There is a product out there, right now, that is changing technology, changing views on banking and privacy, challenging cybercrime wannabes, and comes complete with earning potential. Serious earning potential. Want to know what the product is?
What is Bitcoin, you ask? Get ready for the answer(s), because the Bitcoin journey is mind-blowing. There is so much to learn about this product and take in, but here are some basics for you to get a better understanding.
Bitcoin is a form of “new money” that is on the tip of everyone’s tongue, has become the subject of investigation, and has totally and utterly changed the way that people look at money. So, what exactly is it, and how can you benefit from it? Good questions. Easy answers!
Bitcoin is a new, revolutionary form of digital currency that no one controls. How is that possible, you may ask? It’s possible because Bitcoin is a decentralized payment network where absolutely anyone can participate, yet there is no sole person or entity that has control over this network. All participants act as their own gatekeeper and control their own money! Sound good so far?
How do you get access and join Bitcoin?
It’s super easy to get started. All you need to do is download the Bitcoin software onto your own computer. It’s this software that “creates” the Bitcoin (the process is called “mining,” on the network). Now, the network does have some control over when and how the Bitcoins are created, and who creates them, so understand that mining isn’t a haphazard, unmonitored process!
Confused? Don’t worry. Stay with me – there’s so much more to learn!
Realize that Bitcoin isn’t physical currency, but more like “stock.” Instead of holding physical coins or paper, you are provided with proof of a public Bitcoin address that contains letters and numbers that you can keep in a software wallet (your own small, personal database) or print them out. The proof, or record of ownership, is sent to this “big ledger in the sky” type of a thing, called a blockchain. These records are listed in this blockchain, this ledger, only by Bitcoin addresses, not by names or bank account information.
This is where modern day privacy sets in, and it’s fantastic! Bitcoin is essentially forge-resistant.
With the way that the ledger is set up, there’s no way to know who owns an account. Bitcoin addresses are extremely complex, comprised of these totally random, arbitrary characters, making anonymity the key result. But, all participants can always see the ledger, which is still perfectly private. You know who you are, and you know who you want to send money to, or receive it from. To everyone else, the information on the ledger is anonymous and essentially, unimportant, so long as it does not directly pertain to them. Basically, you only recognize a Bitcoin address because you need to know.
Does this mean that there is no fraud with Bitcoin?
There aren’t many rules to Bitcoin, but for those that do exist, they are strictly enforced. Since the internet connects all the laptops and computers that are running the Bitcoin software, everyone can kind of keep an eye on everyone. The network keeps careful track of who spends what, and where. In other words, no one can say they are “double spending,” or spending money where they didn’t when there are eagle eyes on the amounts. How can someone say they have spent money when their account value didn’t change?
It’s easy to send Bitcoins, too. All you need to do is tell the network to update the ledger. The amount is then subsequently deducted and credited to the appropriate Bitcoin accounts by their addresses. These changes can be viewed by others, but remember – no one knows who anyone is. Participants will see amounts, addresses conducting the transactions, and where funds are being spent.
Is Bitcoin-related income taxable?
Another good question, with not so easy an answer. I would defer to a tax expert with your unique set of circumstances. Since the IRS has deemed Bitcoin income as property, not currency, this type of income involves that whole saga of capital gains and all that other stuff. Any questions you may have related to this should truly be answered by a tax expert.
Are there fees to using Bitcoin?
Yes, there are some very small fees, but they are not like banking fees simply because there are no banks involved! You will pay fees to three separate groups for their services: the mining pools you join; the online exchanges that will convert your Bitcoins into dollars; and the nodes (servers) who are responsible for supporting the miners’ network.
Now, the biggest question would be, how do you make money through Bitcoin? There’s quite a few ways to achieve that, which will be discussed in one of our next blogs!