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What is Bitcoin? Definitive Guide On Bitcoin For Beginners & Experts 2019

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What is Bitcoin? Definitive Guide On Bitcoin For Beginners & Experts 2019

bitcoin casinoBitcoin is open-source software and an original cryptocurrency which was released in 2009. It is a digital currency which is predicated with cryptographically secure transactions, with a proof-of-work consensus model, and a decentralized P2P distributed ledger network. The Bitcoin’s
distributed ledger is the first blockchain which is a shared and distributed timestamped ledger of the data blocks which are connected through the chain of cryptographic hashes and it has solved the double spend problem that has plagued the previous iterations of other digital currencies.

The Bitcoin is a decentralized medium of exchange with a high-value of settlement layer, and with a store of value that which exists outside the traditional financial system. The Bitcoin network is entirely a P2P,and there are no intermediaries or any centralized control.The proponents of Bitcoin view it as the first truly and free money from the centralized control and is the proliferation of the network’s hash power,the general network effects of Bitcoin have solidified its position as the sovereign proof medium of the value exchange.

Since the inception of Bitcoin it has fueled the growth of the entire industry of the cryptocurrencies. Many of these cryptos are forks of the Bitcoin protocol while the others have developed into a full turing and complete smart contracts platforms. The Bitcoin’s narrative has evolved itself throughout the lifetime and has been subject to the polarizing debates and the contentious network protocol decisions.

In spite of having the wild-west atmosphere within the broader of the cryptocurrency industry and often with the polarizing nature of the communities, the Bitcoin has emphatically remained to be resilient. Having a decade of experience under the belt, the legacy of cryptocurrency has shown a penchant for the conservative change which has led to a remarkable stability, decentralization, and transparency irrespective of the criticisms it has faced over the course of its survival.

The Bitcoin has emerged as the exceptional technological feat, and its future implications along with the growing industry has sparked to be profound.It was released either by a person or group of people using the pseudonym called Satoshi Nakamoto on October 31, 2008, to the Cypherpunk mailing list with a white paper titled “Bitcoin: peer-to-peer electronic cash system.”

The real identity of the pseudonym Satoshi Nakamoto is not known even today, despite of the numerous attempts made by people to claim the identity of this obscure Bitcoin creator.

The genesis block which launched the Bitcoin mainnet was mined on January 3rd, 2009 with a reward of 50 BTC and a text message was embedded in the coinbase transaction.

At present Bitcoin is under constant development and adaptation. The future road map of it has some intriguing and sophisticated concepts which should be proven vital to the sustainability of its network and the narrative direction.

A Complete Bitcoin Guide: Index

  1. Who Invented Bitcoin?
  2. Where Can I Find Bitcoins?
  3. How to Buy Bitcoin?
  4. How Can I Store My Bitcoins?
  5. What Are The Transactional Properties of Bitcoin?
  6. What is Bitcoin Mining?
  7. Why Use Bitcoin?
  8. How do Bitcoins Work?
  9. Important Bitcoin Terms:
  10. What Are The Pros and Cons of Bitcoins?
  11. What Is Bitcoin Fork?
  12. What Are The Uses of Bitcoin?
  13. Is Bitcoin Legal in USA?
  14. The Future of Bitcoin

(1) Who invented Bitcoin?

Bitcoin is the first established cryptocurrency that was created in 2009 by an anonymous individual or group, named Satoshi Nakamoto. The goal was to start a new electronic cash system which was decentralized and hence free from the control of a central authority or server.

The first details of how a bitcoin would work were described in a whitepaper published by Satoshi Nakamoto at an online cryptography forum in 2008. It was marked as a ‘peer to peer electronic cash transfer system’.

The white paper also successfully attempted to portray how the different parts of the bitcoin protocol will work and can be kept secure.

Other digital tokens or cryptocurrencies have imitated the basic idea of Bitcoin its blockchain to address perceived problems with new blockchains.

The first release of bitcoin was version 0.1 that was written by Satoshi Nakamoto. The hard coded genesis block is the very first block in the bitcoin blockchain. According to Satoshi anyone could download the source code and run it to join the bitcoin network.

(2) Where can I find Bitcoin?

Bitcoin being a decentralized cryptocurrrency can’t be found in any places that deal with traditional money. Hence in order to procure your first bitcoins one should check out these four places that are listed below:

Cryptocurrency exchanges are best place to exchange your regular fiat currency for bitcoins. These exchanges are online places that accept payment in traditional money for the corresponding amount of bitcoin against it. Coinbase is one of the reputed cryptocurrency exchanges from where one can acquire his first bitcoins.

Next there are bitcoin ATMs at many places where you can exchange your fiat currency for corresponding amount of bitcoins via a money vending machine that is similar in function to a general ATM machine.

You can directly acquire bitcoins from person primarily from any classified community against regular cuurency. Here you are trading your bitcoin for cash.

One can also obtain bitcoin by selling any products or services for bitcoins.

(3) How to buy Bitcoin?

The following five things are absolutely necessary to be sorted before buying bitcoins:

  1. Bitcoin address-this is a represented by a string of alpha numeric character that allows you to receive any bitcoin payment. This is known as ‘public key’. It is the address where the bitcoins are directed.
  2. Bitcoin wallet – it is a secure place like bank account to store the bitcoin that are obtained. But this wallet needs to be arranged before acquiring the bitcoins.
  3. Bitcoin exchange-it is the online cryptocurrency marketplace where cash can be exchanged for bitcoins
  4. Payment method-this includes debit or credit cards that will enable the payment when you purchase bitcoins online.
  5. Form of identity-it includes any valid identity document.

Now let’s take a look at the step by step guide to buy bitcoins online:

  • First step is to finalize a credible cryptocurrency exchange from where you intend to purchase bitcoins. Coinbase is one of the most reputed online sites for buying and selling cryptocurrencies.
  • Before signing up you need to have a bitcoin wallet ready. These can be downloaded prior to the purchase or they are also provided by the exchange itself.
  • Once you have the wallet, you have to pay for the corresponding amount of bitcoin at the exchange using traditional payment method such as credit card, bank transfer or debit card
  • Once the payment is processed, the corresponding amount of bitcoins is transferred in the wallet.

One should always remember to transfer the bitcoins from the exchange’s wallet to more secure wallet because exchange wallets are vulnerable to hacks as they are not the primary services of the exchanges.

Technically speaking, the wallets, don’t store bitcoins instead they store the ‘private key’ that is similar to your bank account password that is guarded with ultimate security features.

(4) Where can I store my Bitcoin?

Bitcoins are stored in special wallets that are somewhat similar to bank accounts that hold your funds. Before obtaining any bitcoin, you need a place or a wallet to store them.

Rather than actually holding your bitcoin, it holds the private key that allows you to access your bitcoin address (which is also your public key) so that you can transfer funds.

Well designed wallet software makes using bitcoin more convenient and intuitive. It usually holds several private keys.

Wallets can either be present on your computer and/or mobile device, on a physical storage gadget, or even on a piece of paper. Here we’ll briefly look at the different types.

Electronic wallets

Electronic wallet is either downloaded software, or is a secure space for the bitcoin address that is hosted in the cloud. The former is simply a formatted file that resides on your computer or device and facilitates transactions.

Cloud based wallets tend to have a more user-friendly interface, but you will have to trust a third party with your private keys.

Software wallet

On installing a wallet directly on your computer, you get the privilege to control your keys. Most of them have relatively easy configuration, and are free. The only major disadvantage is that they require frequent maintenance in the form of backups.

If your computer gets stolen or corrupted and your private keys are not also stored elsewhere other than the system, you lose your bitcoin.

They also require greater security features because if your computer is hacked and the hacker gets a hold of your private keys, he also gets hold of your bitcoin.

The Bitcoin Core protocol the original software wallet, the program that runs the bitcoin network..

Currently most of the wallets in use are “light” wallets or a SPV (Simplified Payment Verification) wallet, which doesn’t download the entire ledger but sync to the real thing.

Online wallet

Online (or cloud-based) wallets offer greater convenience than their counterpart for you can access your bitcoin from any device if you have the right passwords.

It is mostly free, easy to set up and come with desktop and mobile apps which make it easy to send and receive bitcoin.

With your private keys stored in the cloud, the disadvantage of online wallet lies in its vulnerable security feature as you have to trust the host’s security features, and that it won’t vanish with your money or close down and deny you access.

Mobile wallets

Mobile wallets are special apps for your smartphone to store bitcoins and are especially useful if you want to pay for something with bitcoin in shops, or if you want to transfer funds while on the move.

All the online wallets and most of the desktop ones mentioned above have mobile versions.

Hardware wallets

Hardware wallets are small physical devices that are intermittently connected to the web to enable bitcoin transactions.

They are the most secure as being generally offline, they are seldom hackable. But they do stand the chance of being stolen.

Paper wallets

Paper wallets are the simplest of all the wallets; these are pieces of paper on which the private and public keys of a bitcoin address are printed stored safely for use when required.

They are ideal for the long-term storage of bitcoin. These wallets are more secure because being away from virtual attacks as they’re not connected to a network. They are, however, easier to lose especially from fire and water.

Many bitcoin investors use a hybrid approach while choosing wallets for their bitcoin funds. They hold a substantial amount of long term bitcoin fund offline, while storing the smaller liquidity in a mobile wallet account.

Whatever option you go for, one should be very cagey while dealing with the storage of bitcoins.

(5) What are the Transactional Properties of Bitcoin?

As bitcoin aims to democratize technology with its incredible technological mechanism, let’s see the transaction properties that makes this pioneer of cyptocurrency such a viable means of exchange.

  • Irreversible:Once the transaction is confirmed in the bitcoin network, it can‘t be reversed by anybody.
  • Pseudonymous: Neither transactions or accounts reveal the real world identities. While it is usually possible to analyze the transaction flow, it is not necessarily possible to track the real world identity of users with those addresses.
  • Fast and global: Transaction is instantly relayed across the bitcoin network and is confirmed within a couple of minutes. Since they happen across a global network of computers they are completely detached from your physical location.
  • Secure:Bitcoin funds are secured in a public key cryptography system. Only the owner of the private key can transfer the bitcoin fund.
  • Permission-less: You don‘t have to ask anybody for any kind of permission to transact with bitcoin. Being a user friendly software programme, everybody can download it for free. After you install it, you can receive and send Bitcoins as per your will and needs without the interference of any gatekeeper.

(6) What is Bitcoin Mining?

The process of creating valid Bitcoin blocks which requires demonstrating proof of work is known as mining. Hence the miners are devices that mine or people who own those devices.

In reality, Bitcoin “miners” are computer programs that run on very specialized hardware that automates the process of securing the network. To sum up, the mining software

  • Collects all the transactions in the network
  • Validates them, and rejects the conflicting ones
  • Packs them into large bundles called blocks
  • Computes cryptographic hashes over and over again until if finds the suitable one
  • Then submits the block to the network, appending it to the block chain and getting rewarded in return.

The mining process perhaps is the most radical innovation of the Bitcoin. In short, people and organizations can use computers to solve immensely complicated mathematical equations.

Upon solving the equation, a “block” is created and in exchange of which the miner is rewarded with a pre determined amount of bitcoin generated by the Bitcoin network.

Every four years the amount of the reward is reduced by half. This will eventually keep declining because the amount of bitcoin is limited.

With the rising popularity of bitcoin, the electricity costs and processing power requirements continues to increase.

Soon hardware experts are coming up with field-programmable gate-arrays (FPGAs) that are essentially custom built hardware created specifically for mining Bitcoins.

They feature ample power but consume low amounts of energy as compared to their predecessors.

However,  FPGA’s  are quickly becoming inadequate and eventually computer hardware companies began producing exclusive BitCoin mining specific chips that are known as ASICs

One of the most important functions of Bitcoin mining is that it assigns an actual value to the currency. Currently, most currencies are not backed by any gold or silver.

Not only that, but Central Banks can create new money at will. Most currencies only have value because we believe they do.

Bitcoin mining ensures that coins must actually be created through a process that requires effort and input, whereas Central Banks can simply print as much money as they want.

(7) Why use Bitcoin?

Bitcoin is often considered as the future of the monetary system due to a variety of reasons, some of which are listed below.

It’s decentralized and restores the power back to the people. Introduced just a year after the 2008 financial crises, Bitcoin has attracted many proponents who found the current financial system as unsustainable.

It instilled some kind of confidence in the hearts of those who were very much sceptical about the government or the financial institutions.

Therefore it is not a matter of surprise that there is a huge community of enthusiasts who are actively building, buying, working and innovating in the cryptocurrency world.

The unique selling point of bitcoin is the concept that one could effortlessly carry out millions or billions of dollars of Bitcoin transaction across borders, pay for anything at any time, and don’t have to anxious about any bank related delay or impediment.

In case of bitcoins, personal information is left out of the transactions. As Bitcoin payments don’t necessarily need to be tied to one’s personal information, users aren’t exposed to any identity theft, which is a constant threat in case of traditional financial institutions. Bitcoin can also be backed up in special digital wallets and they are also encrypted to ensure the security of your funds.

Low Transaction Fees. Banks and companies like PayPal charge a good amount of money to send and receive money while bitcoin dismisses nearly 2.5% of “transaction fee” and replaces it with only a fraction of that.

The Immutable Ledger. Bitcoin’s blockchain which is its public ledger is completely objective. People have began to trust the technology and consider it to be fair because it is based on pure mathematics and computer science instead of being plagued by human error and corruption of questionable politicians.

(8) How do Bitcoins work?

Bitcoin’s ruthless verification process is one of its most appealing features because it hugely minimizes the risk of fraud.

Since Bitcoin is a decentralized structure, volunteers—referred to as “miners”—constantly verify and update the blockchain that contains data related to each and every bitcoin transaction.

Once a specific amount of transaction is bundled up into a block and is verified, the block is appended to the blockchain and the transaction gets completed.

So what is “Mining”?

Instead of a single central server verifying every transaction, essentially every other computer in the network verifies each transaction.

Miners are presented with a complex mathematical problem. They compete against each other to solve the math problem first. The first one to present the solution adds the verified block of transactions to the ledger.

The completion of the mathematical problem is the proof that a minimum amount of energy was spent to get a correct answer. This process is known as Proof of Work.

Bitcoin mining is carried out by high end computer hardware and not by any human being. These machines create the blocks, add them to the blockchain and solve the complex crypto graphical problem generated by the system to complete the process of mining. The successful miners are duly compensated with a pre-decided amount of bitcoins.

As per the Bitcoin’s programming, the reward is designed to change over time, and the block reward becomes half about every four years. The current reward assigned to the miners for each new block of verified transactions is about 12.5 bitcoins.

The mining processes have become increasingly sophisticated with the outstanding technological advancement, and there are number of best bitcoin mining sites, pick the one that is according to your requirement. The most popular method uses ASICS–Application-Specific Integrated Circuits. ASICS are hardware systems similar to CPU computers that are built solely for mining bitcoins.

Bitcoin mining operations consumes a lot of effort and power thus it involves a lot of capital investment and the sheer amount of competition in the present scenario makes it difficult for newcomers to enter the race and make profit.

A new miner would not only need to have adequate computing power and expertise, but would also need the extensive amount of capital necessary to fund the operations.

(9) Important Bitcoin Terms

Altcoins: All other cryptocurrencies except Bitcoin are altcoins.

Examples: Ethereum, Litecoin, Dogecoin, etc.

Bit: A sub-unit of bitcoinis called bit. 1 bitcoin (BTC) = 1,000,000 bits.

Note: You can always buy and sell using money that is less than one bitcoin.

Bitcoin: The term Bitcoin with a capital B represents the complete ecosystem of Bitcoin which includes the technology, the community, the protocol, and the software.

bitcoin: The term bitcoin with small b describes the unit of currency.

XBT and BTC: These are the common abbreviations for bitcoin.

Note: There isn’t much difference between these two abbreviations.

Confirmation: When a transaction happens in the bitcoin network, the blockchain confirms the transaction’s validity. The confirmation is done by “miners” which are computer hardware that carry out the complex processes.

Note: During this process, there might be multiple confirmations & you should wait for at least 2-3 confirmations before calling a transaction “successful”.

Mining: The process of computer hardware performing complex mathematical calculations for the Bitcoin network to confirm transaction and enhance the security of the system. Users who run these computers or rent resources for mining are called miner.

(10) What are the pros and Cons of Bitcoins?

Bitcoin is the most popular and the first-ever introduced cryptocurrency which was created in 2009 as open source software by the pseudonym Satoshi Nakamoto.

It is a peer-to-peer version of electronic fund that allows online payments to be sent directly from one party to another without passing through any financial institution.

Although there are more than a thousand cryptocurrency sites that use bitcoins today, bitcoin is the most widely used cryptocurrency that is equivalent in some of the purpose of traditional, fiat currencies.

Let’s discuss the pros and cons of Bitcoin for better clarity about this medium of exchange.

Bitcoin Pros:

Bitcoin has greater liquidity as compared to its peer

This unique feature allows users to retain their inherent value while converting bitcoin to fiat currencies like the US Dollar and Euro.

Bitcoin has full acceptance and popularity among the people

Hundreds of merchants have started accepting Bitcoin payments. People are getting more and more inclined towards Bitcoin more than the other cryptocurrencies.

Bitcoin makes virtual transactions easier than regular currencies

Bitcoin operates over the blockchain technology, which is decentralized in nature. There isn’t any transaction fees required nor does one have any red tape to navigate, as is the case with credit card payments, international money transfers and ATM cash withdrawals.

While most of the cryptocurrencies don’t have to face any kind of international red tapes, cross-border Bitcoin transactions are easier simply because it is more popular around the world.

Lower transaction fees

Compared to other third party virtual transaction mediums such as PayPal or credit card payments, Bitcoin comes with a minimal transaction fee. Though the fee is variable, seldom does a BTC transaction cost more than 1% of the value being transacted.

Bitcoin’s privacy and anonymity in relative to traditional currencies

When you spend your money using credit cards or any other online transaction medium, the private authorities or the banking authorities might track the records for any reference.

In case of Bitcoin transactions, the users will know the public address but they can’t actually identify the individual user.

Bitcoin doesn’t depend on creators or political agents

Since Bitcoin isn’t created by any state entity or any governmental organization, it is independent of any political interference.

Scarcity makes bitcoin more valuable. There are only 21 million bitcoins, out of which 17 million has already been mined. Hence bitcoin’s limited nature makes it more precious like scarce metals.

Bitcoin Cons:

Delayed transactions

The major problem with Bitcoin is its transactions speed which is lower as compared to other cryptocurrencies like Ripple, Ethereum etc.

As of now, Bitcoin can process 6-7 transactions per second as compared to centralized payment networks like Visa which does 2000 transactions in a second.

Dark marketplaces are working towards tarnishing its image

Bitcoins remains as a lucrative medium for criminals to utilize funds for illegal activities in spite of high visibility prosecutions of the offenders. If such shady activities continue, the system might face marginalization.

Bitcoin is susceptible to price swings

Lately bitcoin price has been very volatile. Over a short period of time its value has risen exponentially.

Once the private key is lost, its lost forever

If you forget the wallet key, your entire money will be lost. By no means can you get it back. It is because the private key or the password only known to the wallet holder.

Furthermore its decentralized nature makes it impossible to arbitrate disputes between users and redress their grievances. Some cryptocurrencies like Ripple do have charge-back or refund function.

Bitcoin faces the challenge of being replaced by potential cryptocurrencies

Every now and then many cryptocurrencies are getting created with newer and advanced features. Some of them utilize the “smart contract” systems to make the providers accountable for their promises.

Every cryptocurrency comes with its own pros and cons. But that doesn’t dent their potential. As the experts have predicted, the cryptocurrency market is going to take over pretty soon.

The market is presently dominated by ‘Bitcoin’ whose impact is way higher than its peers. Whenever it comes to investment, there is clearly a certain amount of risk associated with it even though they are heralded as the most revolutionary payment solutions.

(11) What is Bitcoin Fork?

Lately a lot of talks are going on around the bitcoin fork which is a technical event that occurs when diverse participants in the bitcoin network fail to agree on common rules.

At the basic level, a fork occurs when a blockchain diverges into two potentially sustainable paths-one that relates to the networks transaction history and the other that decides on new rules in deciding what makes a transaction valid. Those who use bitcoin have to show support for one or the other choice.

A fork is a technical term that is used by developers working on open source projects. It basically refers to a “software update”.

Hence every time you update a program on your phone or computer you fork out from the older version. Bitcoin has introduced two new fork concepts:

Hard fork – Hard fork refers to a mandatory software update that conflicts with the older version. The bitcoin program won’t run if you don’t update it.

For example, when a critical bug is found in the system that allows people to exploit the software, everyone is required to update their program in order to continue using it. If you don’t update it, you can’t use the program. Also, a hard fork once created can’t be reversed.

Soft fork – A soft fork refers to the software update that doesn’t conflict with the existing software. Moreover it isn’t mandatory and allows the network to accept the new features implemented on the go.

While a soft fork is occurs, even computers running the old program will still be able to use the program without any hindrance.  If the soft fork doesn’t work out, has bugs or people don’t adopt it – it’s can be completely reversed and you can go back to the older version

Most programs you use today are controlled by a single entity. So whenever they want to “fork” from their original program they issue an update in the form of a soft fork which if not updated might not work.

(12) What are the uses of Bitcoin?

Bitcoin was basically invented as an alternative, decentralized payment method. Unlike international bank transfers at the time, it was a low-cost and almost instantaneous medium of exchange. An added benefit of bitcoin for merchants was that it was irreversible thus it removed the threat of expensive charge-backs. Let’s illustrate some primary uses of bitcoin as concluded from their use cases.

In some parts of the world, bitcoin serves as an effective, efficient and cheaper means to transfer money across borders hence several remittance startups are using this feature for their advantage.

A number of large and small retailers now accept bitcoin as a form of payment.

Many individuals are finding it comfortable holding a part of their wealth in bitcoin as nobody can confiscate it or can take a cut for storing it.

Recently bitcoin seems to have assumed the role of investment asset due to the potential gains from price appreciation. More and more traders, institutional investors and small savers are waking up to the gains.

Individuals who wish to support causes whose funds are curtailed by the government or major organizations use bitcoin for the purpose. In addition, these donations are anonymous hence they don’t affect their professional or personal life.

Bitcoin payment are used in the tours and travels industries for booking hotels and utilising other services.

According to some sources, bitcoin is increasingly being used for money laundering by anti social element. Bitcoins are seen as an ideal form of payment when purchasing illegal goods.

Since bitcoin is a decentralized form of payment, it is not subjected to any government’s regulations. This allows enthusiasts from all over the world to gamble online using bitcoin.

(13) Is Bitcoin Legal in USA?

Bitcoin exists only on the Internet, usually in a digital wallet, which is software that stores relevant information such as the private security key that enables transactions. Digital ledgers known as blockchains are used to keep track of the existence of bitcoin.

Bitcoins can be directly send or received from anyone who has a bitcoin address via the so-called peer-to-peer transaction module. It is also traded across various exchanges throughout the world, which is how its value is established.

The question of legality arises as the Bitcoin platform introduces a brand new paradigm that is far away from the traditional regulators and regulations that govern fiat currency.

Bitcoin exists in a deregulated marketplace; there is no centralized issuing authority nor is there any means to track back to the company or individual who created the bitcoin. There is no detailed personal information required to open a bitcoin account or to make a payment with the account as is the case with a bank account.

The semi-anonymity part of the bitcoin is another cause for concern. Even though every single transaction is recorded in the Blockchain, users can stay almost anonymous, as those records only contain the public keys and the amount of funds transferred.

As far as taxation is concerned, the government views virtual currencies as property for federal tax purposes, similar to stocks and bonds. The federal tax law states that purchasers and/or sellers must also treat it as such.

As Bitcoin becomes more and more mainstream, tax authorities, law enforcement agencies legality regulators all over the world are trying to fully acquaint themselves with the concept of cryptocurrency and its ramifications, and also with the fact that how exactly it ought to fit into existing regulatory and legal frameworks.

Bitcoin payments in the U.S. are subjected to the same anti-money laundering regulations that apply to transaction in traditional or fiat currencies processed by banks and other financial institutions. Moreover, the anonymity of bitcoin transactions makes it far easier to flout the rules.

The former chairman of the Federal Reserve, Ben Bernanke, has expressed his concern that terrorists may use bitcoin because of its anonymity. Drug traffickers are known to use it for clandestinely carrying out their business. The best-known example was the Silk Road market case where all the transaction was done via bitcoin.

The FBI eventually shut it down in October 2013, and its founder, Ross William Ulbricht, is serving multiple life sentences. However, numerous other dark Web bitcoin-based markets have reportedly sprouted in recent years.

Is Buying Bitcoin Legal?

The U.S. Treasury Department’s Financial Crimes Enforcement Network reports that as of 2013, using Bitcoin to purchase well-natured goods and services is not illegal. It was classified as a convertible decentralized digital currency.

They have also issued guidance that states that those who obtain units of this cryptocurrency and use it to purchase goods are not considered money transmitters and are operating within the law.

Bitcoin is accepted as a form of payment on several major and minor online marketplaces. Many shops and restaurants all over the U.S. accept BTC payments.

According to the same guidance, investing in cryptocurrency is also considered to be legal. Many regulated US-based cryptocurrency exchanges comply with the Anti-Money Laundering and Know Your Customer policies.

One can always buy BTC at one of the exchanges and those who wish to trade and invest in it have to verify their ID and connect an existing bank account.

It’s legal for businesses, both big and small, to accept Bitcoin payments and they are also required to pay taxes on income received through BTC.

Bitcoin has been classified as a convertible virtual currency, which implies that accepting it as a form of payment is exactly the same as accepting cash, gold or gift cards.

The U.S. Securities and Exchange Commission (SEC) has warned potential investors that both fraudsters and promoters of high-risk investment schemes may target bitcoin users and rob them of all their bitcoin funds.

When it comes to taxation, the IRS views cryptocurrencies as property for federal tax purposes, similar to stocks and bonds, and federal tax law states that purchasers and/or sellers must treat it as such.

Is Bitcoin Mining Legal in USA?

In the U.S., crypto miners legally carry out mining new coins. There Virtual currencies are classified as digital commodities hence only capital gains should be reported.

As long as you keep them, there is no obligation to report but when you exchange, or spend them, the gains must be reported.

The FinCEN guidance dictates that users creating units of Bitcoins and exchanging them for fiat currency can be considered money transmitters and might be subject to special laws and regulations that cover those types of activities.

Is Bitcoin Trading Legal?

Securities and Exchange Commission (SEC)

At the federal level, the Securities and Exchange Commission focuses on the use of blockchain assets as securities. They assess whether or not certain Bitcoin investment funds should be sold to the public, and whether or not a certain offering is fraudulent.

Whether BTC should be treated as a security depends on the particular transaction, but the SEC has stated that any firm using Blockchain technology to trade securities would have to register as an exchange, Alternative Trading System (ATS) or a broker/dealer.

Commodities Futures Trading Commission (CFTC)

The Commodities Futures Trading Commission (CFTC) has a greater say in crypto regulation as bitcoin has been classified as a “commodity.” It is yet to draw up comprehensive digital currency regulations.

Presently it is focusing on monitoring the nascent futures market. It has also filed charges of fraud, misappropriation and issuing false account statements in connection with solicited investments in BTC in several crypto-related schemes.

Uniform Law Commission

The Uniform Law Commission, a non-profit association that intends to bring clarity and cohesion to state legislation, has drafted the Uniform Regulation of Virtual Currency Business Act.

The Act aims to illustrate which virtual currency activities are money transmission businesses, and what type of license they would require.

BitLicense

The New York State Department of Financial Services (NYDFS) has come up with set of regulations regarding BTC transactions which is known as BitLicense, for Bitcoin companies operating in New York.

Companies that want to obtain the license will need to appoint a compliance officer for overseeing the firm’s compliance with the regulations.

Moreover, they have to obey all other federal and state laws like Money Transmitter laws, Anti-Money Laundering and Know Your Customer policies that apply to Bitcoin.

Financial Crimes Enforcement Network (FinCEN)

According to FinCEN’s guideline on cryptocurrency, ‘virtual currency,’ is defined as a ‘medium of exchange that operates like a currency in some environments, but does not possess all the attributes of an actual currency.’

It only addressed convertible virtual currency like Bitcoin, that can either act as a substitute for real currency or has an equivalent in existing currency.

The FinCEN’s regulation doesn’t consider users of virtual currency as MSB (Money Serving Business)  . This implies that if you obtained BTC to pay for goods or services, you are not subject to MSB registration, reporting and recordkeeping regulations.

Internal Revenue Service (IRS)

According to IRS regulations, purchasing goods and services with cryptocurrency is similar to selling an asset. This means if you spend your coins, it means that you’ve either made a profit or a loss.

You have to keep a record of all your Bitcoin-related transactions in order to comply with IRS regulations.

Federal Reserve

The U.S. Federal Reserve is very eager about the digital currencies and the technology associated with them. They have published thorough papers on both Bitcoin and Blockchain.

This effort and interest on the part of a financial giant like the Federal Reserve in understanding the concept of Bitcoin speaks volumes about how influential the currency is becoming.

Financial Industry Regulatory Authority (FINRA) 

FINRA is a self-regulatory organization for U.S. brokers that are proactive in defining Bitcoin, completing guides and issuing cautions for its clients.

In its report on Distributed Ledger Technology it stated that the widespread use of Blockchain technology could impact the organization’s core business practices.

Office of the Controller of the Currency (OCC)

The office of the U.S. Treasury proposed a possibility of moving ahead with considering applications from FINtech companies to become Special Purpose National Banks (SPNBs) in order to provide companies that intend to be a limited purpose digital banks with a unified federal regulatory regime.

However, this initiative entails some significant political and legal uncertainties surrounding Customer Financial Protection Bureau (CFPB)

The Bureau has issued a consumer warning about Bitcoin pertaining to volatile exchange rates, possible lack of assistance from exchanges in case of lost funds and the threat of hacking and scams.

National Futures Association (NFA)

NFA is an independent self-regulatory body for the U.S. futures market. Every participant in the futures market, including those trading in Bitcoin, is bound to have NFA membership.

Regulation of cryptocurrency varies across the country as there is a huge difference in approach towards the cryptocurrency across individual U.S. states. A study classifies America’s 50 states as either “friendly”, “murky” or “hostile” to BTC and other altcoins based on the laws they entail.

(14) The future of Bitcoin

Bitcoin is a decentralized, digital payment network where bitcoin-the cryptocurrency-is the medium of exchange that allows masses to send and receive funds without a third party intermediary such as bank or any financial institution.

The bitcoin network is not controlled by any single person or group but it is managed by a community of ‘miners’ who uses their computational means to verify and confirm the transactions. They are rewarded with a certain amount of bitcoin for their work and effort.

The technology that drives the bitcoin is known as blockchain.  Its format is similar to that of a giant ledger book that is available to all the users. The Blockchain is extremely transparent system as the transactions that are entered in it can’t be changed or reversed.

Bitcoin is most popular cryptocurrency in terms of market capitalization, reputation and real-world usage yet the performance level of its transactions are actually poor.

In fact, there are many other cryptocurrencies that are emerging as faster, cheaper and more scalable medium of exchange than bitcoin.

Inspite of all the interesting and innovative features of the bitcoin, the clouds of speculation still looms over its head. In the world of cryptocurrencies, the prices are so volatile that even after nearly 10 years of being traded, an absolute prediction of their future dynamics seems to be a futile exercise.

While contemplating on the future of bitcoin, we see that its bright prospect depends on few of its important aspects likeimproved technology, future objectives and roadmaps, new partnerships or even regulations.

Some popular price predictions for the year 2020 as suggested by some of the illustrious personalities and organisations dealing with this pioneer cryptocurrency, range from $91,000 to $1 million.  Let’s look at some of the predictions made by some biggest names in this business.

  • McAfee claims that Bitcoin’s future price will be $1 million in 2020.
  • Analyst Tom Lee, on the basis of chart analysis forecasted that bitcoin will reach $91,000 by 2020.
  • Bitcoinist’s analysis predicts that its value will reach new all-time highs in 2020, which will be around $20,000.
  • According to the CEO of Brave New Coin, a cryptocurrency research organization, bitcoin price will reach new highs of $200,000 by the year 2020.

There has been a steady rise in the adoption rates of bitcoin as more and more people are using the network, the wallets and apps. As more and more people buy and use Bitcoin, its price will of course increase. In fact, in countries such as Japan, there are more than 200,000 stores where you can spend Bitcoin in the real-world.

Essentially, if Bitcoin sees an increase its real-world usage, we could see one of the really positive Bitcoin price prediction 2020 come true.

Although Bitcoin has always been the number one cryptocurrency, it is important to remember that it is facing competition from more than 1,500 different coins in the market.

Many of the altcoin projects have been built on top of other blockchain protocols such as Ethereum and there are also lots of individual blockchain’s too.

Furthermore, various central banks and governments are considering releasing their own digital currencies powered by the blockcain technology, which could pose a direct competition to Bitcoin.

In the long-term, Bitcoin could be either be used more as a store of value, or as a medium of exchange as envisaged by its creator.

Women in Cryptocurrency?

The following infographic is all about the top 10 women in Cryptocurrency.

  1. Joyce Kim
  2. Perianne Boring
  3. Amber Baldet
  4. Jinglan Wang
  5. Jen Greyson
  6. Fahima Anwar
  7. Meltem Demirors
  8. Raine Revere
  9. Shermin Voshmgir
  10. Sa Wang

Women In Cryptocurrency

Please add the source when you use this infographic on your website, Source – MrBTC.org

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5 thoughts on “What is Bitcoin? Definitive Guide On Bitcoin For Beginners & Experts 2019”

  1. Pingback: GraphicsPedia

  2. Wow
    This is a beautiful article on Cryptocurrency. But can you please list some top crypto exchanges where we can buy easily and whom we can trust.

  3. Nice to read and everything together on one spot. Beside Bitcoin, there are many other cryptocurrencies on the market and some of them are running under the regulation of bank systems and are limited to countries of usage. What I find funny is the fact that we always had currencies which existed only on paper but had not office hard money involved. Let’s look back to the first European currency, the ECU. It existed for trades between the European countries. Or let us look at all the loyalty programs, they work with points which convert into real money, is this also kind of virtual currency? Just because they would use a crypto technology based on blockchain they would convert to a cryptocurrency, right?

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