By now, most people have heard of bitcoin and cryptocurrency. However, despite all of the talk that goes on and about the digital currency, many people do not have a firm grasp of just what cryptocurrency is or how it works. The following is everything you need to know about cryptocurrency as 2020 moves forward.
What Is Cryptocurrency
Cryptocurrency is a digital asset that allows for monetary exchange from person to person. These financial transactions are secured and encrypted with the help of cryptography. People then use these “coins” to shop online or hold on to as an investment. Bitcoin and Ethereum are treated like any other form of money or investment by the people that use them.
Cryptocurrency transactions are secure and anonymous. They are also not regulated by governments or central banks. The total value of cryptocurrency in circulation has exceeded $4 billion. According to Turbo Wallet, cryptocurrencies use a technology called ‘blockchain’, which is a technology that manages and records any type of transaction.
How is Cryptocurrency Used
Cryptocurrency is mostly used online to buy and sell products and services. Bitcoin and other cryptocurrencies are normally not accepted at any brick and mortar establishments. There are also many places online where the coins cannot be used as currency.
Cryptocurrency investors hold bitcoin and other digital currencies as part of their financial portfolios in hopes of realizing a profit when the coin increases in value. This has made many of the early investors very wealthy, so long as they held on to it.
How Do I Obtain Cryptocurrency
It is not very difficult to purchase cryptocurrency online. However, you may have to do a little more work to unload your digital coins.
Coinbase is one online crypto exchange where bitcoins and other digital currencies can be purchased. Apps called digital wallets or visiting coin switch website, allow you to store your bitcoins for trade availability. The private key for your digital wallet can be stored on the device you use to access your wallet.
What If a Private Key is Lost
There are many stories of people losing out on mini and vast fortunes because they are unable to locate the private key that allows access to their supply of Bitcoins. And while some of these stories are no doubt tall tales, some of them are true. James Howell is a man that found out the hard way why you should safeguard the private keys for your cryptocurrency. Howell accidentally threw out his privacy key and found out he is unable to access more than $19 million worth of Bitcoin. There are ways you can possibly recover your digital coins if you misplace your key, but it is better to ensure this does not happen.
Are Taxes Paid on Cryptocurrencies
For tax purposes, cryptocurrencies are considered to be “property” by the IRS. Bitcoin taxes are paid when you purchase digital coins, hold them for more than a year, and sell them at a profit. The gains are taxed at 15 percent unless you are in the tax bracket reserved for individuals and couples that make more than $400,000 a year. In that case, your cryptocurrency taxes will be 20 percent of your capital gains.
Are There Hidden Fees
Like with most things, it is necessary to read the fine print when you buy and sell cryptocurrency. Fees differ from one digital coin to the other, and they are assessed when a coin is purchased and when it is used or sold. The fees are not something cryptocurrency users are happy about, but they are less than many other methods of transferring funds.
Are Cryptocurrency Transactions Secure
Cryptocurrency uses blockchain technology to record all transactions. Blockchain software provides a ledger that is not controlled by any institution or individual person. Transaction records are maintained in different places and cannot be manipulated by a single person.
Things were rather quiet surrounding cryptocurrencies when the first bitcoin came into existence a little over a decade ago. But since that time, the cryptocurrency ride has been both public and extremely wild at times. The information above is complete with all the information anyone interested in bitcoin in 2020 will need to understand what the digital currency is and how it works.