital environment for storing cryptocurrencies is safer, from, for example, keeping currencies on exchanges, but still, all items stored in a hot wallet are vulnerable to attack given that public and private keys are connected to the Internet;
  • Very often they are free to use (depends on the provider).

Bad…

  • They are susceptible to hacker attacks making an increased possibility of theft;
  • They depend on a third party, and they do not give you as a user full control over your funds: Namely, most Hot Wallets offered by exchanges do not allow you access to private keys, and you only get a login and password to access your account (despite sharing responsibility for the security of assets)
  • They are subject to property loss: If the exchange or resource you use closes and your funds are not secured, you will lose everything, and the same happens if your wallet is hacked.

Let's get to know Cold Wallet in more detail: What's good and what's not?

Good…

  • Security: You do not entrust your private keys to third parties. The wallet is not connected to the Internet, so it cannot be hacked. It is not recommended to carry it around for safety, and it is advised to store it inside a safe or bank vault. Moreover, you enter the password on your hardware device, not on a personal computer where there is a possibility of hacking. Most Cold Wallets are encrypted with pin protection, and some of them even come with an additional layer of biometric authentication.
  • Recovery: Cold Wallet snails the recovery option, which you set as a user during the initial configuration. A recovery phrase consisting of 112 to 24 words needs to be written down and stored in an equally safe way. The phrase is unique it is generated by the device. When your hardware wallet is lost, damaged, or stolen, you can acquire a new hardware wallet to recover your crypto assets or import your recovery data into a software wallet, and immediately receive your funds back. Warning! The recovery phrase is configured by the device itself. It may not be provided in writing or obtained from third-party sources. For safety reasons, it is advised that it is best to purchase a Cold Wallet device directly from the manufacturer.

Bad…

  • Delays: Even if the transaction itself takes the same, it will take you longer to access the CW device. Moreover, you probably won’t be able to use it in a public place or on the go. Therefore, it is not very suitable for daily traders and fast transactions.
  • High Cost: While many online crypto wallets are available for free or have low fees, cold hardware wallets come at a certain cost, depending on the manufacturer, but on average they cost around $100.
  • Restrictions: CW devices typically do not accept the same number of cryptocurrencies as most popular Hot Wallets. Therefore, if you are buying cryptocurrencies that are not yet very popular, Cold Wallets may not support them.

Food for Thought: Hot or Cold?

We have learned – both Hot and Cold Wallets have their advantages and disadvantages, which also makes them more or less suitable for a particular application.

For example, Cold Wallets are not a suitable variant for daily traders, since they require: additional steps and time, and active trading in an environment where prices fluctuate minute by minute. Moreover, it can have a profound negative effect on your gains.

Despite this, due to the level of security they provide, Cold Wallets are an indispensable choice for HODLers, long-term investors and all those who own large amounts of cryptocurrencies. Even exchanges that provide Users with Hot Wallet options use cold storage to hold most of their clients’ funds.

Hot Wallets, on the other hand, are very practical. They have intuitive Krisnic interfaces, sync across multiple platforms and make your life easier. We can’t say they’re completely insecure because there are multiple layers of protection to keep your funds safe, but still – it’s Hot Wallets that are the first target of hackers.

Specifically, crypto crime reached $4.5 billion globally in 2019. That year, a record number of twelve crypto exchanges were hacked. In total, cryptocurrencies worth nearly $293 million and 510,000 user logins were stolen from crypto exchanges in 2019. While losses from cryptocurrency theft, hacking and fraud were reduced in 2020, hackers have begun investigating new targets, such as the hot “decentralized finance” sector. What we know for sure is that scammers never relax, and that you as a crypto trader should not neglect the security of your assets. Therefore, keeping large amounts of cryptocurrency in Hot Wallet for a long time is, to say the least – reckless.

Overall, it’s quite common for cryptocurrency owners to have both hot and cold wallets, but for different purposes. The best strategy is to keep the cryptocurrency intended for long-term storage in Cold Wallet, and transfer the amount required for active trading to Hot Wallet.

If you’re interested in rare, unusual coins, you may be disappointed that trusted cold wallet providers don’t support as many cryptocurrencies as online alternatives. In this case, hot wallets will become your only option. What is important is to choose those Hot Wallets that offer at least some insurance or additional security measures, which can help protect your crypto assets in a digitated environment.

We hope we have successfully guided you through the story of Crypto Wallets, but in case of additional questions – you can always contact us via email or find us on Instagram!

Until the next blog,

Kriptomat.hr Tim

Public vs. Private Crypto Keys: What’s the Difference?

Public vs. Private Crypto Keys: What's the Difference?

Although in the world of cryptocurrencies, there is a lot of technological jargon to study – it is always worth getting acquainted with the terms. If you own any type of cryptocurrency, you’ve probably heard of public and private keys. They are fundamental to the functioning of cryptocurrency and ensure that your funds are protected. But how do public and private keys actually work? Throughout this blog post, we will highlight the differences and clarify the importance of crypto keys whether public or private.

What does Blockchain mean for private and public keys?

The way Blockchain technology is scolded is based on cryptography – that is, encrypting user addresses, as well as other information using sophisticated computer operations. Cryptography is a key security factor that guarantees the security of crypto transactions. That’s why these digital assets are called cryptocurrencies. Your approach to blockchain is based on a special system that we categorize as public key cryptography.

Access to Wallet, and the funds contained on it, begins with a public key, that is, with a long series of numbers and letters that serve as your account number when interacting with the blockchain. Data that only you see is encrypted with your public key before it is published in the blockchain. In order to send you funds on the blockchain, senders use your private address – that is, a shorter series of numbers and letters derived from your public key.

Bitcoin vs. Ethereum keys

Bitcoin uses 256-bit private keys, while Ethereum uses private keys of 64 hexadecimal characters. Despite the differences between private keys in different blockchain protocols, what is common is that each private key is formed in a process known as public key cryptography (Public Key). Public key cryptography). As the name suggests, this process also forms public keys.

As both Bitcoin and Ethereum use the same elliptical curve in the process, the same pair of private/public keys can be used in the case of both.cryptocurrencies. However, the steps to convert the public key to address vary for Bitcoin and Ethereum.

What is a private key?

Your private key is about the most valuable piece of information you’ll ever get. It functions as a code and is required to carry out crypto transactions using your funds. It is effectively used to “sign” each transaction to confirm that you have approved it as a user. You should never share your private key with anyone because it gives you direct access to your cryptography. We can compare it to a password that gives access to your personal account. The private key works by decoding information that’s meant for you that’s published on the blockchain. In doing so, you are given access to data and crypto funds. In other words, a private key gives you access to your assets on the blockchain.

One of the reasons that contributes to the security of the private key is that there are so many possible combinations of numbers and letters. In fact, there are combinations of 2. to 256. degrees, or about 1.16 x 10^77. By comparison, astrophysicists believe that there are about 10^80 atoms in the entire universe. Mathematicians estimate that it would take about 325,000,000,000,000,000,000,000,000,000 years to guess a single private key by trial and error. Based on these estimates, breaking the private key seems like a mission impossible.

What is the initial phrase aka seed phrase?

The initial phrase comes in the form of 12 or 24 words that are essentially a representation of a long series of random numbers. However, we as users, do not see this string of digits, but see a version that is far easier to write down and remember.

Where is the starting phrase? If you use a software wallet, you may be asked to physically back up the initial phrase. Different wallets and wallet types have different backup processes.

This is what “path” looks like from a seed phrase to a public address:

Private key at Trust Wallet

We’ll show you what a private key looks like on the example of Trust Wallet, which is usually one of the hot multi-coin wallets that depend on the Internet, and are thus less secure than cold wallets that work offline. Trust Wallet supports a large number of cryptocurrencies from various blockhains – including Bitcoin, Ethereum, Binance Coin, Litecoin, XRP and others. Read more about crypto wallets in one of our previous blogs. The private key comes in the form of a random alphanumeric string of characters and can vary depending on the type of cryptocurrency for which it is used. When creating a private key, you are advised to always manually back up your wallet. Specifically, your recovery phrase or private key is encrypted on your device, but the best way to back up your wallet is to manually write down your recovery phrase or private key. Then no online service can capture information about your wallet. With Trust Wallet, as well as other hot wallets, they state that they have no record of your recovery phrase or private key, and that it is therefore extremely important to back up your multi-coin wallet. On the pages of the Trust Wallet community, read how to get a recovery phrase, but in general, your phrase serves you for recovery and is the key to your wallet. Remember, if you lose your recovery phrase, you’ll lose access to your wallet. Trust Wallet, as well as other crypto wallets can be downloaded or downloaded online, in Google Play or App Store depending on whether you are using an Android or Apple smart device.

What is a public key?

Unlike a private key, a public key can be viewed or shared by any user on a particular blockchain. Like a private key, a public key is also a long string of random characters and is unique to you and your property. Because public keys are so long, they are shortened to wallet addresses for faster transactions . A private key is an attempt to imagine a kind of password, and a public key as an email address or bank account number. Both keys serve to identify you or the account you own. Sharing your public key doesn’t put your crypto at risk because there’s no way it can be used to access or move your funds. Although public and private keys are used for different purposes, they are very closely related. In fact, the public key generates a private key and will always be paired with each other. But as we have stated before, it is almost impossible to retrieve someone’s private key from the public key. If someone tried, it would take billions of years to succeed. In general, with public key cryptography – public keys are encrypted and private keys decrypted – so no funds can be stolen using only the public key. Because of this, public keys do not need to be protected, but private keys absolutely must. Without public and private keys, conducting cryptocurrency transactions would be a less secure process. Without insight into who is moving funds from place to place and without a level of public key cryptography protection – there would be a lot more room for hacking.

Storage

Most cryptocurrency owners choose to store their private keys in their wallet, and today you can choose from a large number of available crypto wallets. Of course, each of them has its pros and cons. If you are one of the crypto investors who chooses to store your private key physically, without relying on the Internet – it is important that you “keep” it as safe as possible. However, there are also cases where your private key is “held” by a third party. If you are a custodial crypto wallet user, your private keys are held by the wallet provider. While some crypto users prefer this type of wallet for convenience, others prefer to “keep” their private keys to themselves. Namely, custodial wallets can pose a security risk, but they are necessary to carry out transactions.

Crypto capsules as a safe option

Crypto capsules are tools for security backup when offline storage of private keys, passwords, as well as wallet recovery schemes. We could say that the capsule is a safe for virtual valuables, and does not depend on the thread of one third party. In capsules, there is an element of engraving, which is the most proven and reliable method of storing information invented to date. Engraving achieves maximum longevity as codes and passwords are assembled manually from a partially random set of supplied circuit boards. Once the desired string is locked into any Cryptosteel unit, it essentially acquires the status of offline durability, and becomes resistant to physical damage, including fire, flood, corrosive conditions, accidents.

Now you know all about the difference between a private and a public crypto key, but also about the importance of keys to the security of your cryptocurrencies. In the following blog we talk about hot and cold wallet, and how and when to use which.

Until the next blog,

Your Kriptomat.hr team!

Tether

Tether - the first and most famous stablecoin

Tether (USDT) is the first and most famous stablecoin in the crypto world. Other stablecoins include True USD (TUSD), Paxos Standard (PAX), and USD Coin (USDC). Tether tokens are assets that move through the blockchain as easily as other cryptocurrencies, and we call them stablecoins because they offer price stability, and are pegged to fiat currency(s). This offers crypto traders as well as funds a solution that provides a lower level of volatility while trading within the crypto market.

Tether is pegged to the US dollar, and as stated on its official website – “it is 100% supported with its own reserves”. In general, Tether, as a transparent society, regularly publishes records of current reserve assets on its pages. This stablecoin is owned by iFinex – a Hong Kong-registered company that also owns the crypto exchange BitFinex. Tether was launched under the name RealCoin in July 2014, then rebranded as Tether in November 2014, and began trading in February 2015. Although originally based on the Bitcoin blockchain, Tether now supports more than one protocol, such as: Bitcoin’s Omni and Liquid protocol, but also Ethereum, TRON, EOS, Algorand, Solana, OMG Network and Bitcoin Cash (SLP) blockchain protocols. The fact that Tether tokens exist as digital tokens built on different blockchains, creates a prerequisite for issuing Tether tokens on different blockchains with different capabilities depending on the transport protocol used.

Popularity and release of Tether

Due to their priorode – Tether tokens allow users to make transactions across different blockchains – without the inherent volatility and complexity commonly associated with digital tokens. That’s why Tether tokens have grown in popularity in recent years, with a market capitalization of over $77 billion (as of December 2021). As of May 2022. Tether becomes the third largest cryptocurrency after Bitcoin (BTC) and Ethereum (ETH), and the largest stable cryptocurrency with a market capitalization of nearly $83 billion.

Apart

  • According to the total trading volume, Tether is the number one cryptocurrency (the total volume is higher than trading Bitcoin and Ethereum combined);
  • Tether (USDT) is a. a stablecoin or tiga stablecoin that strives for a stable valuation;
  • Tether is used by investors who want to avoid cryptocurrency volatility, while still “holding” funds within the crypto system;
  • Tether’s creator paid in 2021. In 2001, he was fined nearly $60 million to settle for two regulatory investigations alleging he mismanaged and misrepresented his reserves.

Understanding stablecoins

Tether belongs to a fast-growing type of cryptocurrency. Crypto breed) which we call stablecoins. The goal of such currencies is to keep the price of their tokens stable, so they most often tie it to the price of a traditional fiat currency such as the US dollar. Note, Tether also issues tokens pegged to the euro, offshore Chinese yuan, and gold; But mostly – Tether crypto the stability of its USDT tokens is tied to the US dollar. Pegging to a traditional currency, often backed by collateral reserves consisting entirely or mostly of a tied currency – aims to ensure that stablecryptocurrencies are not as susceptible to price volatility as more speculative cryptocurrencies like Bitcoin. To be as transparent as possible about its stability, Tether updates the breakdown of its reserves on its website daily. From 12. [Getty Images] he reported assets of US$81.3 billion for Tether. On the same date, Tether reported holding:

  • 83.74% of its reserves in cash, cash equivalents, short-term deposits, and commercial papers;
  • 4.61% in corporate bonds;
  • 5.27% in secured loans to unrelated entities;
  • 6.38% in other investments including digital tokens.

How does the perception of cryptocurrency stability affect usage?

Stable value promotes the use of stablecoin as a medium of exchange that is almost as certain as conventional money. As noted above,stablecoins.have definitely contributed to less risky investments in the cryptocurrency markets. Their rapid growth in popularity stemmed from the fact that stablecoins are also used by decentralized (DeFi) lending and staking protocols in May 2022. The price of Tether briefly fell to just $0.96, after the value of another stablecoin – TerraUSD ( UST ), whose issuer is not related to Tether, nor to BitFinex, also fell. But the price of the Tether token soon returned to over $0.99, and Tether stated that it continues to meet redemption requirements that are 12. May reached 2 billion tokens at a ratio of 1:1 to the US dollar.

Why is Tether useful?

Tether is extremely useful because it helps investors move their funds between the cryptocurrency market and the traditional financial market, while reducing volatility precisely because of its attachment to the US dollar.

How did Tether “fare” during the FTX collapse?

Tether’s USDT token – or the largest stabilcoin by market value, lost its firm attachment to the dollar as market volatility continued to harass the crypto sector after the FTX collapse. Tether dropped 4% to about 96 cents. The issuer also tried to freeze a bunch of USDT tokens, which could be affected by an active law enforcement investigation. The reserve, worth roughly $46 million, was in an FTX-owned crypto wallet. A Tether spokesman declined to comment on specifics, but noted that the company openly cooperates and communicates with authorities, including the U.S. Department of Justice. Be that as it may, the FTX scandal isn’t the only blow Tehther has “survived.” Let’s also not forget about the Terra collapse, after which the amount of funds deposited in Tether recovered, as the volatility of cryptocurrency decreased. In addition to the decline in the value of Tehther as a stablecoin, the value of the largest cryptocurrencies is also currently falling. Thus, during November, Bitcoin fell by about 17%, while Ether fell by 19.3%. On this day, Tether’s value is very close to 1 US dollar, and you can track the movement of values in real time online. Paolo Ardoino, Tether’s chief technology officer, recently said on his Twitter account that the company has processed about $700 million in ransom demands in the past 24 hours. This fact definitely favors the long-term stability of Tether.

How is Tether as a stablecoin different from Bitcoin?

As we have already explained, stablecoin is a cryptocurrency that aims to maintain an unchanged price. Bitcoin, on the other hand, is the world’s largest cryptocurrency whose value is variable in nature. The concept of stablecoins was introduced only to reduce the volatility effect of Bitcoin and other cryptocurrencies, and to raise the level of uncertainty when investing in crypto. Bitcoin is one of the most popular cryptocurrencies whose price rises and falls in a short period of time – which is why traders are waiting for the right time to exchange their Bitcoins. Stablecoins whose value is only equal to any fiat currency, help exchange cryptocurrencies such as Bitcoin, and generally stabilize the volatile crypto market.

How is Tehter as a stablecoin different from Bitcoin?

As we have already explained, stablecoin is a cryptocurrency that aims to maintain an unchanged price. Bitcoin, on the other hand, is the world’s largest cryptocurrency whose value is variable in nature. The concept of stablecoins was introduced only to reduce the volatility effect of Bitcoin and other cryptocurrencies, and to raise the level of uncertainty when investing in crypto. Bitcoin is one of the most popular cryptocurrencies whose price rises and falls in a short period of time – which is why traders are waiting for the right time to exchange their Bitcoins. Stablecoins whose value is only equal to any fiat currency, help exchange cryptocurrencies such as Bitcoin, and generally stabilize the volatile crypto market.

How and where can you buy Tether?

Tether tokens can be bought and sold on cryptocurrency exchanges including Binance, CoinSpot, Bitfinex and Kraken, but you can also buy/sell it with us – at two kriptomat locations in Zagreb. Check out all the details of our currently available locations here. On our web you can also find instructions on how to use kriptomat, and if you get stuck somewhere – contact us directly via Instagram. To make it easier for you, we have prepared separate instructions for buying as well as for selling all available cryptocurrencies through kriptomat. Go into your crypto story and remember – don’t be distracted!

Until the next crypto blog,

Your Kriptomat.hr Team

Bitcoin Halving

How does Bitcoin Halving work?

The last halving of bitcoin took place on 11 May. May 2020, with the next one expected in 2024. – but what exactly is halving, how do we translate it into Croatian, how does it affect the price of cryptocurrency and what does it mean for miners? Find out in our new blog. Bitcoin halving, or as they would say in Croatia – the “halving” of bitcoin, is the name for one of the most important events in the history of Bitcoin.

In May 2020. The number of bitcoins (BTC) going into circulation every 10 minutes – known as block rewards, fell by half – from 12.5 to 6.25. Halving occurs repetitively every 210,000 blocks, which is approximately every four years, and before 2020. – happened twice. As the expected growth in value is associated with bitcoin halving, this event is closely monitored and awaited. Namely, halving reduces the number of new bitcoins entering circulation, while demand, in theory – remains the same. In the long run, this affects the growth of the value of bitcoin.

Halving in a couple of points

  • New bitcoins enter circulation as rewards for blocks, produced by the efforts of “miners” who use electronic equipment to earn or “mine” them;
  • Approximately every four years, the total number of bitcoins miners can potentially win halves;
    2009. the system rewarded successful miners with a reward of 50 bitcoins every 10 minutes;
  • Three halves later, the reward dropped to 6.25 bitcoins paid out every 10 minutes;
  • The process will end when the number of bitcoins in circulation reaches 21 million;
  • It is a popular estimate that this will happen somewhere around 2140. (Various sources ï¿1/2 12/12/ 03/ 03/ 03) halving.

What is expected from the next halving?

There are many predictions about how the next halving will affect the value of this cryptocurrency. It depends on the halving itself, but also on the response of the market. According to the co-founder of PoWx – a non-profit crypto research organization – there will be fewer bitcoins available for purchase, in case miners have less to sell. Certainly, the periodic decline in the bitcoin minting rate (eng. Minting rate) could have a deeper significance for the functioning of this cryptocurrency – except for the short-term price increase. We must not forget that the blockchain reward is an important component of Bitcoin, and has the role of maintaining the security of this system without a central leader. As the award decreases in the coming decades, this will inevitably affect the functioning of the reward process itself.

How will halving affect the price of bitcoin?

The halving of bitcoin attracts so much attention mainly because many believe it will lead to an increase in price. The truth is that basically no one knows what’s really going to happen.

Bitcoin has seen three halves so far:

The 2012 halving showed how markets would respond to Nakamoto’s supply schedule. Until then, the Bitcoin community didn’t know how a sharp drop in rewards would affect the network. As it turned out then – the price began to rise shortly after the halving. The second halving of 2016 was expected, live was followed, and Blockchain.com introduced a “countdown” as well. Each halving has fueled strong speculation about how the event will affect the price of bitcoin. Day 16 July 2016, the day of the second halving, the price fell 10 percent to $610 but then returned to pre-halving levels. Although the impact of halving on the price was initially small – the market at the end of the year still showed reactions caused by the second halving. Some argue that the resulting increase in the value of bitcoin is actually a delayed result. Delayed effect of halving. The basic premise is that when bitcoin supply declines, the demand for bitcoin remains the same, pushing the price upwards. If we look at the price of bitcoin 365 days after the second halving, we can see that it has risen by 284%. If we look back at the latest halving, we can also see that the price of bitcoin continued to rise throughout the year, but this time the increase was of over 559%.

Who chose the Bitcoin distribution schedule?

The creators of Bitcoin under the pseudonym Satoshi Nakamoto disappeared about a year after Bitcoin was released into the world. Although we are talking in the plural, it is possible that it was also about the individual. Today, the creator or creators are not there to explain why they chose this formula for adding new bitcoins to circulation, but the first e-mails sent by the Nakamoto group, still reveal something to us. Shortly after the publication of Bitcoin’s “White Paper,” Nakamoto summarized the different ways in which their monetary policy could take place, that is, the schedule by which miners receive rewards for blocks. During development, they took into account the circumstances in which their policy could lead to deflation (when the purchasing power of the currency increases) or inflation (when the prices of goods and services that can be purchased with currency rise).

Either way – Nakamoto couldn’t have guessed then how many people would start using the new digital money. Also, there was a chance that no one would start using it. Of the overall communication, it is very little worked out why they chose the formula they chose, but we know this with certainty: “Coins somehow have to be initially distributed, and a constant rate seems like the best formula” – Satoshi Nakamoto.

Why do miners get rewards?

Bitcoin could not function without block rewards. As pseudonymous independent researcher Hasu said, there are prerequisites for the functioning of Bitcoin. The prerequisites deal with possession and answer the question – “who owns what and when?”, and are solved by cryptography. Only the owner of a private key, which is like a secret access code, can spend bitcoin. Without block rewards, the bitcoin network would be a mess. Hasu explains that if they had enough computing power, miners could attack the network in two ways:

  • double spending of coins;
  • stopping the transaction.

But what strongly encourages them not to try either because they would then risk their block of reward.

In other words, miners will lose money if they don’t follow the rules. The more computing power miners direct towardBitcoin, the harder it is to attack the network because an attacker would need to have a significant portion of this processing power, known as a hashrate, to carry out such an attack. The more money they can make through block rewards, the more mining power goes to Bitcoin, and thus the network itself is more protected.

What happens when the reward block becomes small or disappears?

Given that miners need an incentive to participate fairly in the network, periodic reward reductions could become a problem. Transaction fees, which users pay every time they send a transaction, are a potentially alternative way for miners to make money. Theoretically, these fees are an option, although in practice transactions without them could wait a long time for processing, in case the network is congested. The size of the fee is set by the user or the wallet software he uses. Fees are expected to become a more important source of compensation for miners as the block of rewards decreases. In a few decades when the reward becomes too small – the transaction fee will become the main compensation to miners. On the other hand, there is also a good chance that transaction fees will not be a sufficient reward. This means that transactions may have to become more expensive over time for the network to be secure.

Traditional currencies and central banks

In most state currencies, the central bank, such as the U.S. Federal Reserve, has tools at its disposal that allow it to add or remove dollars from circulation. If the economy is down, the Fed can increase circulation and encourage lending by buying securities from banks. Alternatively, if the Fed wants to reduce the amount of dollars in circulation – it can sell securities from its account. Good or bad, bitcoin is a little different from traditional currencies. For one thing – the supply schedule is almost carved in stone. Unlike the monetary policy of government currencies, which takes place through political processes and human institutions – bitcoin’s monetary policy is written in code shared across the network. The change would require tremendous coordination and agreement in the Bitcoin user community. Unlike most national currencies familiar to us like the dollar or the euro, bitcoin is designed with a fixed supply and predictable inflation schedule. There will always be only 21 million bitcoins. This predetermined number makes them rare, and it is this shortage along with their usefulness that greatly affects their market value.

Another uniqueness of Bitcoin

Bitcoin is programmed in such a way that the reward for the block decreases over time. This is another aspect in which Bitcoin deviates from the norm of centralized financial systems in which central banks control the money supply. Unlike Bitcoin’s reward for a halved block, the dollar’s offering has roughly tripled since 2000. The Nakamoto group hinted that Bitcoin was created for political reasons because of a controversial statement that reads like a headline from “The Times” magazine. It is thought that bitcoin, if widely and long-term accepted – could potentially reduce the power of banks and governments over monetary policy. In Bitcoin’s system, it is impossible to create central monopolistic power.

You want to know more?

If you want to know more about Bitcoin, read our blog about:

For any questions, we are at your disposal. Send dm on instagram or email.

If you visit one of our cryptomat devices, don’t be distracted. Look at the instructions on the Kriptomat.hr, and if you get stuck somewhere count on our help.

Until the next blog,

Your Kriptomat.hr Team

FTX stock market crash

Ftx stock market crash: What happened and how to protect yourself as a user?

Just when we thought it was the end of surprises we were witnessing the craziest days in the crypt in years. After the crypto market withstood interest rate hikes, we were all hoping for a rise in the value of cryptocurrencies. The reason for this is that this market somehow always reacts differently from other markets – both to economic and energy crises. However, then all the events in the market, in which we classify the constant Twitter debates between the largest players in the crypto world – resulted in one of the most significant events in the history of cryptocurrencies, and that is the collapse of the FTX exchange due to its decrease in liquidity.

What does a liquidity crisis really mean?

This means that the FTX exchange is no longer able to return the cryptocurrencies that users hold on that exchange because FTX has somehow run out of them. It seems that FTX and Alameda Research traded cryptocurrencies of users deposited on the exchange, and that due to these actions and a number of other financial irregularities – Binance refused the originalintended purchase of FTX. If this is proven correct FTX CEO Sam Bankman Fried will have to be held legally accountable, and there is currently an ongoing investigation into the Bahamas.The FTT token, which FTX has used as collateral in many loans – has seen a drop of over 70% in the last few days. The FTT token was attempted to be defended with $22 support on that token, but given that it was “breached” – it’s doubtful what will happen next, but it’s likely to get to zero. It’s currently worth less than $2.

Here are some of binance’s CEO statements, the “cz_binance” that preceded ftx’s bankruptcy:

CZ has publicly stated that it has been instructed by the mistakes that Binance has so far paid dearly in the case of the CRYPTOCURRENCY LUNA – made the decision to “release” the FTT cryptocurrency that he received as compensation for cooperation with the FTX exchange. As a reason for this move, he stated that he did not want to support those who lobby against others in the crypto industry, alluding to the CLOSE association of the FTX CEO with politicians and regulators in America, which Sam Fried turned against the Binance Exchange.

Information section

FtX exchange is one of Binance’s biggest rivals, and along with Coinbase, is the only one that went side by side with the innovative solutions binance is known for. After tweeting, skeptics, investors and FTX exchange users began withdrawing cryptocurrencies and money, not wanting to give in to risk due to the clash of the two biggest players in the market. This has led to major and visible changes in the FTX stock market:

  • FTX stablecoin reserves have fallen to an annual low, i.e. by 91% if we consider the last two weeks;
  • The main wallet of the FTX exchange has an extremely low balance – the wallet had about two billion dollars in various tokens at the beginning of the week, of which more than 50% , or $ 1.1 billion was in the FTT token – the source token of the exchange.
  • The FTX owner had a clear response to Binance’s initial allegations, and sent a message that users don’t have to worry, and that everything is fine with the FTX exchange. Unfortunately, this message has been withdrawn, and is no longer valid because FTX has just continued to sink deeper.
  • Crypto analysts and experts have made an audit of the FTX exchange’s financial data, and have encountered holes as well as insolvent figures. Then there was silence, and FTX stopped withdrawals from their stock exchange. What followed was an unexpected public solicitation of the FTX leader’s help, and from cz itself.
  • In response to the call for help – Binance initially expressed his intention to buy the FTX exchange, and Sam publicly thanked. However- again a coup! Binance nevertheless gave up the purchase, which further influenced the negative perception of FTX in public.

The refusal to buy FTX was followed by a statement by cz on Twitter:

There is speculation about how this whole situation was triggered by Binance to “kill” the FTX exchange as its biggest competitor. According to this theory, the retrospective would look like this:

  • Binance set off a rumor of FTX;
  • Binance became a threat to FTX because they wanted to sell a huge amount of their tokens;
  • Binance intended to buy FTX, its main competitor, to save them from decay, but gave up on that intention.

Traders in the crypto market, frightened by such an explosive and unexpected development, are not sure who to trust in these situations, and doubt the liquidity of other exchanges, given that a fall in FTX can trigger a “domino effect”. The biggest losers according to this development are cryptocurrencies that had a close association with FTX and Alameda Research companies, but also the users of the FTX exchange themselves. As the value of FTT tokens has dropped almost to zero, there is no room for optimism for now. If we consider that Binance only after “peeking” deeper into ftx’s business still decided not to buy the stock market, we can conclude that the situation was really bad.

Current status

FTX – one of the world’s largest cryptocurrency exchange platforms, is in major financial turmoil. At its peak , FTX was valued at $32 billion and on 11/11/2022. the company filed a bankruptcy claim, after rival offshore crypto exchange – Binance, withdrew a contract to buy it, and users withdrew the amount of about $6 billion in funds from FTX. Ftx CEO Sam Freidman stepped down as CEO on Friday after seeing his estimated net worth fall by billions almost overnight, as his cryptocurrency exchange platform is on the verge of collapse. Between 8. and Nov. 9 Sam’s net worth fell to $991.5 million, down about 94% from his estimated $15.2 billion before this event.

What can we learn further?

Never, but never “store” your cryptocurrencies in online exchanges, such as FTX and Binance, no matter how big they are. In other words, never “store” your cryptocurrencies in hot wallets, and certainly not on platforms that don’t give you access to private cryptocurrency keys. Hot Wallett or tiga hot wallet refers to a virtual cryptocurrency wallet that is available online, and facilitates mediating cryptocurrency transactions between owners and customers. A collection of private keys stored in a program connected to the Internet is used to store and send various currencies such as Bitcoin. Instead of storing your cryptocurrencies in a hot wallet, transfer them there only for the purpose of trading, and then, after the work is done – return them to your cold wallet or tiga ledger. Cold wallet, on the other hand, needs online connectivity only at the time of sending and receiving cryptocurrency, and for storage – it works completely offline. One of the main risks of stock exchanges and other centralized financial institutions is precisely that the beneficiary’s funds are not in the hands of users. Because of this – in crisis situations when the stock market runs out of liquidity, those who suffer are users.

Let's recap, what happened in the crypto world?

Here’s a quick look at the events that defined the craziest week in cryptocurrency history. Although we have witnessed a multitude of one-time incidents that have turned the market upside down before – such as the hacking of the Mt. Gox Stock Exchange (2014), Tesla’s $1.5 billion bitcoin purchase or Musk pumping Dogecoin with his Tweets – we never had the opportunity to follow the series of events we just saw, and in just a few days. In the coming days there will be a lot of thinking about what led to the madness, but for now – let’s breathe deeply.

Chronological review of recent events that have shaken the crypto world

2.11.2022.

Data on the key balance sheets of FTX’s sister firm Alameda Research, showed large investments in the FTT token. The data was released by Coinbase, and in doing so, rumors of insolvency and shady dealings between Alameda and FTX were launched.

6.11.2022.

Binance CEO Changpeng “CZ” Zhao said Binance will sell its remaining portion of the FTT token. In response to his statement – Caroline Ellis – CEO of Alameda Research, through a Tweet announcement communicates that Alameda will buy out FTT tokens from Binance at a price of $ 22. With this, the FTT token tried to be defended, but still unsuccessfully given that this value of $22 was “breached”.

8.11.2022.

The price of FTT tokens falls below $22, and Binance publishes a non-binding letter of intent to buy FTX, after thoroughly analyzing FTX’s financial books and loans.

9.11.2022.

After one day, Binance withdraws from buying FTX, and officially withdraws from the FTX contract.

10.11.2022.

FTX CEO declares that Alameda Research – a trading company founded by Sam Bankman-Fried is closing down. At the same time, the bankrupt FTX faces a criminal investigation in the Bahamas: Local regulators have frozen the assets of FTX Digital Markets and all parties involved, calling it a “prudent procedure” to “preserve assets and stabilize the company.” The Bahamas Securities commission also suspended ftx registration and appointed a lawyer to temporarily manage assets. According to the commission, it is true that clients’ assets were mishandled and managed, and that the property was transferred to Alameda Research. Any actions of this kind are potentially illegal.

11.11.2022.

FTX is filing for bankruptcy protection in the U.S.

What if ftx bankruptcy is actually a hack?

Although there has been talk of FTX bankruptcy for days, there is a chance that not everything is as it seemed at first. Given that hundreds of millions of dollars were mysteriously withdrawn from the FTX exchange during Friday’s collapse, suspicions arose that it was actually a hacking incident. Specifically, FTX stated on the same day that it was considering a series of “abnormal” asset transactions. Later analysis showed that more than half a billion were potentially stolen.

Events in favor of the “FTX Hack”

  • Telegram admin announces that FTX has been hacked, that there is malware in the app, and that official websites are infected with a Trojan;
  • Telegram admin announces that it is sending all crypto to cold storage due to bankruptcy, to disable additional losses due to unauthorized transactions;
  • Users of platforms FTX.com and FTX.us suddenly report that they do not have funds in their wallet (note, before all this week’s events, FTX.us guaranteed coverage for its American users);
  • Analysts analyze that the outflow of ETH tokens, Solana and Binance Chain tokens went towards decentralized exchanges such as 1inch.

According to these events, the hacker managed to steal $477 million out of a total of $650 million moved to chain 11. He currently holds $62 million in total assets. Cryptanalyst ZachXBT, shared on Twitter that the recent movement of funds is just a fake of tokens in the chain. He explains that the standard ERC-20 “transfer and transfer from” functions can be modified to allow any arbitrary address to be the sender of the token, as long as it is specified within the smart contract. the smart contract. This further results in the transfer of tokens from a different address from which the transaction was initiated. These tokens can be sent to any address and then sent from that address (to any other address) without the address owner having any control over those tokens. If you open a transaction and see “transfer from” – a different address will be displayed. Analysts call this phenomenon “on-chain spoofing”.

What if it's about the mutual interest of FTX global and FTX. The U.S.?

Another fact is interesting – and that is that hackers managed to drain funds from FTX global and FTX. The US is almost simultaneously, despite the fact that these two entities were completely independent. This further set off rumors that it was actually about internal interests. Given that there is no evidence so far that the private key has been compromised, it is also reasonable to doubt the theory that someone with access to mutually independent FTX exchanges staged everything and transferred funds.

How did all this affect the value of Bitcoin?

Bitcoin (BTC) fell 22% in a seven-day period to 11/14/2022, and analysts are currently struggling to assess how the digital asset market will behave, and what consequences are “threatening” the blockchain industry hit by the FTX scandal. In the short term, it will be painful for crypto traders who have lost their funds held on the FTX exchange, and in the long run, further price volatility in the crypto ecosystem is expected. FTX’s digital assets are likely to be the hardest hit.

We are sure that more new information will come in regarding FTX, and we will try to accompany them. In order to stay at the source of verified and current information from the crypto world, stay with us, follow our posts on Instagram, and regularly read Kriptomat blog. Verified information is important in order to make the right decisions about investing, but also about “keeping” your cryptocurrencies safe. For all questions, suggestions and comments – contact us and follow us on Instagram.

Until the next blog,

Your Kriptomat.hr Team

What is Blockchain?

What is Blockchain?

Blockchain is an ever-growing list of electronic records in real time, with each block containing a timestamp, information about the previous block in the chain, and data . The blockchain architecture is therefore resistant to data changes within the blockchain chain. The first blockchain prototype occurs in the early 1990s when scientist Stuart Haber and physicist W. Scott Stornetta applied cryptographic techniques in the blockchain chain to protect digital data and documents from potential abuses. This event further inspired many other developers and cryptographic enthusiasts, which eventually led to the creation of Bitcoin as the first decentralized digital “cash” system or simply – the first cryptocurrency. BItcoin’s “White Paper” was published in 2008. under the pseudonym Satoshi Nakamoto. The Bitcoin protocol, which has an immutable, distributed blockchain at its core – has since continued to inspire others to develop numerous other cryptocurrencies and tokens that are based on blockchain.

Blockchain technology

Blockchain technology is older than Bitcoin – it is a fundamental component of most cryptocurrency networks that acts as a decentralized, distributed and public digital ledger that permanently records all previously confirmed transactions in the blockchain. Transactions on the blockchain take place within a “peer-to-peer” network of globally distributed computers. Each computer represents a “node” in the network. “nodes” ) containing a copy of the blockchain, and contributing to the functioning and security of the entire network. This technology is called distributed ledger technology (DLT). Based on The DLT type of technology – Bitcoin is the first decentralized digital currency that does not require third-party mediation in order for transactions to take place. More about You can read Bitcoin on our blog, which guides you in detail through everything about this cryptocurrency, and explains its consensus mechanism in more detail. Also, on one of our previously published blogs, you can learn all about the differences between bitcoin and gold.

Designed to be resistant to modifications and fraud such as double spending, blockchain today enables instant transactions in minutes anywhere in the world. The data that is stored in most cases on the blockchain network is precisely the transactions of selling and buying cryptocurrencies, and we can say that the blockchain functions like a “digital ledger” that contains all the essential information about transactions such as participants, amounts, success. With bitcoin, we are talking about the so-called “Proof-of-Work” consensus mechanism, which is exactly what allows Bitcoin that its blockchain can continuously operate as a distributed network, even if some of the participants show unfairness or inefficient functionality. The algorithm on which consensus is based is important for the mining process of Bitcoin.

Blockchain Technology – Distributed ledger technology (DLT) Although it is designed to work as a distributed digital ledger on decentralized systems – blockchain can also be placed on centralized systems to ensure data integrity and kst to all users.

How does it work?

Let’s take Hansel and Gretel as an example and imagine that a transaction is taking place between them. For starters, Ivica buys from Marica a certain amount of bitcoin or some other cryptocurrency. After the transaction has been executed and confirmed – all the details of this purchase are recorded and added to the list. All lists containing transaction data are stored in one of the blocks in the chain, each of which has its own limit, that is – can not receive an infinite number of lists of transactions. This number depends on the potential of the individual network. When one block is filled, it connects to the previous block, whereby it becomes part of one long, chronologically complex chain. New transactions are further added to the list, which is further stored in the next empty block. Lists are stored in a block in such a way that the data cannot be changed, and that they provide chronological insight into transaction history.

Confirm transactions

The blockchain is powered by a network of computers, which means that every computer that uses blockchain simultaneously acts as its engine. To become part of the network, you need internet access and a computer. All computers, i.e. all participants in the chain, check the details of the transaction to determine if it is valid. One way to check transaki is with the help of explorers that can be tied to only one cryptocurrency, such as in the case of Bitcoin – Blockchain explorer, or for multiple cryptocurrencies – Blockchair explorer. Given that each computer can see transactions from previous blocks, participants can easily determine the validity of new transactions. After the computers approve the transaction, it is stored in the block and added to the chain, after which it can no longer be changed.

The main features of blockchain

  • Transparency: a database that all users of the blockchain network have access to;
  • Decentralization: unlike most other databases where data is stored in folders where it can be added, modified, deleted – Blockchain technology stores data in decentralized blocks, in chronological order;
  • Security: Data in the blockchain cannot be changed, and is cryptographically protected – which guarantees security to all users.

Benefits of Blockhain

Experts around the world consider blockchain technology revolutionary for the world of finance, gaming, entertainment, but also in the development of science. The main advantage of blockchain is the fact that it does not require the involvement of a third party in order for transactions to take place. If you are trading cryptocurrencies, you can invest in crypto without an advisor and without a bank that would process your payment slip per credit or debit card as a central entity in fiat transactions. With blockchain, you don’t need the approval of a bank or financial experts, and transactions can be made in just a few minutes.

In addition to simplicity, the absence of an intermediary also has a financial advantage because no commission is given to a third party, regardless of the number of transactions made. Blockchains are owned but also managed by users who act as a reliable and decentralized peer-to-peer database. Copies of all transactions on the blockchain are stored on a network of distributed nodes. Each transaction is checked before adding it to the block , and security is guaranteed because there is no single failure point in the peer-to-peer network.

With traditional databases, the decline of a centralized storage provider can bring all your data offline, which is not the case with blockchain. Verification takes place in a way that the blockchain uses a consensus mechanism to validate each transaction. After the transaction is confirmed, only then is it added to the data block in the form of a block. In this way, hackers are prevented from inserting false data.

Another advantage of blockchain technology is that it supports the creation of new types of decentralized applications, but also business models. You’ve certainly encountered the term “NFT” (Non fungible token) lately. It is an irreplaceable token, i.e. a cryptographically protected piece of blockchain that is designed to be unique. Its purpose is to preserve value, but also to easily verify, i.e. proof of ownership of other forms of digital or physical assets. Some of the examples are works of art, collectible uniques, and the like. NFTs are often created as irreplaceable and unique records on the ethereum blockchain, based on Ethereum smart contracts, but there are ALSO NFTs on other networks. In addition to irreplaceable tokens, blockchain is the foundation for the development of a whole generation of decentralized innovative applications (ENG). DAO) with wide application in finance, gaming, science.

Given that they do not have existing financial infrastructure, blockchain-based applications, contribute to the financial autonomy of people who are not bank users. According to the survey, as many as 1.7 billion people in the world currently do not have access to banking services. With blockchain technology, the world of financial trading and savings is becoming accessible to anyone with a smartphone and doing so throughout the day, 24/7. If you use blockchain-based apps, you don’t have to wait until morning or Monday for the bank to open, but through your smartphone, you can do everything yourself, without intermediaries because the blockchain network is always ready.

Disadvantages of Blockhain

In addition to all the advantages mentioned, of course – there are also a lot of disadvantages of blockchain. Although this technology has the potential and a wide range of applications, and can support the development of innovative applications and services, we must take into account that it is also very complex and new.

Limited network scalability

Network maintenance and a shortage of skilled engineers make blockchain technology expensive to develop and maintain, and therefore it is still not in the “mainstream” phase of application. Also, the speed of transactions is expected to increase in the future, and it currently amounts to less than 50 transactions per second with Bitcoin and Ethereum. Although the safest due to decentralization, crypto mining based on the “Proof-of-Work” mechanism is extremely harmful to the environment due to the consumption of large amounts of electricity, which is necessary in order to approve and add each block to the chain. Another disadvantage is related to encryption, which is the basis for network security, but if you lose your private key as a user – you also lose access to all your means. There are known cases in which users lost millions because their access to their blockchain account was disabled without a private key.

As blockchain technology matures, experts estimate its adoption will accelerate. Blockchain added value is projected to rise to $176 billion by 2025. Non-financial uses of technology, for example in science, are included in the value.

In what ways is blockchain technology applied?

Science and healthcare

According to PreScout’s report, drug development and supply chain management, clinical research management, and a personalized patient approach are the three areas with the greatest potential for blockchain adoption and expansion. When manufacturing drugs and managing the supply chain – blockchain can be very effective as a security solution. Specifically, origin identification and monitoring of drug development are two key areas that are in the non-blockchain world under the jurisdiction of centralized public health institutions. Here, blockchain can greatly provide security when storing data due to the inability to change records of batches of pharmaceutical ingredients in the manufacturing process. Current processes identifying the origin of the drug and monitoring the supply chain are fragmented due to silos that are created in databases, leaving room for human error, but also malfeasance.

One example of blockchain-health cooperation so far is between the FDA (Government Food and Drugs Administration) and IBM. In this collaboration, blockchain is being applied to identify, track prescription drugs, and distribute vaccines.

As for clinical trials – the benefits of applying blockchain technology – are even greater. As we encounter a large number of participants who include patients/respondents, sponsors, suppliers of medicines and medical devices, examiners, doctors and nurses, and various national regulatory authorities – there is great emphasis on the need for a high level of safety. Sensitive data, including patient health records and clinical trial outcomes, must remain completely private and safe, with the whole process being conducted transparently for all trial participants. Therefore, clinical trials are the perfect terrain for the application of blockchain technology – which allows for data records immutability, scalability, as well as different permission levels for different levels of data access.

The use of blockchain for the purpose of personalized medicine and individual approach to the patient is based on “smart contracts”. Here, smart contracts allow giving consent to manage health data and prescription medicines, manage patient requests, etc. The Prescrypt project, implemented by Deloitte in the Netherlands, uses blockchain technology where drug prescriptions are linked to blocks for secure communication, monitoring of use and analysis by healthcare professionals.

Real estate

Whether it’s property rights, the size and location of the property, the type of land – blockchain technology introduces greater transparency in the real estate industry, but also in transactions between contracting parties. It is estimated that in the future, all properties will be purchased on the blockchain. In fact, real estate blockchain is already becoming increasingly popular as a way for buyers, sellers and investors to communicate with each other. By using distributed ledger technology (DLT), trust is increased through greater transparency, and it is trust in the real estate sector that is imperative. Real estate blockchain also speeds up contract processes, saves time and reduces costs.

Vote

In Croatia, we are currently witnessing a major public debate, but also a much-needed revolution in the voting system. Although the application of blockchain is unlikely to happen soon – the benefits of using blockchain technology to improve transparency in democratic elections are evident. The most commonly mentioned arguments suggest that blockchain application could prevent potential voter fraud, and offer an easy way to count votes.

The Future of Blockchain

Although blockchain-based cryptocurrencies have persistently made headlines in recent years, and many have viewed decentralized finance (DeFi) systems as the ‘Wild West’ in the banking sector blockchain technology continues to evolve, and is finding wider application. The idea of maintaining the status quo in the world we know today is a farce, given that central banks around the world are struggling to develop their own offerings of cryptocurrencies that are pegged to fiat currency, for example the US dollar. Such cryptocurrencies are known as stablecoins that we will tell you about in one of our future blogs.

At the EU level, a bill to introduce a digital euro is being debated, while the USA is leading the way with a regulation on the plan for digital assets in the US, including the possibility of introducing a digital dollar. Also, major global online commerce chains such as Amazon, Alibaba, are sure to see the benefits of introducing blockchain technology, and will start accepting cryptocurrencies as payment for goods and services in order to increase the number of transactions per second. What is not in favor of blockchain is the environmental impact, i.e. excessive energy consumption, which is associated with ensuring a high level of security of all transactions on the blockchain. Combined with the discussion of climate change – this could slow the adoption of blockchain technology in the mainstream world.

We look forward to seeing how things develop further, and by then we hope for less volatility in the cryptocurrency market, as well as growth in value. In the following blogs, we will reveal more about interesting facts related to the development of blockchain technology, but also about other cryptocurrencies based on the blockchain protocol. In addition, we will introduce you to an interesting debate about whether blockhain really consumes so much energy or whether it is just a myth.

Until then, you have material to read, and we are here to answer your questions! Follow us and get back to us on Instagram. We look forward to your comment or inquiry. We may also meet on one of the Kriptomat.hr devices in the city, and discover the currently available locations through our web.

Until the next blog,

Your Kriptomat.hr Team

Bitcoin vs Gold

Bitcoin vs Gold

Every week in our blog, we bring stories from the crypto world, and today we are talking about the differences between gold and Bitcoin. Through the differences, we also explain the advantages of Bitcoin as an option for long-term savings, but also for quick earnings. Well, let’s go!

For starters – You can buy Bitcoin as opposed to gold on Kriptomat – with us, with the lowest commission in Croatia of 4.5%. In addition to Bitcoin, we also have other cryptocurrencies available, such as Ethereum, Litecoin and XRP, whose values on the stock exchange you can follow on our web. Find out which cryptocurrencies you can sell and which you can buy:

Buy: Bitcoin, Ethereum, Litecoin, Ripple, Dogecoin, DAI, Bitcoin Cash;
Sell: Bitcoin, Litecoin;

Bitcoin

Similarities and differences

The main similarity between Bitcoin and gold is that they are limited in their quantity. Gold is one of the rarer metals, and Bitcoin is rare compared to other cryptocurrencies. However, the fundamental difference is in the background factor that affects the limitation. Gold is a natural resource, and thus its limitation in nature is conditioned. Conversely – with Bitcoin, the limit of the amount is artificially generated by encoding in Bitcoin’s source code. In order to remember the differences and similarities between Bitcoin and gold well – “take a look” at our current Instagram post that through infographics in a simple way points out the main differences.

Bitcoin as an option for long-term savings, but also for making a quick profit?

There is no simple answer to this question, but generally speaking – Bitcoin is a better choice for investors who want to make money on a change in value in the short term, but also – Bitcoin is not a bad option when it comes to long-term savings. Namely – “savers” who opt for long-term savings in Bitcoin are exempt from paying taxes on cryptocurrency in their possession, if they own it for more than two years. Unlike gold, Bitcoin varies considerably more in price – that is, it has a much higher volatility than gold. In practice, this means that investing in Bitcoin is generally easier to make a profit, but thus the risk of investing is much higher. In other words, with this type of investment, higher earnings are possible, but a greater loss is also possible. That is why Bitcoin is attractive to those who see the opportunity for quick earnings in the frequent price difference.

Be that as it may, each of the options has both pros and cons, and it’s up to you to assess as much sense as possible in your case – investing in Bitcoin or in gold. That assessment comes down to your goals and investment opportunities. Ask yourself – do you enjoy speculation, or are you focused on long-term savings; What is your risk tolerance, and how much capital you can afford to lose if the market turns.

The good news is that one does not exclude the other, so more and more investors are opting for both Bitcoin and gold. So – compromise is not necessary, and so an increasing number of portfolios contain precious metals in addition to crypto assets. What makes a difference in such hybrid portfolios is the share – which in the case of short-term investors goes in favor of cryptocurrencies, and with long-term oriented savers – it favors gold.

How does strengthening the dollar affect the attractiveness of investing in Bitcoin and gold?

Given the growth of the US dollar lately – Bitcoin and gold are no longer the first choice for investors to protect themselves from inflation. The current turbulence in the world financial markets, the energy crisis and the overall uncertainty – have resulted in a decline in the value of Bitcoin, but also gold.

On the other hand, they unexpectedly contributed to the strengthening of the dollar, which investors turned sharply to. While we’re not financial experts who advise you on investments and savings – if we’re asked – strengthening the dollar seems like an immediate but not long-term trend. Although for Bitcoin 2022. it hasn’t been a great year – it’s important to point out that this world’s largest cryptocurrency still ranks among the best performing assets in five years. Bitcoin has been around since 2017. until July 2022 it recorded an increase of as much as 840%.

Why can't gold keep up with Bitcoin?

As we stated earlier, although due to a similar nature gold and Bitcoin are often compared, the precious metal still has a hard time keeping up with Bitcoin. When Satoshi Nakamoto created Bitcoin, he set a strict limit on the number of Bitcoins that could ever exist. This limitation, known as the hard cap, is encoded in bitcoin’s source code, and directly affects its value. Like gold and real estate investing in Bitcoin is a successful preservation of purchasing power over time. Thanks to halving, it becomes more difficult to produce as every four years the speed of release of new coins gradually decreases. According to estimates, the last bitcoin coins will be mined in 2140. year. Precisely because of this limitation of currency and halving, the long-term value is expected to increase, and therefore it is worth investing in bitcoin.

Contrary to Bitcoin, gold due to its traditional stability is a safe haven for investors. This precious metal has remained stable to this day, and what works in its favor is that no capital gains tax applies to gold. In other words, by buying gold, you preserve the purchasing power of money by protecting it from inflation, and when selling – you do not pay tax on the yield made on the difference in the buying and selling price of gold. However, as we have stated before – bitcoin is also tied to tax-free, if the investor owns the cryptocurrency for more than two years. We are constantly witnessing global turmoil and fears that initially favor gold as investors turn to it as a safe harbor when the market situation stirs. Despite this, after the initial growth, Bitcoin takes away the advantage of gold. While Bitcoin initially responds to each of these rises more vulnerable ly than gold, we note with detachment that Bitcoin has risen by more than 15.5%, as opposed to gold, which has risen by just 1.6% (As of May 2022).

Review of bitcoin's advantages over gold

  • Gold is harder to send, compared to digital currencies;
  • In the case of larger quantities – sending gold requests a third party;
  • Gold quality control is a lot more complicated;
  • The amount of gold as a noble resource found in nature is unknown, while Bitcoin’s current as well as maximum amount in circulation is known;
  • You keep Bitcoin on your hot or cold wallet, which is always available to you – wherever you go; while gold is more difficult to transfer and stored in a vault or bank;
  • Bitcoin is not limited by physical boundaries or location;
  • Due to the digital nature, Bitcoin is easier to store and transfer compared to gold;
  • More and more young investors are choosing digital assets as a means of investing.

Where and how to buy / sell Bitcoin and other cryptocurrencies through Kriptomat?

If you opt for Bitcoin for trading or long-term savings, you can make a purchase at one of Kriptomat’s two locations in Zagreb.

  • CBD Automat Shop La Canntina, Trg Josipa Jurja Strossmayera 8, 10000, Zagreb
  • Avenue Mall, Avenija Dubrovnik 16, 10020 Zagreb

Come and see us.

To ensure the high quality of your customer experience, we use the latest generation of Kriptomat devices that provide you with a secure, fast and quality cryptocurrency exchange service. For amounts less than HRK 15,000.00, you do not need to register with us. All you need is a cell phone number and a crypto wallet. On the other hand, for larger amounts, you need registration with an ID card, a “selfie”, an email address and a mobile number. Learn more about all the steps through our buying and selling instructions.

Whatever your choice – investment, savings, gold, crypto or combination – we keep our fingers crossed, and we hope our article helped you make the right decision. In the next blog, we talk about cryptocurrency taxes in Croatia.

Until the next blog,

Your Kriptomat.hr Team