What are bit coins
John Hawkins formerly worked in two central banks and for the Bank for International Settlements. This story is part of a series on financial and economic literacy funded by Ecstra Foundation. Often these are based on not much more than extrapolations by people with vested interests: the price has gone up a lot so it will keep going up. If it gets above its previous high, it must keep going up. A fundamental value in traditional financial-speak means a value based on what return or cash flow is generated by an asset.
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What is bitcoin?
Updated on : Feb 01, - PM. Bitcoin is one of the earliest forms of cryptocurrency , forming part of the worldwide peer-to-peer payment system. Cryptocurrency is digital money. It is considered to be more secure that the real money. Cryptocurrency uses something called cryptography to secure its transactions. Cryptography, to put it in simple words is a method of converting comprehensible data into complicated codes which are tough to crack.
Cryptocurrencies are classified as a subset of digital currencies, alternative currencies and virtual currencies. Bitcoin was the first ever cryptocurrency created in the year Subsequently, there has been a rapid increase in the number of cryptocurrencies that have been created some of which are Litecoin, Ethereum, Zcash, Dash, Ripple etc.
Bitcoins, in India, have slowly started gaining popularity, given the efforts of the government to move towards a cashless economy. However, one should know that bitcoins, as of today, are not centrally administered or regulated by any specific body like the RBI which administers physical currency in India.
In fact, peer-to-peer transactions with bitcoins are managed using something known as the blockchain technology which serves as a public ledger for all transactions. The process of cracking such puzzles which are integral to the blockchain technology, help in maintaining them. As a reward for this, the miner gets new bitcoins which is nothing but creation of a bitcoin or mining.
Everyone cannot be a bitcoin miner. Hence, you can consider buying bitcoins from bitcoin exchanges and store them in an online bitcoin wallet in digital form. Unicorn, Bitxoxo, Zebpay, Coinbase etc. Such bitcoins would be purchased in consideration for real currency. It would be interesting to note that currently, the value of 1 bitcoin is approximately about INR 31,99, Though this may not be a common phenomenon in India currently, there are few savvy businessmen who accept bitcoins instead of real currency on sale of goods or services, they deal in.
As earlier discussed, bitcoin, as a medium of payment, has neither been authorized nor been regulated by any central authority in India. Further, no set rules, regulations or guidelines have been laid down for resolving disputes that could arise while dealing with bitcoins. Hence, bitcoin transactions come with their own set of risks.
However, given this background, one cannot conclude that bitcoins are illegal as, so far, there has been no ban on bitcoins in India. The Supreme Court of India has in its ruling pronounced on 25 February required the Government to come up with Cryptocurrency regulation policies. The matter had been adjourned in the hearing on 29 March and has been rescheduled for hearing in the second week of July The concept of bitcoins being quite new to the Indian market, apparently the government has not yet brought taxability of bitcoins into the statute books.
At the same time, the levy of tax on bitcoins cannot be ruled out because the Indian income tax laws have always sought to tax income received irrespective of the form in which it is received. Therefore, the possibility of tax on bitcoins can be looked at under the following circumstances:. Bitcoins created by mining are self-generated capital assets. Subsequent sale of such bitcoins would, in the ordinary course, give rise to capital gains.
However, one may note that the cost of acquisition of a bitcoin cannot be determined as it is a self-generated asset. Furthermore, it does not fall under the provisions of Section 55 of the Income-tax Act, which specifically defines the cost of acquisition of certain self-generated assets. Therefore, the capital gains computation mechanism fails following the Supreme Court decision in the case of B.
Srinivasa Shetty. Hence, no capital gains tax would arise on the mining of bitcoins. This position would hold till such time the government thinks of coming up with an amendment to Section 55 of the Act. At this juncture, given that the Indian tax laws are silent on the taxability of bitcoins completely, we thought it right to comment on a probable contrary view by the income tax authorities.
There is a possibility that the department may not consider bitcoins as capital assets at all. Hence, the provisions of capital gains would not apply at all. If bitcoins, which are capital assets, have been held as an investment and are transferred in exchange for real currency, the appreciation in value would give rise to a long term capital gain or a short term capital gain depending on the period of holding of the bitcoin.
The cost of acquisition for arriving at long term capital gains will be determined after giving the benefit of indexation. A simple example is given below to understand this :. Reiterating the probable contrary view of the income tax authorities discussed under Point 1 above, the IT authorities may not consider Bitcoins as a capital asset and hence the provisions of capital gains would not apply.
The benefit of indexation as would be available if taxed under capital gains, would also not be available if taxed under Income from other sources. The income arising out of bitcoins trading activity would give rise to income from business and accordingly, the profits arising out of such business would be subject to tax as per the individual slab rates. Bitcoins being received so shall be treated on par with receipt of money.
It would constitute income in the hands of the recipient. Further, since the recipient received this income out of a business or profession, he would be taxed, normally, under the head profits or gains from business or profession. As regards the disclosure requirement of bitcoins in the income tax return forms, there continues to be a lack of clarity. Distributed ledger system or the blockchain technology allows the organisation of any chain of records or transactions without the need for intermediaries.
The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto assets in financing illegitimate activities or as part of the payment system.
The Government will explore use of blockchain technology proactively for ushering in digital economy. Therefore, considering that bitcoin transactions are gradually picking up in India, while, laws regulating them are significantly absent, we are hopeful that the government will come up with a notification soon to dispel the ambiguity around the legality of bitcoins, their taxability and disclosure requirement of bitcoins. While this article aims at discussing the taxability of Bitcoins only, the tax treatment on transacting with other cryptocurrencies would also be similar to that in the case of Bitcoins.
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Updated on : Feb 01, - PM. Bitcoin is one of the earliest forms of cryptocurrency , forming part of the worldwide peer-to-peer payment system. Cryptocurrency is digital money. It is considered to be more secure that the real money. Cryptocurrency uses something called cryptography to secure its transactions.
What Is Bitcoin?
When I think about Bitcoin, the best known cryptocurrency right now, I think of a quote from Warren Buffett. It's common sense really. And while Bitcoin and other cryptocurrencies have been around for quite a while, and have made lots of people rich, these two points sum up why I'm staying away. That is not to say that Bitcoin is going to collapse. It's just that Bitcoin doesn't make a lot of sense as an investment to me. When they succeed, businesses are productive: they tend to make money, and as a shareholder, you're entitled to some of it. It's the same with property, which can be rented out to generate an income stream for the owner. You might decide, for example, to accept a certain return from a business or rental property, like 5 per cent. That can help you decide how much you're willing to value the investment: in this case, 20 times rent or income. But how do you decide how much to pay for Bitcoin?
Bitcoins and other cryptocurrencies: everything you need to know
Company Filings. The rise of Bitcoin and other virtual and digital currencies creates new concerns for investors. A new product, technology, or innovation — such as Bitcoin — has the potential to give rise both to frauds and high-risk investment opportunities. Potential investors can be easily enticed with the promise of high returns in a new investment space and also may be less skeptical when assessing something novel, new and cutting-edge. We previously issued an Investor Alert about the use of Bitcoin in the context of a Ponzi scheme.
What are the Worst Bitcoin Losses Ever?
The objective of this work is to do a research challenge about the digital currency named Bitcoins, as well as exploit the general concept behind digital currencies and cryptocurrencies, and enumerate some of its current criticism and problems. Such currencies usage and public knowledge is increasing hastily on the last few months, and many questions arise with its popularity. The need for exchange is an ancient human characteristic. Since prehistoric times, trading of goods for another goods, services for goods or services for services was present in human endeavor. However, with the increase on the commerce and the exchange needs, the barter become less efficient. It is known, because of Homer, that silver weights made the exchange easier on the Hellenic civilization, circa IX B.
A Complete Beginner’s Guide To Bitcoin
The declaration of bitcoins and other digital information units "tokens" in the Swiss tax return is in practice still unclear. Our article in German provides some guidelines. Bitcoin ist ein weltweit verwendbares dezentrales Zahlungssystem und der Name einer digitalen Geldeinheit. Das Bitcoin-Netzwerk basiert auf einer von den Teilnehmern gemeinsam mit Hilfe einer Bitcoin-Software verwalteten dezentralen Datenbank, die Bitcoin-Blockchain, in der alle Transaktionen verzeichnet sind. Es wird daher auch als «Internet der Werte» bezeichnet. Neue Einheiten des Bitcoins werden nach und nach durch das sogenannte Mining dt. Die maximale Geldmenge ist durch das Netzwerkprotokoll auf 21 Millionen Bitcoin-Einheiten festgelegt und kann nicht durch einzelne Teilnehmer beeinflusst werden. Ein Bitcoin kann wiederum in bis zu einer Hundert Millionstel Einheit 0.
After the feds seized and shuttered Silk Road, an online marketplace for illegal drugs, earlier this month, some technology experts started sounding the death knell for Bitcoin, Silk Road's international currency of choice. Instead, we may soon see Bitcoin's real value. Invented in , Bitcoin is not the first attempt at an all-digital, cryptographically based currency.
When my girlfriend became pregnant I decided to sell my bitcoins to decorate a nursery. I auctioned them via localbitcoins. You put your coins into an escrow account, wait for an offer and, when the buyer has paid by Bacs, you release the coins. The buyers are verified by email, telephone and an official ID. After a couple of days I had an offer.
Instead the currency uses some complicated programming to limit the amount of money that can be created. Only 21 million Bitcoins will ever be created, and there is no human decision maker who can influence that. For advocates of the currency, this is a major advantage, as it prevents the abuse of the power to create money. It is easy to see why this would be so appealing — after all, we have recently seen the damage that can happen when commercial banks have the power to create hundreds of billions of pounds in just a few years. But there are serious problems with Bitcoin. The key point to note is that Bitcoin is a prototype for what is now known as crypto currency. It was the first of its kind, an experiment designed by someone or a some group going by the name Satoshi Nakamoto.
It's only taken four years but early Bitcoin investors who put their money in Mt. Gox may at last be about to get some of their coins back. The Japan-based cryptocurrency exchange, which at one time handled 70 percent of all Bitcoin transactions, declared bankruptcy in after revealing that hackers had made off with , bitcoins.