Surprising Facts about Cryptocurrency
The cryptocurrency market is exploding and shows no signs of slowing down. The industry has grown so much that many people have started to invest in it as a way to generate passive income. There are many cryptocurrencies on the market, but Bitcoin is still the most popular one by far.
9 Surprising Facts about Cryptocurrency
1. Cryptocurrency is not private
When bitcoin first began to gain traction the idea that it was anonymous and private gained popularity. Today we know that this is not true at all, as bitcoin transactions are stored publicly on the blockchain, which means anyone can see how much a specific address has in their wallet.
If you host your own wallet you can remain completely anonymous but remaining private is impossible because of the public nature of the blockchain. Add on top of that if you purchase bitcoin from an exchange you lose your anonymity and become linked to your bank account or credit card.
2. Cryptocurrency is usually used for investment, not as currency
Most people use cryptocurrency as an investment vehicle, but it can be used as a way to make transactions. As a matter of fact, the first major bitcoin transaction was made in 2010 when a computer programmer spent 10,000 Bitcoins on a couple of pizzas from Papa John’s.
At the time that was $41 worth of bitcoin. And it took 4 days to find someone who could make the transaction for him. Less than a year after this transaction bitcoin reached parity with the US Dollar which made his pizzas worth $10,000 but it doesn’t stop there. As a point of reference, Bitcoin is now worth about $60,000 each and so that bitcoin would now be worth $600 million dollars.
Hopefully, those pizzas came with a large soda!
3. If you lose access to your wallet that money is gone
The way that cryptocurrency storage works is in a file called “Wallets” these wallets are encrypted with a key that you need to access your wallet and make transactions. If the file is lost or corrupted there is no way to restore any of those funds back into another wallet. This means if someone steals it, breaks a hard drive it’s gone forever unless you have backed up your wallets in multiple secure locations.
A 35-year-old British man accidentally threw out a hard drive containing a wallet with 7,500 bitcoin which had a value at the time of about $280 million. He was so desperate to get it back that he requested to his city council that he be allowed to search a garbage dump that he believed the wallet was promising to share some of the profits with them. His city council denied the request citing environmental concerns.
If you are going to store your wallet on your hard drive be sure to have backups of it in multiple secure locations.
4. Cryptocurrency is not regulated by governments
One of the major selling points behind cryptocurrency is that it’s unregulated and not affected by any government. This means the value could skyrocket (like we’ve seen with bitcoin) or it could go to zero depending on what people think of cryptocurrency at a given time.
This can be a good thing if you don’t have faith in your government to fiscally do the correct thing but it also opens it up to market manipulations.
Elon Musk, the CEO of Tesla and other techy startups, has obtained a cult-like following and he likes to use it. He has been fined by the SEC for tweeting about stocks and potentially manipulating those and so his attention has changed to the unregulated industry of Cryptocurrency.
When Musk (or Tesla) purchases bitcoin or tweets about Dogecoin or Shiba Inu, it prompts many of his followers to do the same. When Musk talks about bitcoin or cryptocurrency the value often soars as those who believe in him invest with both feet!
This makes the crypto market in general more unstable, but it does drive adoption and investment.
5. You Pay taxes on Cryptocurrency as you would with stocks
Even though crypto isn’t regulated by government organizations many governments tax to buying and selling of cryptocurrency. Just like any other type of investment vehicle, you will be required to pay taxes on the profits that you make from cryptocurrency exchanges.
Cryptocurrency is treated as an asset which you would pay capital gains taxes on similar to how you would pay taxes on the stock market.
If you are using cryptocurrency to avoid paying your taxes then this is not the best course of action. It is illegal and there have been many arrests associated with people who were trying to use it for tax evasion purposes.
This means it is extremely important for you to keep track of the transactions that you make and the gains and losses that you incur on your cryptocurrency investments! The best course of action, if you have a lot of transactions, would probably be to find an accountant that is familiar with cryptocurrency.
6. Cryptocurrency is banned in some countries
Some countries really dislike the concept of cryptocurrency and have done everything from banning it outright to trying to control their citizens’ ability to purchase cryptocurrency.
Here is a list of some countries that have made an attempt to ban cryptocurrencies
Even though these countries have banned cryptocurrency the digital nature of the currency makes it nearly impossible to completely prevent their citizens from using it.
Cryptocurrency is not backed by gold or other precious metals like traditional currency
One of the major selling points and downsides to cryptocurrency is that there’s no central bank backing it up and giving people a sense of security when they invest in cryptocurrency. There are some cryptocurrencies out there that do have an intrinsic value.
7. Some Countries use Cryptocurrency as an official currency
Even though many countries have tried to limit the usage of cryptocurrencies in their borders. El Salvador recently became the first country to adopt Bitcoin as an official currency. This in theory will make it cheaper and easier for migrants to send money home to El Salvador and vice versa.
This is because Bitcoin transactions are much cheaper than those of Western Union and other traditional payment transfers. It also reduces the risk that immigrants will be exploited by people taking an unfair cut from their transfer fees.
The biggest concern over this is that bitcoin is still a very volatile currency that can lose up to half of its value overnight which could cause a serious problem for a nation that uses it as its official currency.
8. You can “Mine” cryptocurrency by validating transactions before they go onto the blockchain
Unlike precious metals which you can mine from the ground, cryptocurrency has to be “mined” by solving complex math problems that function as a verification of transactions.
These miners are individuals who have powerful computers and use them for this purpose. The more people mining on the network, the harder it is to get coins because each coin requires even more difficult equations to solve.
This is a concept that was created by Satoshi Nakamoto as a way to combat the problem of double-spending. In traditional currency, if someone were to give you two $50 bills at separate times they would both be considered valid forms of payment and it would be difficult for anyone else to tell them apart from each other unless there are obvious signs of damage or rips.
Bitcoin has a limit of 21 million coins and it will not be possible to create anymore once they are all mined out
Since the goal was for cryptocurrency to function as an alternative currency, Satoshi Nakamoto wanted there to only ever be one that would replace traditional forms of payment like cash dollars and credit cards.
This means that as more and more people mine for the coins, it will become increasingly difficult to get your hands on one.
This process of mining and verifying transactions is where bitcoin is created and new bitcoin hits the market which incentivizes people to use their computers and their power to make a profit.
9. You can start your own Crypto even as a joke
Not all crypto is serious. While cryptocurrencies like Bitcoin and Ethereum have serious intentions of disrupting the financial world, there are others that exist just to be a joke.
Dogecoin is one of these cryptocurrencies and started as an internet meme about the Shiba Inu breed. These coins for a long time were seen to be valueless but once the meme became widespread the value actually became serious and people made millions off of it.
People also lost a lot of money purchasing these coins because they saw it as a joke. Just because a coin is created does not mean that it will have value.
Go Forth and Crypto
In conclusion, Bitcoin is a cryptocurrency that was created to function as an alternative currency outside of any government’s control. Whether you’re looking for more information about how it works or what its current worth, this article should have answered some questions for you.
- How Does Bitcoin Differ From Other Cryptocurrencies
- Bitcoin Security: What You Wanted to Know
- What You Did Not Know About Crypto ATMs
- Cryptocurrency for Beginners
- Guide to Bitcoin ATMs