Eight Facts About Bitcoin You Need to Know
Bitcoins can be a bit confusing, so it’s important to make sure you understand everything before using or buying them for your transactions. Here are eight facts to consider that will help you get a better understanding of bitcoins.
1) Bitcoin is Programmable Money
Programmable money means it can be used to facilitate transactions with predetermined terms. For example, a $100 US dollar bill is only worth that amount because someone assigned that value to the paper. With bitcoin, the value is determined by the buyer and the payer, and the bitcoin is created when both agree to the terms of the transaction. This makes bitcoin a more versatile and trustworthy form of currency.
2) Bitcoin is Created Through Mining
Bitcoin is created when miners use software to find keys that open wallets or padlocks. In essence, they are certifying transactions that take place between people. By doing this, they help to distribute new Bitcoin into the blockchain.
3) Bitcoin Has Real Value
Bitcoin is real money, not fake money. Its value is determined by users, not by an outside entity. Bitcoin’s value comes from the fact that more and more people are seeing its potential to function as money; as demand for it increases, so does its value. While Bitcoin’s price is influenced by multiple factors, its core value comes from its ability to function as designed – as a currency. To the degree that it is able to carry out this function, people will trust it and be willing to accept it as payment.
4) Bitcoin is a great way to pay for things both locally and online
You can use bitcoin to buy things from lots of online retailers, and more and more brick-and-mortar stores are accepting bitcoin as well.
You can also use bitcoin to buy gift cards from lots of popular retailers, or even donate to your favorite charity.
Plus, there are lots of other ways to use bitcoin, too. You can hold it as an investment, trade it on an exchange, or even use it to buy other cryptocurrencies.
5) No One Has Control Over Bitcoin
Bitcoin isn’t controlled by anyone – not by governments, not by banks, not even by its users. The rules of Bitcoin are enforced by its users. As of now there have been over 18 million bitcoins mind, though when you subtract Bitcoins that have been lost, stolen, or are being kept by large investors, the total number of Bitcoins in circulation are around 8 million.
6) Bitcoin is Limited
Bitcoin is different from the dollar in a key way – there is a limited supply of 21 million bitcoins, and no more will ever be created. The value can go up or down, but the total supply will never change. This is unlike the American dollar, which can be printed at any time by the government.
7) You Must File Taxes on Bitcoin
When it comes to filing your taxes this year, the IRS wants to know all about your cryptocurrency activity. That includes any virtual currencies you may have traded or sold last year, like bitcoin, ether, or even NFTs. Keep in mind that the IRS treats cryptocurrency differently from other assets and investments, so there are specific rules you need to follow. As crypto becomes more mainstream, it’s important for average investors to understand how it’s taxed. Unlike traditional currency, cryptocurrency is treated as property for tax purposes. So anytime you use or transact in crypto, there’s a potential for gain or loss on your tax return. If you sold crypto last year, be sure to report that on your return. And if you traded one cryptocurrency for another, that also needs to be reported.
8) Don’t Lose Your Wallet
Don’t let your hard work go to waste – back up your bitcoin transactions carefully or you could lose everything. According to the Federal Trade Commission, nearly $82 million was reported lost to crypto scams during the fourth quarter of 2020 and first quarter of 2021. That is more than 10 times the amount from the same period the year before, the FTC reported. So take care of your wallet – it’s the only way to keep your bitcoins safe.
Final Thoughts on Bitcoin
If you’re thinking about investing in bitcoins, it’s important to do your research and understand the risks involved. TokenTops.com is a great resource for learning more about this digital currency. It’s also a good idea to find a mentor who can help you navigate the new terms and money system.
FOR FURTHER READING
This blog post is intended to provide general information about investing in cryptocurrencies and is not intended to constitute financial advice. All investors should seek professional financial advice from a qualified financial advisor before making any investment decisions. Investing in cryptocurrencies is a high risk investment and should only be done after you have researched the topic yourself and understand the risks associated with investing in such assets.