Have you considered investing in bitcoins? The price of bitcoin against the euro or the dollar is being recorded at the same time as scepticism about the virtual currency grows. What is the mechanism behind it? Is it secure? We respond to these and other questions in a straightforward and concise manner.
1. What is bitcoin and how does it work?
Bitcoin is a cryptocurrency or virtual money. It is a self-regulated payment unit with no physical reference or endorsement from a country, which preserves the anonymity of its owners and whose transactions are carried out via the internet using encrypted codes and confirmed in a variety of ways by the network’s members themselves (via the so-called “blockchain” technology, in practise an accounting book or shared record of the aforementioned transactions). Knowing a code entitles you to ownership of the asset (cryptocurrency).
2. What is the price of a bitcoin?
The price of bitcoins can be found on websites dedicated to virtual currency’s trading. As a result of the demand and supply fluctuations registered by the system’s participants, there is a real-time quotation. Given that the number of bitcoin users is small in time, economists argue that the price will begin to rise as the number of users grows. Bitcoin supporters contend that it is not a pyramidal financial system and no one is guaranteed returns and no single issuer benefits. However, like for any investment, there is no assurance that the bitcoin’s value will not fluctuate. But there is an awareness that being a scarce and distributed digital currency, its price will never be zero.
Does bitcoin challenge the system?
Bitcoins are valued as long as they are useful as an investment tool and a currency, or as long as people are willing to accept it as a form of payment. It has money-like characteristics (durability, portability, fungibility, scarcity, divisibility, and recognizability), but it is focused on mathematical properties (and is becoming increasingly scarce), and it is not backed by any government. The price of the club will rise as the number of members increases. Otherwise, as with any financial derivative, the price would plunge. Changing the price of bitcoin does not require a large sum of money.
3. How was bitcoin created?
The definition of cryptocurrency was first suggested in 1998 on the ‘cypherpunks’ email list by a computer scientist called Wei Dai, who proposed the idea of a new form of money that would use cryptography to manage its development and transactions rather than a centralised authority. Satoshi Nakamoto published the first bitcoin protocol specification and proof of concept on an email list in 2009. Satoshi, who is unknown if he is an individual or a working group, left the project in late 2010 without disclosing his true identity. Any computer may revise or generate its own updated version of the Bitcoin code.
4. What can be done with bitcoins?
You can pay for a product or service with bitcoins. Bitcoins can be bought in exchange houses or made with special machines. The bitcoin would be the product of payment for the theoretical energy used in the manufacturing process. Even if you don’t have a merchant account, you’ll have bitcoins. You’ll need a virtual wallet to use the app. Payments are usually made by entering the recipient’s address (the bitcoin account) and the amount to be paid into a smartphone or computer programme and pressing send. There is no going back after the button has been pressed; the virtual money has already been exchanged.
5. What are bitcoin miners?
New bitcoins are created through a decentralised process known as “mining.” This system is founded on the fact that the network rewards individuals for their contributions. Bitcoin miners receive bitcoins in exchange for processing transactions and securing the network with advanced “hardware.” Bitcoins are generated at a consistent and decreasing rate. Each year, the amount of bitcoins generated is automatically halved until the total number of bitcoins issued reaches 21 million. The price of bitcoin continues to rise as a result of this belief. Bitcoins were issued in excess of 18 million units at the start of 2021.
6. How and where to buy bitcoins?
Bitcoin can be purchased from online exchanges. An example list of these intermediaries can be found here. In Spain, there are also physical agencies or offices dedicated to the selling of cryptocurrencies. The procedure necessitates:
- Create an account with one of the providers mentioned above (as well as a ‘wallet’).
- Make a deposit into the newly opened account (for example, by bank transfer, credit card or PayPal).
- Purchase the desired currency (for example, Bitcoins, Ethereum, Ripple, Litecoin or Dash, there are about 8,000 cryptocurrencies).
- You can sell the currencies whenever you want.
- Transfer the remaining balance to a personal account.
7. Is it safe to invest in bitcoins?
Bitcoin supporters argue that no company or person can regulate Bitcoin and the network is safe even if not everyone can count on it. In any event, security agencies alert that a user or device assault against exchange homes will rob code. For such robbery, Hackers designed programmes. Kaspersky researchers revealed a number of years ago that the CryptoShuffler Trojan was identified, for instance, to alter the user’s cryptocurrency wallet addresses on the compromised computer clipboard. Since the performed operations are not cancelled and anonymous, no solution can be found to any theft of data.
8. What does it imply that it is a virtual currency?
Bitcoin is so virtual that people use credit cards and banking networks every day. The ECB gives banks and the banks the ECB as virtual capital. Money has long ceased to only be cash as a virtual payment obligation. If you agree on this transaction, you will use Bitcoin to pay ‘online’ and physically in stores like any other currency. Bitcoins are deposited in a vast network, and nobody can technically change them. This means that Bitcoin users have sole control of their money and Bitcoins cannot disappear simply because they’re virtual.
9. How is it taxed to have earnings in bitcoins?
Bitcoin is in no jurisdiction a legal fiat currency so the rules are not very precise. Any capital gain must in principle be included in the Treasury as a shareholding increase. There are some uncertainties on whether a profit in cryptocurrencies is again invested in cryptocurrencies after a potential profit does not become a legitimate tendering asset. In this case, it is not obvious. It is not clear whether the asset is an asset outside Spain or elsewhere. The Treasury could levy a fine even higher than its valuation, in the case of a property not declared abroad. In any case, it is not as private as people sometimes say, to deal with cryptocurrencies.
10. Is it advisable to invest in bitcoins?
It isn’t possible to advise someone to invest in bitcoins, like any risk investment. Also, the supporters of crypto advise not to invest in virtual currency savings. Its extremely unpredictable existence makes it very close to gambling today’s investment in cryptocurrencies than to serious investment. Bitcoin’s sponsorship by major financial groups gives it a reputation not available to other cryptocurrencies. Since it started, the accumulated returns per bitcoin make it the most valuable commodity in history.
Central banks already acknowledge freely that digital money or virtual currency will play a key role and plan their alternatives already in future. But because of its own features, Bitcoin has already managed to lead. In future, digital currencies would be supported by the state. Their position in the remaining private cryptocurrency is merely a speculative asset, but the so-called ‘secure coins’ or the digital currencies referred to by currency or large technology firms (Facebook, Amazon, Alibaba …) will also play a part.