What Is Cryptocurrency?
Cryptocurrency is digital money. They differ from conventional ones in two main ways.
– Independence. Cryptocurrencies are not tied to any existing currency, oil price, or any other assets.
– Virtuality. Cryptocurrency exists only in the digital space, stored in an electronic wallet.
Cryptocurrency has no regulatory body like the Central Bank. The only issue of digital money is by users running applications. They are paid a certain amount of virtual money for using resources (computer power). The more powerful the computer, the more “mining”.
Cryptocurrency can be exchanged for real money through virtual services-exchangers.
What Cryptocurrencies Exist?
There are thousands of them. Yes, it all started with bitcoin, which appeared in 2009. The boom in the popularity of digital coins began three or four years later. And now there are about 300 kinds of cryptocurrencies traded on the largest exchange.
Anyone advanced in technology, even a schoolboy, can write their own cryptocurrency. And this is not a metaphor: tech-savvy schoolchildren really create their own cryptocurrencies. Cryptocurrencies are written in much the same way that programs are written.
The “ready-made” digital coin needs to be put on an exchange for users to buy it. And preferably not just one exchange, but dozens: just like it is more profitable for a farmer to supply milk to ten stores instead of just one shop. And the more people buy your cryptocurrency – the higher its rate will rise.
Where Can I Buy Cryptocurrency?
On cryptocurrency exchanges.
Now in the Coinmarket rating there are 163 exchanges with a daily turnover from a few dollars to $630 million. Exchanges take a commission for the purchase, sale, withdrawal of cryptocurrencies: from 0.2 to 3% on average.
The best known and largest exchange is Poloniex, established in the USA. Also, popular exchanges among users are Yobit and EXMO, which withdraws bitcoins and altcoins in different currencies.
The pitfalls of any exchange are insecurity and vulnerability of users.
- First, the exchange can shut down. For example, the VTS-e exchange suddenly closed, its daily turnover was up to 4,000 bitcoins.
- It can happen to any exchange. “Due to the malicious intent of its creators, either the law enforcement agencies may question it, which will also freeze its work, or it will be subjected to a hacker attack. All of these events have a common outcome – the possibility of losing your crypto assets.”
- There are subtleties: “hot” and “cold” wallets. “Hot” wallet means your money is stored on the exchange itself. “Cold” is a personal cryptocurrency wallet, it is stored on your laptop or phone, but if you lose the gadget, your money is gone.
- Second, hackers steal money from the accounts of cryptocurrency exchange customers.
- “In August 2017, hackers stole more than 600 bitcoins (more than $3 million) from the customer account of the Chinese exchange OKEx. Exchange representatives said the attack had nothing to do with the security of the platform itself, and police refused to investigate, considering such trading a type of financial pyramid.”
Cryptocurrency Taxes
Cryptocurrency is legal tender in the U.S. Starting in 2022, individuals and businesses are required to declare income from cryptocurrency transactions. The U.S. Internal Revenue Service explains in detail how to pay taxes.
Cryptocurrency in the U.S. is considered property. Taxation depends on the duration of the investment, the amount of profit or loss the user made.
If an investor does not sell a cryptocurrency for more than a year, it is considered a long-term investment. In this case, starting from $41,676 of profit received, the tax rate is 15%. And if the cryptocurrency has brought the owner more than $459,750, the tax rate increases to 20%.
Investments in cryptocurrency for up to one year are considered as ordinary income of an individual, and their profit is taxed from 10 to 37%. The income tax rate depends on the taxable amount and the taxpayer’s marital status.
That’s It!
To summarize, at the moment cryptocurrencies are in an ambiguous position. Many are afraid to invest in them, because they do not understand how
In addition, not everything is so unambiguous with e-money and with the prospect of investment. It is potentially one of the most profitable income tools, but it is almost impossible to predict.
On the other hand – the cryptocurrency market is actively developing, and every year there are more and more new platforms and opportunities for e-money. This is not to mention the fact that countries are beginning to take cryptocurrencies more seriously, trying to introduce them into their economies.