Bitcoin is a decentralized cryptocurrency that uses peer-to-peer technology for instant payments between people or businesses.
What Is Bitcoin?
Bitcoin is a form of digital currency that is created and held electronically on a computer. Bitcoins are not paper money such as dollars, euros, or yen controlled by central banks or monetary authorities. This is the first example of cryptocurrency, produced by people and businesses around the world using advanced computer software to solve mathematical problems.
Bitcoin has many features that differentiate it from traditional currencies as an all-global means of exchange. Central banks or monetary authorities do not control the number of bitcoins, and it is decentralized, making it global. Anyone with a computer can set a btc address to receive or transfer bitcoins in seconds. Bitcoin is anonymous, and cryptocurrency allows users to maintain multiple addresses, and no personal information is required to establish an address.
How Bitcoin Works?
Bitcoin is a method of payment or transfer of value that is independent of government officials such as central banks that traditionally control the supply of money and the availability of currency in the global market. Transfers are made instantly via computer with low transaction fees.
Bitcoin is a fixed asset as it has only 21 million coins. Solving advanced mathematical problems results in the mining of bitcoins. However, bitcoin is divisible so the growth potential for the exchange medium is unlimited. One of the most interesting inventions that came with btc is the blockchain or distributed ledger technology. DLT has amazing potential when it comes to bearing traditional operations and settlements for businesses in the financial and other industries. The DLT tracks ownership and allows for immediate and efficient transfer of bitcoins.
Satoshi Nakamoto first proposed bitcoin in a 2009 white paper as a means of payment based on mathematics. The idea behind bitcoin was to create a currency system that did not involve banks and would instead work using a decentralized ledger known as blockchain.
The value of bitcoin first crossed $ 1,000 in January of 2014 before hitting its peak at the end of that year. Since that time, its value has increased slightly from $ 3,000 to $ 33,000.
Do I Need to Pay Taxes?
The IRS recognizes cryptocurrency as an asset and performs it based on its value. For example, if you perform a service and are paid in bitcoin, you must report an income equal to the value of the amount of bitcoin received at the time of receiving it.
Also, money earned from buying and selling bitcoins should be reported as capital gains such as money earned from buying and selling other items.
Alternatives to Bitcoin
Bitcoin is not the only cryptocurrency available, but its market cap is more than double the value of the next 10 largest cryptocurrencies. It had a market cap of $ 296.75 billion as of November 13, 2020, followed by Ethereum at $ 50.99 billion and XRP at $ 26.8 billion. In total, there are 14 different cryptocurrencies with a market cap of at least $ 1 billion.