Bitcoin’s Uncertain Future

Bitcoin’s Uncertain Future

First, it is worth distinguishing between Bitcoin, capital letters, a decentralized user-to-user payment system without financial or banking intermediaries, based on highly sophisticated open-source software managed and developed by highly skilled volunteers (“miners”), and Bitcoin, lowercase (BTC), the unit of account for the payment system.

Bitcoin and Bitcoin were created in 2008 and operated in 2009 by a very sophisticated and unknown programmer under the pseudonym Satoshi Nakamoto. Its operating system is based on mathematical proofs, and “miners” using software programs follow the same mathematical formula to produce bitcoins. The formula and its software are public and free.

The “miners” who create Bitcoin are individuals or institutions that use increasingly sophisticated computer systems to perform the increasingly complex calculations required to create and verify transactions between users. That is, the seller is the rightful owner of the bitcoins, and every transaction is properly recorded in a common record of all transactions, called the blockchain.

These “miners” create the blocks that make up the ever-growing blockchain, which contains hundreds of transactions, in addition to a set of random numbers and letters generated by applying complex mathematical formulas to the data of each transaction ( hash). Also, they include the hash of the previous transaction and some last added data (nonce). These volunteer “miners,” about 100 in total, are compensated with 25 bitcoins (about $16,000) for every block they complete.

There is also a limit to the maximum number of bitcoins a “miner” can produce (up to 21 million), and the math required to reach this number becomes increasingly complex. It has been calculated before that this amount can be reached in 2041.

Bitcoins can be obtained by creating them, which is impossible for any individual or institution that is not a “miner”, or by buying them with cash or credit card on the market or Bitcoin exchanges (there are already around 100 or so) They come to gain the world. world. The most important thing today is BTC China, until February 2014, Mt. Gox in Japan and now Bitstamp in Slovenia, BTCe in Bulgaria, Huobi in China and Bitcoin Central in France. There are also individual ATMs that have proliferated since 2013, albeit scarce and expensive.

In order to conduct a transaction, both parties need to have an account in the Bitcoin system, called a Bitcoin wallet, which, in the aforementioned exchanges, is equivalent to a physical wallet or bank account. There are two types of wallets: hot wallets, which are stored on a device with an internet connection (computer or smartphone) and can be hacked and stolen, and cold wallets, which are offline. Many Bitcoin holders keep larger amounts offline and smaller amounts online for frequent use.

Likewise, the Bitcoin system does not allow credit or its participants to fall into debt, so payments can only be made in a single account on the payer or receiver.

Bitcoin can be used to buy at some bitcoin stores (BitcoinStores or Bitcoinshops) and some online stores (WordPress, Overstock.com, Zynga, Tesla, Virgin, Reddit, OKCupid, etc.). But today, by far, the largest use of bitcoin in the world is online gambling.

From July 2010 to the present, Bitcoin has suffered multiple blows. The first of a large Mt. Gox bitcoin exchange in Japan. In June 2011, a hacker hacked Mt. Gox and stole $500,000. In April 2013, Mt. Gox ceased operations for one day. In February 2014, a hack of Mt. Gox made it impossible for its customers to withdraw their balances, causing it to go out of business and shut down.

China has made two negative decisions about the future of Bitcoin: since December 2013, the People’s Bank of China (PBOC) has not recognized Bitcoin as currency and banned financial institutions from using it, and its largest Bitcoin market, BCT China , you will not be able to accept RMB payments.

On March 27, 2014, the U.S. tax collection agency, the IRS (Internal Revenue Service), announced that for tax purposes, it would treat Bitcoin as property rather than currency, and by not recognizing Bitcoin’s existence, levied capital to them. Earn up to 20%. Many Bitcoin users and traders see this as good news, as its existence is officially recognized.

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