History of Bitcoin

With the changing technology, the financial industry has also been constantly evolving. A path-breaking financial evolution has been happening for nearly a decade or so is now a rage in the financial markets.

The new form of currency called Bitcoin is developed by someone with a strong sense of technology and maintained by a brilliant team of experts. This new form of currency is held digitally. One factor that sets Bitcoin apart from other types of currency is that it is not controlled or owned by the Government. Its value is decided by the community of users.

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For long, the U.S. currency is based on gold. When you deposit a dollar in the bank, you receive an equivalent amount of gold. The value of Bitcoin is based on mathematics. Complex mathematical formulas involve a series of sequences and permutations that are used for generating Bitcoin. Every transaction processed is recorded and validated in a public register using unique blockchain technologies.

The fact that the Bitcoin network is not controlled or managed by any institution or government body created a deep sense of interest in this technology. Decentralization is the idea behind the Bitcoin technology.

The technology is completely independent of any central authority such as bank, government, or country.

Who invented Bitcoin? Is it a legitimate currency?

The identity of a Bitcoin creator is a mystery. A pseudonym, Satoshi Nakamoto is the name given to its creator. His account is no longer active, nor have the Bitcoins in his wallet ever spent.

An article is doing the rounds that the pseudonym Satoshi Nakamoto could be associated with some people, including Charles Bry, Vladimir Oksman, and Neal King. These are the people who filed for a patent to secure communication just a couple of months before purchasing the Bitcoin.org domain. Was it planned to be that way or was it a mere coincidence? No one would know.

It is important to ensure that the Bitcoin Blockchain is never tampered. This responsibility of taking care of Bitcoin Blockchain is of miners.

The Bitcoin.org domain was registered on 18th August 2008 by an unknown person or entity. Soon after, on 8th January 2009, the first version of Bitcoin was announced and the mining process was initiated.

As privacy was the key need of Bitcoin and the users of this crypto-currency, the mystery associated with Satoshi Nakamoto was apt in a way. Many other people have tried to claim credit for Bitcoin but did not provide sufficient proof. Craig Wright from Australia was the most recent claimant. Regardless of who invented the technology, it is clear that introduction of Bitcoin has created a disruption in the global finance markets.

Uses of Bitcoin

Bitcoin is no different from other popular currencies in terms of stability and value. A currency's value can be judged by what it can be used on. Many top vendors and merchants now accept Bitcoin as legal tender.

The popular computer company, Dell was one of the first businesses to accept Bitcoin and also one of the largest international companies to do so. Besides, there are many others joining the bandwagon primarily because the growth of Bitcoin can benefit retailers in multiple ways. The example of Dell will clear up facts.

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During the financial year of 2015, Dell reported earnings of $59 billion. With traditional currencies, they have to shell out 2 to 3 percent transaction fees. With Bitcoin, the fee is considerably lower. This saved the huge sums of money.

Other companies that accept Bitcoin as legal currency for transactions are airBaltic, Expedia and Cheapair. Even the iconic technology company Microsoft has started accepting Bitcoin. Users can now purchase their favorite MS apps, games and digital content by simply loading their account with Bitcoin.

These companies want to remain connected and cement their position with their tech-savvy audiences and Bitcoin is a great way to do so. Other benefits of using this crypto-currency are -

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Faster Payment

Bitcoin ensures faster payment than wire transfers and checks can take some days for clearance. Bitcoin can make payment in a few minutes.

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Lower Transaction Fees

The cost of transacting with Bitcoins is lower than other forms of payment methods like Paypal or credit cards.

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Elimination of Chargebacks

Charge-back is eliminated with Bitcoin. It eliminates the chances of frauds and scams.

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No Government Regulations

This currency operates on a decentralized format which means users need not worry about policy changes and regulations that affect normal government operated currencies.

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Protection against Inflation

Unlike other common currencies, Bitcoin is mined for a fixed number. The important scarcity factor protects the coin from inflationary movement.

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Ownership of Currency

With Bitcoin, you remain in control as you own your coins entirely. In other forms of payment, there is a possibility of users getting locked out of their assets for a variety of regulatory and operational reasons.

Bitcoin is a Commodity or Currency?

Bitcoin is in the unique position of being a currency as well as a commodity. It can be used for purchases. It can also be treated as property or commodity according to a guide released by the IRS which states that virtual currencies will be dealt with in the same manner as properties for federal reasons.

In specific situations, Bitcoin operates like any other legal tender. However, Bitcoin does not enjoy legal tender status anywhere. IRS guide states that:

  • General tax principles applicable to property transactions will also apply to those carried out using virtual currency. The following transactions done using virtual currency will attract taxes as per rules of the IRS.
    • Wages paid to employees
    • Using virtual currency, payments are made to service providers and independent contractors
  • The gain or loss from the virtual currency sale or exchange totally depends on the capital asset of the currency. Also, the United States Commodities Futures Trading Commission has stated in 2015 that Bitcoin is a commodity.

Future of Currency

Bitcoin has been written away several times in the past but it continues to emerge stronger with every obit. There has been a significant increase in adoption rates with more brands allowing payment using this virtual currency. The growth has been slow but it must be understood that new technology does not enjoy instant acceptance. For the new generation users who love anything that’s groundbreaking technology, Bitcoin is undoubtedly the biggest thing to happen in the financial sector.