Almost after being for 10 years in the financial market, Bitcoin is still a mystery for a lot of people. People would often hear it from people using it in the financial market but would often end up confused. So what is bitcoin? I have written this article for all the financial dummies out there bitcoin explained in detail.
Bitcoin is a cryptocurrency also called a digital currency or virtual currency ( a type of money you can only use virtually). It is like an online mode of cash flow. This online cash can be used to buy products or services if your country allows it legally.
Bitcoin is basically a computer file that is stored in a digital purse called a wallet, in the form of an app on your computer or smartphone. Bitcoin basically follows blockchain technology. Every single transaction is stored in the public ledger. You can literally trace the history of coins they don’t own, trying to make faux copies or reversing the transaction.
How to get Bitcoins?
There are mainly three ways bitcoin can be purchased. You can go through in detail each one of them and see for your self which can suit you better.
- Buy bitcoin with real money: You can use your currency to buy virtual money and later put them into the wallet. The wallet will be used for further trading, spending, or buying.
- You can use your credit, debit cards, or bank transfers (ACH) to buy bitcoin on exchanges that can later be sent to your wallet.
- Providing personal documents: Government has to be sure about your identity. So they ask you to provide some identity proof to be sure that you don’t get into money laundering or cheat on taxes.
- Secured internet connection: If you want to trade bitcoin online, make sure you’re using a secured connection and browser. Your digital wallet requires safety in order to save itself from malicious software. And to save from attackers and hackers.
How Bitcoins are created?
In order for Bitcoin to put into use, people can make their computer transactions accessible to users. The computers are processed to solve incredibly difficult sums. Occasionally they are rewarded with a single bitcoin to the owner. People at once sit in front of their PCs and set the desktop with the most powerful software to get a hold of bitcoin. This process is called Mining.
Miners have received bitcoins as a token of appreciation for their hard work, to legitimize and monitor transactions of bitcoin, checking their validity. As bitcoin is a decentralized unit, it has no one authority to monitor its working process. It is the duty of the miners the audit the bitcoin transaction and that’s why they are paid in bitcoin as a reward.
But mining is a very long and tedious process. The sums are becoming difficult day after day. If you start mining now, it will take you years to earn a single bitcoin. So, it is not recommended for an individual to mine alone. You’ll lose out a lot on money on electricity using your computer then you will make even after getting a bitcoin.
Why do people really want Bitcoin?
One thing that attracts most of the users is that there is no interference from any particular organization or government. The bitcoins can be spent anonymously. Although all the transactions made are recorded publicly, but no one would know your identity unless you tell them your account number.
Do you have to pay tax for bitcoin?
The Indian Revenue System counts cryptocurrencies as property and taxes, based on their value. For example, if you provide a service to a company/ individual and are paid in Bitcoin, you would be required to report income equivalent to the value of the amount of Bitcoin you received at the time you received it.
Moreover, the money you earned by selling and buying Bitcoin should be reported as capital income similar to the gain you get by selling or buying any other commodity.
Are bitcoins secure?
- As we have already mentioned, every transaction mane in bitcoin is recorded publicly. It makes it really difficult to replicate, forge, or trying to sell somebody else’s coins, as everything is in the public eye.
- But there have been few thefts in the bitcoin wallet in the past. It is possible to lose your bitcoins from the wallet forever. To not let that happen, you have to be extra cautious of the browser and internet connection you’re using.
- There are other valuables like gold and diamonds. Bitcoin is one such valuable item too. People are willing to exchange bitcoins for real goods and services and even cash. It has some kind of benefit, that’s why it is counted as a valuable source.
- The value of bitcoins keeps fluctuating since its launch. So a person has to see the market and make decisions accordingly. If you want to make your real money into bitcoin, then go for it.
The biggest competitor for Bitcoin
Ethereum has long been regarded as the one Bitcoin (BTC) competitor that actually grabs a lot of attention from the peers. Ethereum is a project focused on more complex smart contracts rather than security through simplicity, and the network’s underlying token, known as Ether (ETH), recently had one of its best days ever relative to the Bitcoin price.