A crash course on Bitcoin
All eyes are on Afghanistan today, for good reason. There’s only one word to describe what’s going on there, and you can’t say it in a family journal. They are actually two words stuck together, the first being “cluster”. I’ll spare you my biased opinion on the subject and let you pick one from whatever source you want, NPR, CNN, Fox News or whatever.
Today, I’m going to talk about cryptocurrency, which, until now, is not a **** cluster, even if the government is bent on regulating it, and therefore screwing it up. The government has been slow to pounce on cryptocurrency so far because it cannot understand what it is and therefore cannot decide which of its agencies should regulate it. Is cryptocurrency a commodity, a security, a technological breakthrough like the World Wide Web was in 1989, or something entirely new? Cryptocurrencies have been in the news for several years, usually when one, like Bitcoin, has a wild change of mood in its valuation. Recently, the regulation of cryptocurrencies was part of the Senate debates on the infrastructure bill. One of the sticking points of the debate was a proposal to give the federal government the power to impose new tax reporting requirements on cryptocurrency brokers. Since cryptocurrencies are by definition “virtual”, you must be wondering how they can become part of an infrastructure, which we generally think of as roads, bridges, buildings, etc. There is a logical answer … well, sort of logical. The connection is that “regulation” of tax reporting rules will increase federal revenues by some $ 28 billion over ten years, and thus help pay for other infrastructure. This is Congress for you.
The recent buzz about regulating the cryptocurrency industry, and in particular Bitcoin, has made me realize two things. First, I really have no idea what Bitcoin is. And, second, whatever it is, I want one. I want to buy one and put it in my wallet. So I started to educate myself. In doing so, I was disappointed to quickly learn that I couldn’t afford a bitcoin at the moment as its current price, as of August 26, was $ 46,756.30. (As you read this, the price could easily have gone up or down by around $ 10,000.) Over the past 52 weeks, the price of a bitcoin has fluctuated between $ 9,916.49 and 64,863.10 $. In October 2010, you could have bought a bitcoin for ten cents. If you had bought for $ 100, your 1,000 bitcoins would now be worth almost $ 47 million.
I also learned that if I could afford a bitcoin today, I could put it in my wallet. So how, you will ask me, can you put anything “virtual” in your wallet? Easy. You get a virtual wallet.
Confident in my newfound knowledge and understanding of cryptocurrencies, I feel compelled to pass this wisdom on to you. Here is my crash course on Bitcoin, lesson one:
Who invented Bitcoin? On January 9, 2009, version 0.1 of the Bitcoin software was released by Satoshi Nakamoto. So Satoshi Nakamoto is considered by people who know these things to be the creator of Bitcoin. But strangely, no one knows who Satoshi Nakamoto is (or was). Not only that, no one knows if Satoshi Nakamoto is a man, a woman, a group or a thing, or if he existed. But he / she survives, because the smallest Bitcoin unit, equivalent to 100 millionth of bitcoin, is called a “satoshi”. As of August 26, the value of a satoshi was $ 0.0004679. Therefore, today one US dollar is equivalent to approximately 2,123 satoshis (SATS). I guess even I can afford some SATS. By the way, did you notice that in this paragraph I mentioned Bitcoin (with a capital “B”) and bitcoin (with a lowercase “b”)? It is not a typographical error. Bitcoin, with capital letters, describes the concept of Bitcoin, or the entire network itself, while bitcoin, without capital letters, describes a unit of currency, as in “I paid two bitcoins (or two BTC) for my last shipment of illegal cannabis. “Yes, the use of Bitcoin has been popular in illicit transactions, as cryptocurrencies are not regulated by any centralized authority, are free from government control and intervention (so far), and have no from a centralized issuer such as a country’s central bank. But Bitcoin is also becoming more prevalent in legitimate transactions (perhaps for the same reasons?). More and more merchants are accepting bitcoins. For example , if you look closely enough, now you can buy things like cars, furniture, vacations, electronics, socks, and even funerals.The common abbreviation for bitcoin is BTC.
Some definitions :
Cryptocurrency – According to old Standby Wikipedia, “a cryptocurrency is binary data designed to function as a medium of exchange in which the ownership records of individual coins are stored in an existing ledger in the form of ‘a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins and to verify the transfer of ownership of coins. Cryptocurrency does not exist in physical form (like paper money ) and is usually not issued by a central authority. Therefore, cryptocurrency is an internet-based system that uses cryptographic functions to exchange financial transactions. Cryptocurrencies are virtual or digital currencies and are not have no physical existence, they exist only as a set of programming codes.
Blockchain Technology – Blockchain is a giant database, but the data is not stored in any central location. It is stored in interconnected computers around the world. The use of blockchain technology is not limited to cryptocurrencies. It can now be used to move a lot of things, like real estate, cars… and bitcoins. And it can do this without an intermediary, like a bank, as happens in a conventional transaction when you order something from Amazon with a US dollar credit card.
Wow! Are you still confused? I am on.
Why would anyone want to invest in a bitcoin if it doesn’t physically exist? Some people invest in it as a hedge against inflation. Why is that? Bitcoin differs from more conventional fiat currencies like the US dollar because, at least in theory, Bitcoin has a finite supply of 21 million units (bitcoins). There can never be more than 21 million bitcoins (at least that’s what they claim). When a government, like the United States, wants to inject more currency into the economy, it simply prints it. Therefore, inflation is built into the system. Inflation rates in the United States have varied over the years, but there has always been some inflation. Since the introduction of the CPI, the highest inflation rate was 19.66% in 1917. The current rate is above 5%. Bitcoin supporters claim that because only 21 million bitcoins can be created (mined), bitcoin is a good investment as a hedge against the ever-rising US dollar. Sounds pretty tempting, right? But wait, there is more. The price of a bitcoin on April 14 of this year was $ 64,863. If you had bought bitcoin on that date, just four months ago, you would have lost over $ 18,000 at today’s prices. Investing in Bitcoin is not for the faint of heart. So, do you think the government should regulate Bitcoin? Do we need the government to save us from ourselves and our own greed? Hopefully Americans are smart enough to make their own decisions about how much risk to take. If you bought bitcoin on April 14, it’s not because someone pointed a gun to your head. But… I’m sure the government will regulate it anyway, because that’s what the government does… as soon as it can figure out what it is.
I am still learning about Bitcoin and intend to continue working on my knowledge and understanding of it. Let me know if you want me to share.