Cryptocurrencies nowadays have become one notable global phenomenon known to many individuals. While there are still those who do not understand what is cryptocurrency really all about, many individuals, governments, banks and companies are aware of the importance of cryptocurrencies.
What is Cryptocurrency Really?
Cryptocurrency pertains to a digital asset especially designed to function as medium of exchange utilizing cryptography in order to secure transactions and control creation of additional currency units. The cryptocurrencies are subsets of the alternative currencies or digital currencies.
Bitcoin actually become the very first decentralized cryptocurrency in 2009 and since then, many cryptocurrencies have actually been created. These are often called altcoins, as combination of bitcoin alternatives. Bitcoin, along with its derivatives utilize decentralized controls in contrary to the centralized electronic money or centralized banking system. Decentralized control is actually linked to the utilization of the bitcoin’s blockchain transaction database in a role of distributed ledger.
Cryptocurrency Security
The cryptocurrencies’ security is known to be two parts. The first part commonly comes from the difficulties of finding some hash set interactions. These are tasks done by miners and the second part likely about a scenario wherein a miner with mining power of over 51% of network can actually take control of global blockchain ledger and then generate alternative block chain.
Cryptocurrency is less prone to seizure by the law enforcement or have transactions hold placed into them from acquirers like PayPal. All of the cryptocurrencies are pseudo-anonymous and some of the added features in creating real anonymity.
Legality and Taxes of Cryptocurency
While cryptocurrencies are legal in many countries except Vietnam and Iceland mainly because of their foreign exchange freeze so they are not free from restrictions and regulations. China has banned most financial institutions from handling these bitcoins and in Russia, while saying that cyrptocurrency is legal, they have made it legal to buy goods with any given currency other than the Russian rubles.
In US, IRS has officially ruled that the Bitcoin must be treated as a property for tax purpose, making the bitcoin subject into capital gains tax. There have been guidelines which have been issued containing imperative caveat especially for Bitcoin miners. This warns that anybody creating bitcoins and then exchanging these for fiat currency is not really necessarily beyond reach of law. This states that an individual who creates convertible virtual currency units and then sell these units to another individual for its equivalent or real currency engaged in transmission into another location and is money transmitter.
The Benefits and the Drawbacks of Cryptocurrency
Cryptocurrency tend to make it easier to transfer some funds between two parties that are involved in the transaction. The transfer is carried out by means of using private and public keys for security purpose. The fund transfer is being done with reduced processing fees enabling users to prevent steep fees that are usually charged by most financial institutions and banks for wire transfers.
Central into the Bitcoin genius is the block chain that it utilizes to properly store in online ledger of the entire transactions which have been conducted utilizing bitcoins, providing data structure for the ledger. This ledger is said to be exposed to limited threats from scammers and hackers and can actually be copied on all computers that run Bitcoin software.
Numerous experts have seen this block chai with many important uses especially when it comes to technologies like crowdfunding, online voting as well as major financial institutions. This also plays a vital role in lowering the transaction cost by making the process of payments more efficient.
Since cryptocurrencies are said to be virtual with no central repository, the digital cryptocurrency balance can significantly be wiped out through computer crash of the backup copy of holdings do not exist. And since the prices are commonly based on the supply and demand, rates of which the cryptocurrency is allowed to be exchanged for other currency can widely fluctuate.
Cryptocurrencies are not really immune to hacking threat. In fact, in the short history of Bitcoin, there are companies that are subjected to more than 40 thefts including few which exceed $1million in value. Still, there are numerous observers who look a cryptocurrency as hope that currency can that preserves value can truly exist, can facilitate exchange and is said to be more transferable.
For individuals who still feel confused on what is cryptocurrency, no need to worry and do not give up. The best thing to do is to wrap your head around the important and foundational concepts of cryptocurrency. This might be a bit of a challenge but there are explanations that can give you clearer insights.
There are also videos that explain what is cryptocurrency in a more efficient and clearer way. To learn more and access everything you need to know about cryptocurrency, you can search online.