Original Post – https://email@example.com/the-hunt-for-the-better-bitcoin-9a79f7dac82d
All Credits to Norbert Gehrke
This story was published in the German daily “Der Tagesspiegel” on January 7, and translated here for the benefit of the global community.
Dominik Schiener is a veteran in the cryptocurrency business. For six years , the South Tyrolean has been working with Bitcoin & Co. — and he’s only 21 years old. “I have been stumbling into this,” says Schiener. It started with computer games. As a 14-year-old, he was once the world’s number one-rated player in the popular first-person shooter “Call of Duty”. “But only because I hacked,” laughs Schiener. Still, with the smaller and larger tricks, with which he gained advantage when playing computer games, his entry into the world of computers began. He began using his knowledge and selling virtual games accessories and other things to other players. And the profits he invested in his Bitcoin business, or more specifically, he worked as a kind of Bitcoin accountant.
Because all transactions of the digital currency are verified by users of the network and then stored in the so-called blockchain. This is really just a long chain of data blocks. Every ten minutes a new block is added, saving the last transactions. To generate the block, however, complex arithmetic operations are necessary, which are performed by so-called miners. One of them was Schiener. As a reward, they receive Bitcoins themselves, which are created when mining. “I’ve earned quite a bit of money there,” remembers Schiener. Enough to move to Switzerland in 2013, to the famous “crypto valley” in Zug, where countless digital currency founders have their formal headquarters due to the favorable tax rates and friendly regulatory conditions. There Schiener founded his first start-up and wanted to build a trading platform for cryptocurrencies. Instead, he saw how dynamic the crypto business can be: A year later there was the first crash. “I lost all my money,” remembers Schiener. About half a million Euros was gone as quickly as it had come.
Bitcoin had quintupled its value in three months and at the end of 2013 had risen to the then insane rate of more than USD 1,000. But then it fell again to almost USD 200. And only in early 2017, it managed again to gain the USD 1000 mark, with which began a new, much more extreme rally.
Bitcoin climbed up to USD 20,000 climbed, became the talk of many parties, and made it to the mainstream news. Schiener also benefits from the recent boom. However, he has long left Bitcoin behind. Instead, he moved to Berlin and started to develop his own cryptocurrency called IOTA together with the Norwegian David Sønstebø.
IOTA aims to be “the backbone of an autonomous economy of machines”. “If you want to exploit the potential of the Internet of Things, you have to allow machines to pay each other,” says Schiener. He is not alone with this idea. If in the next few years autonomous vehicles carry passengers, they should pay for fuel or parking by themselves. “If vehicles pay for loading or parking on their own, they need safe technology,” says Johann Jungwirth, Chief Digital Officer at Volkswagen. That is why he met with Schiener, whose solution he called “extremely interesting”. The development is still in its infancy. And yet other big corporations are interested too. Deutsche Telekom, Microsoft, Innogy or Volkswagen are among the companies that are currently watching or experimenting with IOTA. Bosch is also one of the partners, the Stuttgart-based company even bought “a significant amount” of IOTA coins at the end of December and now wants to develop joint projects.
The price of IOTA also rose sharply last year, from less than 20 cents in the summer to sometimes more than five dollars. At times, IOTA was one of the five most valuable cryptocurrencies in the world. Most recently, it was in tenth place with a market capitalization of over ten billion Dollars.
Since there are now more than 1,300 cryptocurrencies, there is lots of competition for Bitcoin . Some of the most promising ones like IOTA or Ethereum are being developed in Berlin. “Berlin is the crypto capital of Europe, if not the world,” says Ethereum developer Fabian Vogelsteller. He sees the latest hype with mixed feelings. Vogelsteller was also surprised by the enormous increase and would have expected a Bitcoin crash much earlier. Therefore many insiders are reluctant to venture forecasts. “I have no idea where it’s going,” says Vogelsteller. From a large, long-lasting crash to a multiple increase over three or four years, everything seems possible. But the price development is also secondary for many protagonists. More important is the development of the still young blockchain technology, which is still at the very beginning. Many compare the current development with the advent of the Internet. In search engines and networks, there were also providers such as Lycos or MySpace until Google and Facebook prevailed. “We are still in the Lycos and MySpace phase for the cryptocurrencies,” says star investor Klaus Hommels, who himself invested early on into Facebook and Skype.
And so many are looking for the new Google and Facebook in the crypto world. Miriam Neubauer in one of them. She is Managing Director of Catena Capital, a newly created Berlin fund investing in startups in the sector. The first two have just moved into a new office in a backyard in the Markgrafenstraße. It is still relatively bare, the wallpaper was just removed in a joint teambuilding exercise. Now, dozens of neon-colored post-its are pinned to it and form the word Cryptotank — the name of the newly opened community office. “Cryptonator is a network of traders,” says Neubauer. In exchange for a membership fee, it provides analysis on the performance of digital currencies and the potential of new Bitcoin competitors launching their crypto coins through initial coin offerings. Another start-up is called Herdius and is working on a marketplace for digital currencies.
Although more and more people want to put their savings into the novel money, it is not so easy. On the world’s largest coin exchange, Coinbase, only three other currencies are traded alongside Bitcoin. Neubauer opens the Etherdelta page to buy another crypto coin. However, she first has to send a few Bitcoin to her account there. The address is a long number and letter code that looks like a bank routing code, rather than a house number. “All the software and purses for cryptocurrencies are not very user-friendly,” says Max Kordek. This is exactly what the founder of start-up Lisk wants to change. In the future, developers should be able to use the technology to build blockchain applications as easily as apps or websites. Of course, he also finances it with his own digital currency called Lisk. When it was launched two years ago, the start-up collected 14,000 bitcoins. At that time, they were already worth almost six million Euros. But Kordek is also benefiting from the price leap: “Our capital has now grown to 200 million.” The number of employees has risen from two to 30, and this year is expected to rise to 60. Like so many crypto start-ups, Lisk has big plans and a lot of virtual capital, but technically still little to offer.
A big exception is Ethereum. It is the most important cryptocurrency in addition to bitcoin, but can do much more. “Bitcoin is like a calculator, but Ethereum is a computer,” says Fabian Vogelsteller, who helped develop Ethereum. While the Bitcoin Blockchain can only subtract and add, Ethereum, on the other hand, can execute complex code. Thus, so-called smart contracts can be programmed, intelligent contracts in which payments can be automatically set and executed. Many companies are already working with it and are already using it. “Every major bank and many other corporations do something with Blockchain and most use Ethereum,” Vogelsteller says.
A start-up owned by Innogy, for example, already uses Ethereum to handle the payment of electric cars at charging stations. However, the price increases also caused the costs to skyrocket. Bitcoin is also a victim of its own success. Originally, the currency was intended to make cross-border payments easier and cheaper. But in the meantime, transaction fees have climbed to USD 50. In addition, the network has become very slow and transactions become backlogged. Bitcoin developers are bickering about not increasing the size of the blocks in the chain so that more transactions can be stored there. “Even if you double the size of the Bitcoin blocks, it does not take long and the network is full,” says Vogelsteller. You would actually have to multiply it hundredfold or thousandfold. Ethereum has similar problems and is therefore working on improvements.
The question is still, will these improvements arrive on time and are they sufficient. Or will a new cryptocurrency take over the field. Some say IOTA could do that. For the Berlin-based company bets on a slightly different technical concept, a kind Blockchain without blocks. Critics do not think this is safe enough. “The whole technology is still in its infancy,” says Vogelsteller. He compares it to cars: the first ones were slow and loud, but they got through anyway. Whether the Bitcoin crashes or not, I do not care, the blockchain technology will remain.