This cryptocurrency, initially considered the domain of computer geeks, are now attracting the ever-increasing interest of investors, as exemplified by investments on the New York Stock Exchange as well as Goldman Sachs, BBVA and Citigroup banks. Bitcoins startups such as Coinbase.com and Circle.com specialize in the transfer of cryptocurrency between users and the storage of their portfolios.
Bitcoin is cryptocurrency, which came into being through a person or group of people using the pseudonym of Satoshi Nakamoto. The very idea of cryptocurrency, however, is nothing new since it was first described in 1998 by Wei Dai on the cypher point mailing list. However, Bitcoin is what he first implemented, and has gained so much popularity and user bases.
Bitcoin’s beginnings date back to 2008, when Satoshi Nakamoto, engaged with cryptography on his forum, released a document describing the theoretical foundations of virtual currency. A few months later, version 0.1 software for the formation of “coins” was released.
Bitcoin is a totally abstract concept, because the currency cannot be physically touched or seen. It is the result of very complex mathematical operations, the outcome of which is stored in a string of symbols which can be saved in a file or printed. Although Bitcoin has no material form, there is nothing in the way of passing it on, paying for products and services, and even using specially prepared ATMs to withdraw its equivalent in local currencies.
Bitcoin is a decentralized currency and is therefore not subject to the regulations and not based on trust with respect to the central issuer. As a result, Bitcoin is completely independent of banks, governments and institutions. Therefore, transactions are made fully anonymous, are fast and not subject to any additional charges. The number of bitcoins is arbitrarily determined, and is exactly 21 million units. The limited resources of Bitcoins means that there is no inflation. On the other hand, the lack of any legislation concerning the marketing of this cryptocurrency means Bitcoin is becoming increasingly attractive to speculators.
The basis of Bitcoin is a Peer to Peer network (P2P for short). Its users connect directly with each other without going through a central server. Each P2P node network delivers computing power, which is essential for complex mathematical calculations to ensure the security of transactions. All online data transactions are recorded in a decentralized database, which is distributed among users of P2P networks.
In view of the above information, it is worth considering whether Bitcoin is, in fact, a currency?
It all depends on the regulations in each country. For example, in the United States Bitcoin is not regarded today as a currency, while the Financial Crimes Enforcement Network has issued guidelines that clearly define when Bitcoin turnover is a financial service which is governed by restrictive regulations counteracting money laundering.
In the European Union Bitcoin is not yet considered a currency, but its development is subject to constant observation. In December 2013, the European System of Financial Supervision, in an official statement, pointed to the risks of investing in cryptocurrency. An exception on the traditional European market is our Western neighbours, who recognized the legality of Bitcoin, so that in Germany it is subject to all financial regulation and legislation.
In Poland, the cryptocurrency issue is by no means settled. According to the Ministry of Finance, Bitcoin is not regarded as a means of payment. Although Bitcoin does not exist under Polish law, the profits from its trading is taxable. Also, if you purchase a product or service with it, VAT is payable.
What then is the future of cryptocurrency?
Despite the high growth rate of Bitcoin, it is still in the very early stages of development. A tiny percentage of the population use the virtual currency . The high susceptibility to speculation and the lack of any legal regulations discourage greater involvement of private investors in the market. On the other hand, we can observe growing interest in Bitcoin Start-ups by large investment funds and banks, which may indicate that the market will soon be regulated, and Bitcoin will become officially acceptable as a means of payment.
Bitcoins are now mainly used by so-called innovators – people who are strongly associated with the IT industry and are looking for technological innovations. Currently, the development of Bitcoin is entering its next phase, and if early market participants demonstrate an appropriate determination and strength, we can expect another revolution such as mobile telephone communications or e-mail. Do not forget also that the Bitcoin is only the tip of the iceberg, and behind it there is a technology that can find a much wider application.
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