It is now virtually impossible for humans to decipher blockchain. Bitcoins blockchain has proved impossible to hack, even with the aid of computers.
The technology of blockchain CANNOT be understated. This is possibly the biggest leap in technology since the creation of the internet.
Blockchain is now being engineered by a multitude of industries, including hospitals, banking, messaging apps and voting technologies.
Blockchain was originally developed by humans (we think) using open software called blockchain.
How do new coins come into existence?
New coin production is controlled by a process called mining, an intensive process where computers (mining nodes) compete against each other to secure the network by solving mathematical equations, collecting bitcoins as a reward if they are the first to create a new valid block, which is then broadcasted to the rest of the network and added to the blockchain.
- To mine cryptocurrency you need to download the free open source software.
- You also need to create a “digital wallet” (also considered a node), so you can receive payment for crypto you have created.
- Originally you could use the hardware of your PC to mine, but as the process became more intensive, now you must have specialized mining software to handle the power, these cost about $1,500 and up.
- The power / electricity needed for one of these hardware devices is enormous… enough to power 285,833 US homes as of 2015.
How does crypto compare to our current money system?
Currently we use a Fiat System. Ever since the US left the gold standard, public confidence in the fiat system has dwindled.
Fiat is currency issued by a government, but which is not backed by a physical commodity. Fiat suffers from inflation, when a government decided to “print” more of a Fiat currency, the value of everyone’s money goes down as a result. This is the exact opposite of what Cryptocurrencies aimed to solve.
How Cryptocurrency exchanges work:
The fiat system. There is nothing (no gold, no silver) backing the generation of the code.
Once you have created an account, you will have to link it with either a debit/credit card, or a bank account.
Afterwards, deposit how much BTC you’d like to exchange from your address, choose the currency of choice, and click on exchange. The process takes anywhere from a few minutes to a couple of days, depending on the exchange that you have picked and your bank/card provider.
Paying Your Taxes
It should be noted that in most countries, when you actually withdraw your cryptocurrency to Fiat, you will be creating a “taxable event” so you should be prepared to pay the tax owed under your local laws. Many countries differ on how they handle this, some are completely tax free, others use the Capital Gains model. The amount of time you have held the currency may also matter, making the difference between short-term and long-term Capital Gains.
As of 2013, law firms and tax return services began to include bitcoin tax preparation, and accounting software.
Trading exchanges are beginning to include platforms for trading cryptocurrencies just like they include trading for penny stocks; and meetup groups and investors services are beginning to open conversations about the trading of cryptocurrencies.
Can I pay for my lunch with crypto?
According to bitcoin.com, Overstock.com, Target, Subway, Amazon, Victoria’s Secret, and many others now accept the cryptocurrency and more companies are expecting to move in that direction.
So, though you may not be paying for your lunch today with cryptocurrency, it does seem as if there is a good chance that you will be tomorrow.
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