At the beginning of 2018, there was not a day when a new record for the Bitcoin rate was not recorded. In a short time, the value of this digital currency has gone from around 4,000 to 20,000 dollars and has made risk-loving speculators rich. But what exactly does Bitcoin stand for?
Bitcoin is an all-digital form of payment that is used for online transactions. So you can pay with it in some online stores if they accept the virtual currency. So far, Bitcoin is not as popular as traditional payment methods.
However, an individual (and entertaining) feature about Bitcoin is the way this online currency is created and controlled. Unlike the zloty or euro, there is no government or central bank that can guarantee the equivalent of the amount in circulation.
Only the computer program is responsible for this, which works in a decentralized manner on all computers involved in the Bitcoin payment process. The program has a database in which information about Bitcoin ownership and payment transactions is encrypted – it is the so-called blockchain.
All information and processes related to Bitcoin are encrypted in such digital currency, which is why it is called a cryptocurrency.
The fact that data control and storage are shared with everyone on a peer-to-peer network builds this trust which is critical to the functioning of the currency. Payment transactions are simultaneously recorded and approved on all computers that are part of the Bitcoin network.
In this way (encrypted and anonymous) information about who and how much money has received and how much he has is available to all users equally. This solution means that every Bitcoin owner can spend the content of his account only once and only he can dispose of it himself.
The Bitcoin mine is a place where computers with very high computing power used to create cryptocurrencies have been gathered.
Another unique feature of cryptocurrencies such as Bitcoin is the so-called mining. Through it, participants in the payment system provide the network with the computing power to calculate encrypted payment data. For this, for example, a functional computer with Internet access and a specific program is used. In return, participants receive Bitcoins. In this way, new loans are created as part of the blockchain, up to the maximum amount of money foreseen by the system. Click here If you want to use Bitcoin as Luxury Currency.
Governments and Bitcoin
And at this point, we come to the ultimate weakness of the cryptocurrency – its susceptibility to the actions of the authorities of countries and international organizations that do not view its spread with a favorable eye. An example of the lack of acceptance for Bitcoin in China, which has announced that the currency will not be convertible at local banks.
Her Majesty’s Revenue and Custom, an essential financial body of Great Britain, declared that Bitcoin would be considered private money, thanks to which the need for multiple VAT taxation of transactions with it will disappear. The cryptocurrency obtained a similar status in Germany, where it can be used for trading and paying taxes.
Bitcoin is not a legally accepted means of payment; moreover – according to the interpretation of the Ministry of Finance – profits from its turnover are taxed in the same way as profits from property rights. As you can see, every state is a different regulation – so it’s difficult to predict if Bitcoin will ever gain the trust of all major governments in the world in the future.
Speculators and governments, who will first threaten bitcoin?
Therefore, bitcoin users still have to take into account the possibility that a currency functions like a financial pyramid – it grows in strength as long as there are new users. And when the rate is sufficiently high (higher than during the 2011 bubble), holders of large amounts of bitcoin will sell them, causing a sharp drop in value and undermining confidence in BTC, and then stop bothering with some virtual currency lying on a mountain of green notes.
On the other hand, this development is not a foregone conclusion, and the digital currency is beginning to enjoy increasing recognition.