The Latest on BITCOIN - What You Need to Know

By Hector Cisneros

What is Bitcoin? Is it the next world currency? Is it something used only by Dark Web criminals or is it becoming a universal currency accepted the world over? Whether you know nothing about Bitcoin, are thinking about getting involved as an investor, want to buy things with anonymity, or you have a horde of Bitcoins already in your portfolio, you will want to read on. Bitcoin is exploding onto the financial seen and isn’t going away anytime soon.  In this episode of Working the Web to Win, we will delve into the ins and outs of Bitcoin. We will explore in depth, what it is, where it’s going, who’s using it, what to look out for and the most important things you need to know because Bitcoin is going to be part of our lives. So, get ready to learn, be surprised and amazed as we delve into the world of Bitcoin and other cryptocurrencies.


Item 1) What is Bitcoin really? Bitcoin is a decentralized digital cryptocurrency (i.e., virtual money) and worldwide payment system that was designed to be used between individual parties without the need for a central bank or government control. The so-called unknown creator's name is Satoshi Nakamoto. The reason I say unknown is there are a lot of unanswered questions as to who actually wrote the code that is the foundation of the database that houses the bitcoin ledgers (aka blockchain). Wikipedia states that “Satoshi Nakamoto is the name used by the unknown person or people who designed bitcoin and created its original reference implementation.[1]” WOW, did he or didn’t he write it?

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Bitcoin is not based on the value of gold, oil or any commodity. Nor is it tied to any governments monetary policy or banking system. Then what is it based on? It's original value was based solving mathematical problems (AKA Bitcoin mining), which still goes on today. In fact, you can mine your own Bitcoin’s if your willing to use extensive computer resources to solve very complex math problems. However, this is capability is out of the reach of most individuals today.
 

Bitcoin is an encrypted currency that is stored on the internet on a peer to peer network of computers. These stored files are called a blockchain. A blockchain is an encrypted special accounting ledger that stores every Bitcoin transaction in use. In essence, blockchains are a group of synchronized accounting databases stored in a decentralized computer peer to peer network. The peer to peer network provides a public view of every bitcoin transaction so you can always see if someone “actually” has the currency they say they have. When a person buys something with a bitcoin (or part thereof) every ledger in the world is updated via an encrypted process where the value of that Bitcoin is transferred from one party’s ledger account to another party’s ledger account.

A Bitcoin’s value is based on its demand like any other commodity, except
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it’s digital. Its price is based on the amount a person or group is willing to pay for it (just like currency). So, why is Bitcoin important? It’s important because it is the first decentralized currency that cannot be controlled by any one nation. It is also an anonymous currency that cannot be traced like dollars. The transaction is between you and the other party, with no bank or government involved. Also, blockchain transactions are not going away. In fact, many large corporations are now adopting this technology to verify other non-monetary transactions. Blockchains could be used to verify the authenticity of drugs, music copyrights, and written documents. Also, since these transactions are not controlled by any nation or bank, the transactions are more secretive and cannot be traced like other currencies.

Here are a series of videos and articles that might explain it in a way that is easier to understand.


What is Bitcoin? 

Item 2) Can it be Hacked? The question of whether Bitcoin can be hacked or not is a tricky question. Any digital device can be hacked if another party is given access to that computing device. Recently, a North Korean hacker group was blamed for a breach of an alternative cryptocurrency called “Monero” from a South Korean company. I haven’t found any articles that state that bitcoin can or has been forged in any way, but if someone hacks your computer or smartphone where you control the access to your digital Bitcoin wallet, they can then use that wallet to buy things or transfer your Bitcoin/s to other accounts. This is not different than someone using your credit card number or bank account information because they have seized access by hacking your
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digital smart device (computer, tablet or smartphone). Another article I read talks about how Bitcoin value dropped significantly because a rival cryptocurrency Exchange (Tether) was hacked and robbed for $31 million! And still another article talks about how North Korea is actively raising funds by using hackers to hijack computers to fund their nuclear ambitions. The truth is any currency that is stored on a computer can be hacked and stolen. Any computer can be hacked and hijacked to take control of your financial assets unless you protect them as if your life depends on it – because it does!

Item 3) Is it only Used on The Dark Web -  A lot of discussions have been made about the fact that Bitcoin’s anonymity is used extensively on the Dark Web to buy illicit things. This is a fact. However, it is this anonymity that makes Bitcoin attractive to many, including banks, governments, and many companies. Yes, the Dark Web is a place that harbors many types of hacker groups, criminals, and other nefarious enterprises. However, what you may not know is that the Dark Web was actually created by the US Navy as a way to help US spies conduct
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anonymous communications with other spies and the US government. It is also used by whistleblowers and anarchist groups to expose corruption of various kinds. I am not advocating that you should start using the Dark Web in any way. In fact, my advice is to stay away from the Dark Web. However, our government (and others) are actively going after cybercriminals using the Dark Web to transact their illegal business. In an article called “US Government to Sell Bitcoin Seized from Dark Web Dealer,” a federal judge in Utah approved the sale of 513 Bitcoins seized from an investigation involving Aaron Michael Shamo, a dark web dealer. Like I said earlier, if someone or group can gain control of your digital assets, they can use those assets to their benefit.

Item 4) Is Bitcoin Volatile - All commodities are volatile in value. The value of all things is based on the demand for that item. Demand is in itself a volatile thing. Demand changes with need, scarcity, usefulness, trustworthiness, fashion, taboo and lots of other influences.  Lately, the price of Bitcoin has been skyrocketing, (surpassing $14,500 per Bitcoin) even though it once had a value of around 10 cents each! Bitcoin and other cryptocurrency prices have been showing many wild swings lately.
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 This is because a lot of people, businesses and other entities have finally discovered Bitcoin spurring a buying frenzy increasing demand. Because of the earlier mentioned North Korean hacks of alternative cryptocurrencies a major selloff occurred, due to a loss of trust, decreasing demand. A recent article in NDTV talked about how Bitcoin prices have fallen below $14,500 and how an alternative cryptocurrency fell below $2. And another article talks about how cryptocurrencies values are rising slowly after their recent slumps. If you buy stocks, bonds, oil futures, penny stocks or engage in any kind of investing, you risk taking a loss. Bitcoin is no different.

Item 5) Is Bitcoin a Good Investment? - The answer you get If you ask someone, whether Bitcoin is a good investment or not is determined by how savvy or lucky that person is as an investor. There are lots of people and businesses making and losing money on Bitcoin. Even governments like North Korea are counting on Bitcoin as a way to fund some of their needs. Many financial pundits are in favor of blockchain technology and
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are still investing in these new cryptocurrencies. In 2018, the New York Stock Exchange and other countries' exchanges have permitted the filing and sale of Bitcoin-related ETF’s (exchange-traded funds). On top of that, a headline in the CRYPTONEWS touted that “Exponential Growth: Cryptocurrency Exchanges Are Adding 100,000+ Users Per Day”. That’s a lot of people jumping on the Bitcoin bandwagon. This exponential growth is fueling the rapid rise in Bitcoin values, but it also is causing some issues with how quickly transactions take place. This means that purchases are taking longer to complete.

Item 6) Are there other Cryptocurrencies? -  There are many new cryptocurrencies available to buy and use now. According to Wikipedia, as of January 7th, 2018, there are 1384 cryptocurrencies in existence and more are on the way.  An article in, Investopedia, entitled “The 6 Most Important Cryptocurrencies Other Than Bitcoin”, states that their top six
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picks include these cryptocurrencies; 1) Litecoin (LTC), 2) Ethereum (ETH), 3) Zcash (ZEC), 4) Dash, 5) Ripple (XRP) and 6) Monero (XMR). Also, Wikipedia has a good article that lists other cryptocurrencies as well.  If you’re interested in cryptocurrencies, I suggest clicking on the above links to learn more about them. In my opinion, the development of more and faster cryptocurrencies and blockchain technologies will continue at a very rapid pace. Blockchain tech is a game-changing technology like the Internet is. The world will never be the same after it is fully fledged and adopted.

Item 7) Do you Have to Pay Taxes on Bitcoin? – The question about taxes is an interesting one. Not long ago, the US Government’s Internal Revenue Service issued Notice 2014-21, that states that Bitcoin and other alternative cryptocurrencies are subject to federal income and payroll taxes. In fact, if you go to Cointelegraph.com website and look under IRS News you will find dozens of articles that discuss how to deal
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with profits from Bitcoin and other cryptocurrencies.  These articles cover everything from Record Keeping to Tax Tips and Tax Amnesty. My suggestion is to read these articles and then to consult with your Tax Preparer. Discuss your situation and make sure your Tax Preparer is up on the whole cryptocurrency tax issue. If they are not, and not willing to do the necessary research needed to help you, find a new Tax Preparer that is.

The bottom line is this. Cryptocurrencies are not going away. In fact, they are just ramping up. I recently read in the INDEPENDENT, a UK online magazine,  that Facebook is looking into implementing Bitcoin technology. Anyone who is into more freedom will love bitcoin’s added anonymity. Banks, companies and government like it for the same reasons. The blockchain technology can be used to authenticate and protect a wide variety of intellectual, patented and proprietary technologies.  If you aren’t currently using Bitcoin or one of the alternative cryptocurrencies, you soon will be. If not, you will be using blockchain
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technology without even knowing it. I recommend reading every story linked to this article and the associated articles listed on the notes page for the Jan 16th, 2018 show on this blog. Blockchain and cryptocurrencies are a game changer, and the genie can’t be put back in the bottle.  I hope that you open your eyes and mind to the tremendous changes that this new technology will usher into our lives. I wish you all good fortune and the best of luck if you're investing in Bitcoin (or any cryptocurrency). May the blockchain be with you.

That’s my opinion; I look forward to reading yours.

This article covers seven of the most important issues related to Bitcoin, other cryptocurrencies, and blockchain technologies. It provides detailed answers to the questions of; What is Bitcoin? How is it used? Is it safe? Do you have to go on the dark web to use it? What gives it its value? Is it volatile? Are there other types of cryptocurrencies? And, do you have to pay Taxes on it? The article provides dozens of links to more content and other resources for the interested reader to complete more research as well.
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Hector Cisneros is COO and Director of Social Media Marketing at Working the Web to Win, an award-winning Internet marketing company based in Jacksonville, Florida.  He is also co-host of the weekly Internet radio show, "Working the Web to Win" on BlogTalkRadio.com, which airs every Tuesday at 4 p.m. Eastern. Hector is a syndicated writer and published author of “60 Seconds to Success

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