Point 1) "Thanks, ..." and "Thank you, ..." are both correct translations of "Danke, ..." German does not have different register versions for "Danke" (eg. polite or colloquial) like English does.
Point 2) In German, just as many other languages, Present Tense is used for many Future and Decision situations, whereas in English the "will" conjugation is used (eg. "I'll see him tomorrow", in German is, literally, "I see him tomorrow")
Point 3) In conversational English, the verbs "to eat" and "to drink" are used for general statements (eg. "I eat whenever I have time to...", "I drink a lot of water throughout the day") whereas "to have" is used for specific statements (eg. when offered a drink or meal, it's more natural to answer, "I'll have tea..." or "I'll have the chicken curry...", both with the will conjugation to express Decision and Future Tense)
Therefore, there are a few possibilities for this translation. A) Thanks and Thank you are both correct; B) supposing you politely declining a different drink (eg. alcohol), "Thanks, I'm drinking water"; C) supposing you are thanking and choosing from offered drinking possibilities (eg. water, juice or coffee, etc.), "Thanks, I'll have water"...); D) other variations are possible, of course.
Ok. So this is based on Verb Conjugation. I understand that -e (trinke) is used when its an "Ich" who is drinking or who drinks water.
My question is about the continuous verb i know (from other questions, that german does not have a -ing verb), But is it up to the context to of the sentance to figure out if the person is drinking or drinks water?
Like he is drinking water? or He drinks water? Is this just something that is lost in translation from English to german?
I understand that trinke, trinkt, trinkst, trinken are all the same meaning, but i am curious about the translation portion of it. (lost in translation).
Should ich be capitalized? I am not reporting a problem I just thought that nouns in German are capitalized.
It's a pronoun, not a noun. Pronouns are not capitalised except at the beginning of a sentence. The only pronouns that are capitalised are the formal you and the formal your.
The complete conjugation of the verb "trinken" is given in the Tips and Notes (lightbulb) of chapter Basics 2: ich trinke, du trinkst, er/sie/es trinkt, wir trinken, ihr trinkt, sie trinken. The information in these Tips and Notes is very useful.