Zug, 22.03.2019

Crypto-currencies for Beginners

18-year-old Robin Gibson has written his school-leaving dissertation about crypto-currencies, explaining all about Bitcoin and blockchain in ways which are easy to understand for the uninitiated.

For many people, there is still something rather suspect about crypto-currencies, even though Crypto-Valley seems to have firmly established itself here in the canton. People seem prepared to talk about the generalities of it all but are less sure when it comes to the details. Indeed, this was the case with Gibson himself, hence he started to take a closer look at it all, entitling his dissertation “Crypto-currencies for Beginners”.

He pointed out for example, that, had he invested a small amount of money in Bitcoin in 2010, he would have seen it rise to be worth several million, the value of the crypto-currency having increased steadily until the end of 2017.

In order to present complex terminology in a simple way, Gibson himself had to grapple with it all and felt it necessary to point out a few commonly held misconceptions, such as the one that you can “invest in blockchain”. This is not possible is blockchain is merely the name given to the type of technology on which crypto-currencies are based, there being a separate blockchain technology for each crypto-currency, of which there are now 1,500.

Then he pointed out another commonly held misconception, namely that blockchain technology makes crypto- currencies safe. “While it is practically impossible to hack into blockchain technology, a skilful thief could steal crypto-coins in the event of human error,” he said. However, Gibson pointed out an even greater risk, that of the fluctuating value of crypto-currencies and possible loss of funds.

As mentioned, back in 2017 the value of Bitcoin rose to CHF19,665, but soon after this the bubble burst and the value fell considerably, something which is being referred to as the Bitcoin winter.  

As part of his study, the school student invested some money in crypto-currency himself. “However, as the fees for paying-in and paying-out were so high, I did not actually make any money at all,” he admitted. As to how it might perform in the future, he declined to say.

As mentioned, the great uncertainty and fluctuation in value puts many people off, despite crypto-currencies representing a lively competition to existing currencies and opening new doors in the world of finance. Gibson feels that, if so little money is invested in them, such crypto-currencies will never be able to stabilise. “It is a devil’s circle, isn’t it?” he concluded.

Gibson, the son of Tabea Zimmermann Gibson of the Alternative Green Party who is also vice chair of the Greater City Council of Zug, has not yet had his dissertation marked. Whatever assessment is made, he intends to go on to study economics at university.

The latest news on the regulation of crypto-currencies is that the Federal Council is to consider proposals for it in the spring, as Ueli Maurer, the current president of Switzerland who heads the Federal Department of Finance, confirmed last Wednesday.

One member of the National Council in Bern, Giovanni Merlini of the FDP party in the Ticino, wants to ensure crypto-currencies are covered by appropriate legislation to prevent any misuse of them, after all, anonymity is key factor in many of them, a factor beneficial to those involved in blackmail or money-laundering. The  extent of scrutiny into crypto-currencies by the Swiss Financial Market Supervisory Authority (Finma) is also to be examined.