Tuesday, 6 December, 2022

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Money rules the world. A maxim as old as the world today is as relevant as ever. However, new means of payment, including cryptocurrencies, may not be understood by everyone. In this text you will learn everything about the most popular of them – bitcoin.

History of the first cryptocurrency

Bitcoin first appeared in 2009 by a man or group of people nicknamed Satoshi Nakamoto. Unlike traditional currencies, it is not issued by any central institution. Bitcoin uses a decentralized database distributed between nodes of a peer-to-peer network to store transactions and cryptography to provide basic security functions, such as making sure that bitcoins can only be spent once by the person who holds them at any given time

The peer-to-peer network topology and lack of central administration make it unfeasible for any government institution or other organization or individual to manipulate the value of bitcoins by producing more of them, however, a speculative bubble is still possible. The construction of bitcoin allows for anonymous ownership and transfers of property. Transactions using bitcoin are essentially impossible to crack. Researchers estimate that it would take computing power equal to half the internet to crack the bitcoin network.

Modern mining

Probably all of you have already heard about cryptocurrency mining. When we hear the term, we might imagine a gold rush. This analogy is not far from reality. All we have to do is turn physical gold into bitcoins, and picks and other tools into graphics cards and software. Just as in the days of the gold rush, not every miner struck their gold, not every cryptocurrency digger will be rewarded for their work and resources.

Cryptocurrency digging is a process in which computers with high computing power solve complex mathematical problems. The key here is the difficulty of these problems. They are so complex that a single device cannot solve them. An entire network of such computers is required. Solving each piece of this puzzle creates a new block in the chain, the so-called blockchain, which can result in the granting of virtual currency.

The law has not kept up

The legal situation for all cryptocurrencies, including bitcoin, is not entirely clear. As it allows anonymous transactions, the world’s governments are not entirely happy, as it can be used to pay for illegal procedures or for money laundering. What is the situation in Poland? Mining and trading of bitcoins, according to the Ministry of Finance, does not violate the law, but they are denied the status of currency or any other financial instrument

The sale of bitcoins, however, according to the Personal Income Tax Act should be qualified as income. The purchase of goods and services for bitcoins cannot benefit from the tax exemption provided for financial services, so it may give rise to a VAT obligation. Then the purchase of goods with bitcoins would result in double taxation. The Financial Supervision Commission issued a communiqué on June 6, 2018, indicating that cryptocurrency trading is legal and that some cryptocurrency exchanges should comply with the regulations of the traditional financial market.

Top photo: André François McKenzie/unsplash.com

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