Is Bitcoin Going to be a Boom or a Bust?

 By Hector Cisneros

Image courtesy Pixabay

If you’re unfamiliar with Bitcoin, there are a few things you need to know.  While you may know that Bitcoin is a digital monetary exchange medium, it doesn’t work like paper money or credit card transactions.  While you can buy and sell things with Bitcoin, due to the volatility of cryptocurrency, the exchange rate of Bitcoin can vary wildly from day to day.  If you’ve been thinking of transacting business or investing with Bitcoin, you need to exercise caution.  Here’s why:

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?

Bitcoin is not based on the value of gold, oil or any commodity. Nor is it not tied to any government's monetary policy or banking system. Then what is it based on? 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 a 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 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 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. Also, since these transactions are not controlled by any nation or bank, the transactions are more secretive and cannot be traced like other currencies.

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. A user of Bitcoin can also be swindled out of their cryptocurrency.  In 2018, Apple co-founder Steve Wozniak was swindled out of nearly $100,000 in Bitcoin when a conman duped him by paying for the cryptocurrency with a phony credit card. The Woz later went on to sue Google over a fraudulent YouTube video that featured images of him and other tech luminaries that attempted to get viewers to send cryptocurrency for a fake Bitcoin giveaway.  

Image courtesy Pixabay

3) Is Bitcoin 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 is what makes Bitcoin attractive to many, including banks, governments, and even criminals. Yes, the Dark Web is a place that harbors many types of hacker groups, cybercriminals, 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 anonymous communications with their handlers. 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 cyber criminals who use the Dark Web to transact their illegal business.

4) 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. There are 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 volatility.  For instance, in December 2017 the price of a Bitcoin went from a high of $18,000 to a low of $3,000. 

5) 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 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.

6) Bitcoin boom or bust?  Like it or not, Bitcoin and other cryptocurrencies aren’t going away. 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.

Please feel free to contact us with questions and or requests for articles you’re interested in by emailing me, at hectorc@workingthewebtowin.com. We love reading what you think about the articles we publish. If you have a comment related to any of our articles, post them at the end of this blog in the comment section. If you would like to advertise on this blog (it receives 50,000 page views a month minimum) contact me by email.

If you or your business could use some help with marketing, give us a call at 904-410-2091. We are here to help. You can also fill out the form in the sidebar of this blog. It will allow us to provide you with a free marketing analysis to help you get better online results. Our claim to fame is that we are one of the few companies that actually provides ironclad written guarantees. Don't forget to sign up for your FREE eBook!

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.