What is Bitcoin? A Simple Stupid Guide for Beginners

Bitcoin is a fully decentralized peer-to-peer electronic cash system that allows users to exchange value without the need for intermediaries. It is the first globally adopted cryptocurrency network that records and verifies transactions through a public ledger known as Blockchain. 

These days, if you are active in the world of investments, it is impossible to go days, or even weeks without hearing about Bitcoin or cryptocurrency in general. If you don’t hear it from folks around you, you can’t escape from seeing it on social media, television or from your favorite celebrities and politicians.

Truth is, Bitcoin is a lot of things and in this article, you will understand what Bitcoin is and the mechanism behind the cryptocurrency.  

In this comprehensive Bitcoin guide, we introduce you to the leading cryptocurrency and cover the following sub-topics:

What is Bitcoin?

Bitcoin is the first ever cryptocurrency that operates without any central authority such as governments or banks. It is an open source technology that cannot be controlled or owned by anyone. 

Bitcoin is an innovative payment system and a new evolution of money. It was first introduced in 2008 as an electronic cash and can be transferred quickly between users from any part of the world. 

It is fast, secure and very reliable with remarkably low transaction fees compared to traditional financial systems. Transactions are processed and verified by network nodes through cryptography and the records are kept in a publicly distributed ledger called blockchain. 

What is Blockchain?

Blockchain is a digital ledger that records information in a way that makes it impossible for anyone to alter. In other words, once data is stored on the blockchain, nobody can manipulate or change it. 

Blockchain is generally made up of a single chain of separate blocks of information arranged in sequence. This simply means that blockchains are designed to record and store information including personal documents, contracts, or even transactions between people and organizations. 

Thanks to innovation, blockchain has since evolved into a separate concept and many blockchains have been created using the same cryptography algorithm on the original Bitcoin Blockchain.  Many people misunderstand this concept and sometimes  refer to every blockchain as the one built on Bitcoin protocol instead of it as a technology. 

Who created Bitcoin?

Bitcoin was created by a person or group of persons with the pseudonym Satoshi Nakamoto back in 2008. However, the identity of Satoshi Nakamoto remains a mystery to date. Let’s take a closer look into some of the information we have on the creator. 

Who is Satoshi Nakamoto?

Bitcoin Satoshi Monero

This question is rather an interesting one as no one really knows who is behind the name Satoshi Nakamoto, the creator of Bitcoin. 

Despite much digging by journalists and members of the crypto community, the identity of this individual or group remains a mystery.  

The name “Satoshi Nakamoto” was used to submit Bitcoin whitepaper with the title “A Peer-to-Peer Electronics Cash System”  back in 2008, which was later published by a cryptography mailing list. 

The whitepaper that first introduced Bitcoin contains a complete roadmap of how to use the peer-to-peer network. It is  important to understand that the Bitcoin whitepaper wasn’t the first idea for digital currency based on the fields of cryptography.

In January 3 2009, Bitcoin was launched with Satoshi Nakamoto mining the Bitcoin blockchain from block one, also known as the genesis block,  which had a reward of 50 bitcoins (BTC). Satoshi continued mining until his disappearance in 2010. 

Satoshi Nakamoto  was responsible for developing most of the early software such as the Bitcoin private keys and the Bitcoin protocol and he continued to modify and provide information related to the technology before he stopped all public communications. 

Why did Satoshi Nakamoto leave? 

There is no straight answer to this question. Just  as no one knows his identity, it is difficult to say why Satoshi decided to go off the radar. However, there are some hypotheses from crypto experts that might explain this. 

Some crypto experts opined that Satoshi lost interest in Bitcoin and abandoned the project due to the complexity of the coding involved in the protocol. They also believed there were some flaws in the protocol that needed to be resolved. 

Another group of experts believe  Satoshi is still actively involved with the project but with a different pseudonym. And then there are  others who say Satoshi left because he thought Bitcoin wouldn’t prosper if he stayed behind. 

However, before Satoshi Nakamoto’s disappearance, the pseudonymous character dropped a final message warning developers that the software is not all resistant to denial-of-service (DoS) attacks. 

“There’s more work to do on DoS, but I’m doing a quick build of what I have so far in case it’s needed, before venturing into more complex ideas. The build for this is version 0.3.19… Added some DoS controls. This is one improvement, but there are still more ways to attack than I can count. I’m leaving the -limitfreerelay part as a switch for now and it’s there if you need it.”

As Gavin and I have said clearly before, the software is not at all resistant to DoS attacks. This is one improvement, but there are still more ways to attack than I can count. I’m leaving the -limitfreerelay part as a switch for now and it’s there if you need it,” the message reads. 

People Claiming to be Satoshi Nakamoto

Although the real identity of Satoshi Nakamoto is still unknown, several people have come out to claim his fame. However, no one has been able to prove beyond reasonable doubt that they are the mysterious creator of Bitcoin. 

Craig Steven Wright

Australian computer scientist Craig Steven Wright has claimed many times that is Satoshi Nakamoto, the Bitcoin creator. But is Craig really Satoshi Nakamoto? 

To back up his claims, Craig provided a list of 145 wallet addresses containing some of the addresses used to mine BTC during the Satoshi era of 2009. 

Craig presented the list during his court battle with Ira Kleiman, the brother of the late David Kleiman, Craig’s former business associate. 

The list of addresses was quickly re-sealed by Kleiman’s legal team, but CourtListener had already published it, making it public knowledge. Some of these addresses were then used to sign a message calling Craig Steven Wright a liar and a fraud. 

Craig Steven Wright is a liar and a fraud. He doesn’t have the keys used to sign this message. The Lightning Network is a significant achievement. However, we need to continue to work on improving on-chain capacity. Unfortunately, the solution is not to just change a constant in the code or to allow powerful participants to force out others. We are all Satoshi.”

Note that the court filing wasn’t about Craig’s claims of being Satoshi rather it was about his business dealings with his former partner David Kleiman. 

Craig also registered a copyright for the Bitcoin Whitepaper in 2019. Afterwards he requested for every website that published the whitepaper to pull it down. This caused uproar within the media community and led to more publications of the whitepaper.  

Dorian Nakamoto

In March 2014, Newsweek identified a man known as Dorian Nakamoto as the brain behind Bitcoin. The publication caused chaos among members of the crypto community as this was the first attempt made at discovering who the hell created Bitcoin. 

The news media displayed several similarities between Satoshi Nakamoto and Dorian Nakamoto as both shared a Japanese connection. In the end Dorian stated clearly that he had no connection with Bitcoin. 

Nick Szabo

The third individual who might be Satoshi Nakamoto is computer engineer and scholar Nick Szabo. 

Szabo came up with the concept of a smart contract in 1996 way before Bitcoin was created. Back in 2008, he launched a Bitcoin precursor called Bit Gold.  His case for being a Bitcoin creator was made by Dominic Frisby, author of a book titled Bitcoin: The Future of Money.  

According to the author, Szabo shared the same writing style as Satoshi Nakamoto in the Bitcoin whitepaper. More so, both Szabo and Satoshi referenced Carl Menger, an Economist in their books. 

What We Know And Don’t Know About Satoshi Nakamoto

Satoshi Nakamoto is an interesting character as no one knows his identity. Bear in mind that very little in terms of facts is known about the Bitcoin creator and that’s because he hasn’t been identified yet. 

What We Know About Satoshi Nakamoto

  • Satoshi Nakamoto might be a group

Thirteen years ago, a person or group of persons called Satoshi Nakamoto released a paper which contained details of the Bitcoin software. Although the name is Japanese, the whitepaper was completely written in English. 

In the paper, Satoshi also used the words “we” and “I” at intervals to address himself which makes us believe there could be a team behind the pseudonym. 

  • The short public life of Satoshi Nakamoto

After the launch of Bitcoin in 2009. Satoshi regularly interacted with a group of developers on the BitcoinTalk forum, updating them on the progress of the new software. 

At the time no one cared about his identity as most of the people in the group were skeptical of the new idea. Satoshi continued to exchange information on the platform before leaving for good. 

His private email conversations with Mike Hearn and Garvin Anderson were later published in April 2011 where Satoshi claimed to have moved on to other things. 

  • Satoshi mined the first bitcoins

During the first year of the Bitcoin release, Satoshi Nakamoto mined about one million bitcoins. The coins are estimated to be worth about $55 billion in today’s market which is a lot of money for those behind the pseudonym. 

  • Satoshi BTC stack remains unclaimed

Interestingly, the 1,000,000 BTC belonging to acclaimed Satoshi addresses has never been claimed or moved between wallets. 

In the early years, members of the crypto community assumed the coins were left untouched out of fear. Some are of the opinion that Satoshi Nakamoto might have lost access to the private keys and cannot  move the coins. 

However, this is just speculation as no one knows why the asset remains untouched. 

  • Nobel Prize Nominee

Satoshi Nakamoto was nominated in 2015 for a Nobel Prize in Economic Science by a professor of finance at UCLA, Bhagwan Chowdhry. 

What We Don’t Know About Satoshi Nakamoto

  • Satoshi Nakamoto biography

Apart from the fact that he created Bitcoin, there is no public record of Satoshi’s biography anywhere on the internet.  In a digital era where it’s difficult to conceal information, Nakamoto’s mystery has remained unsolved. 

He was too careful not to reveal anything related to his personal life. All the information he shared was about Bitcoin and its code. 

  • He could be dead

There is speculation that one of the reasons Satoshi Nakamoto is still unable to be identified is probably because he’s dead. 

One theory was  that Hal Finney, a computer scientist who received the first bitcoin transactions on 12 January 2009 was really Satoshi Nakamoto. If this is true, then the identity of Satoshi may never be uncovered as Finney passed away in August 2014. 

  • Satoshi Nakamoto could be a group of companies

Some crypto community members have suggested that Satoshi Nakamoto may not be a person. Instead, some groups of companies such as Samsung, Toshiba, Nakamichi, and Motorola formed an alliance and crafted the name from their brand names. 

  • Satoshi Nakamoto may be the NSA

There are claims that Bitcoin was invented by the NSA or CIA  and that Satoshi Nakamoto is an acronym for a group of secret service cryptocurrency experts. According to the claims, Bitcoin is a privatized asset of an American intelligence agency designed to provide quick funding to United States intelligence activities across the globe. 

  • Will Satoshi Nakamoto ever reveal himself?

Well, no one knows if Satoshi Nakamoto will ever reveal his personal identity as numerous attempts to uncover this truth have proven elusive. 

What does a real bitcoin look like?

In the wake of growing interest in Bitcoin, a lot of people have been asking questions about the appearance of a real bitcoin. However, the cryptocurrency doesn’t have a physical attribute except for the computers used for mining (verifying and processing transactions on the network).

In other words, bitcoin is a digital currency and as such it does not have a physical form. In fact, you may have seen many images depicting what Bitcoin looks like, but none of them is correct. 

Bitcoin is a computer code that looks like 1s and 0s on a computer screen because it does not exist outside the Internet. Just look at it as a file stored on your computer but in this case the file is stored in your Bitcoin wallet rather than a computer. 

A wallet address refers to an alphanumeric string made up of characters such as lowercase a to z, uppercase A to Z and the numbers 0 to 9. You can learn how to get a Bitcoin address here.

Example of Bitcoin address

(Example of a Bitcoin address)

What is backing Bitcoin?

As you may already know, Bitcoin is an open source system and as such does not need the  backing of centralized authorities, such as the government, nor does it require intermediaries like banks to propagate its use.

Simply put, Bitcoin is backed by anyone who interacts with the protocol, ranging from developers to miners and end users who send and receive coins on the network. The value of BTC is determined by demand, supply, usability, acceptance and its technological value and not by any assets like gold or silver. 

How does Bitcoin mining work? 

Bitcoin mining operations

Bitcoin Mining Machines

Bitcoin mining refers to the process of verifying and recording new transactions on the Bitcoin public ledger. Mining requires the use of  extremely high processing machines including Graphics Processing Units (GPUs) and Application-specific Integrated Circuits (ASICs) to solve complex computational puzzles called hashes.  

The Bitcoin protocol uses a Proof-of-Work (PoW) consensus to enable miners to create new blocks. In addition to adding blocks and verifying transactions, mining also creates new bitcoins as a reward for the miners, which adds to those already existing. 

Technically anyone can set up powerful miners to participate in the Bitcoin mining process. Sadly mining has become saturated and competition is on the high side.  Miners have now resolved to purchase even more powerful machines that consume less electricity to profit from mining. 

Bitcoin has  a limited supply of 21 million, which is the total number of bitcoins that will ever exist. This makes the cryptocurrency the most desirable coin among investors.  So far, about 90.5% of the total supply has been mined, and the last BTC will be mined around the year 2140. 

Currently, miners receive up to 6.25 BTC as a reward for completing each block. Anyone who solves the puzzle first gets the reward. Although this amount decreases by half at four years intervals as a result of a process called Bitcoin halving. The halving occurs after each set of 210,000 blocks are mined. 

By reducing the number of rewards, less bitcoins are created. The last halving took place in May 2020 which means the next one will happen in 2024 and miners will start to receive 3.125 BTC per block. 

Miners also receive rewards for each transaction fee paid within the network. These rewards are sent directly to their wallets that have been set in place. It takes the blockchain roughly 10 minutes to process and record transactions once the math problem has been solved. 

Difference between Bitcoin and Ethereum 

When people talk about cryptocurrency, at least one person who is new to crypto must ask for the differences between Bitcoin and Ethereum. 

Due to the random mentions of cryptocurrency on television and everywhere else in the mass media the phrase “Bitcoin and Ethereum” has been drilled into our collective consciousness. 

Bitcoin and Ethereum are unarguably the most influential cryptocurrencies, both by market cap and adoption. They have greatly contributed to the growth of the crypto industry. 

To many, Bitcoin and Ethereum are simply examples of cryptocurrencies which use the blockchain technology and encryption to run their operations. 

Although both cryptocurrencies share some similarities, there are differences in their designs and functionalities so much that sometimes it might seem as though they are two completely different technologies. 

Bitcoin was originally designed as a payment gateway and a store of value. Simply put, Bitcoin is built as a database of accounts or wallets for monetary transactions which allows nodes or messages to be attached to each transaction. 

Ethereum, on the other hand, was created by a group of developers including Vitalik Buterin, as a smart contract ecosystem that facilitates the development of decentralized applications (dApps). This simply means that developers can build crypto projects on the Ethereum network. 

With that said, Ether (ETH) is the native cryptocurrency of Ethereum. It is used to process transactions as well as interact with applications built on the network. 

Read More: What is Ethereum?

Advantages and Disadvantages of Bitcoin

To help you decide whether investing in Bitcoin is the right move for you, let’s explore some of the advantages and disadvantages of the cryptocurrency. 

Advantages of Bitcoin

  • Bitcoin transactions are fast with low transaction fees compared to the traditional financial system
  • Fully decentralized with no third-party involvement. 
  • Anyone can trade and invest in bitcoin regardless of their age. 
  • No money “chargeback” after transaction confirmation since it cannot be reversed. 
  • Cross-border transactions
  • BTC transactions are pseudonymous.
  • Bitcoin transactions do not involve banks or require bank accounts. 
  • Bitcoin cannot be banned
  • BTC transactions are mobile and secure.
  • BTC transactions are permanently recorded on the blockchain for reference purposes. 
  • 21 million max supply

Disadvantages of Bitcoin

  • The price of BTC is volatile. It is called high-risk = high-profile for a reason. 
  • The government sees Bitcoin as a threat.
  • You cannot access your funds if you lose your private keys
  • Bitcoin transactions cannot be canceled. 
  • Bitcoin can be used for illegal transactions since there’s no central authority.
  • High energy consumption.
  • The layer-one network has an in-built scalability issue. Transactions may take several hours to settle and may cost significantly higher fees.

Is Bitcoin a good investment?

Many financial experts believe that bitcoin should be an important part of any diversified investment portfolio because its price increases in response to events relating to the crypto industry or other markets such as stocks and bonds causing their price to drop. 

Although the price of BTC can be volatile in the short term, it has always maintained its value over the long term. Over the years it has served as a hedge against inflation and the erosion of other cryptocurrencies, hence bitcoin is an investment worth considering.

During the first decade of its existence Bitcoin has proven to be a worthy investment, going from $0.0008 to $69,000 during its current all-time high price in 2021.  Today the cryptocurrency is trading around $44,000 and still has significant possibility for further increase.

With that said, Bitcoin proponents often say that there is never a bad time to join the bandwagon. But before investing in BTC, make sure you are not investing out of fear of missing out (FOMO) and you understand how the crypto market works. Having an investment strategy is also important as that will help you determine how long you are willing to hold your investment. 

Bitcoin Regulation Around the World

Since the invention of Bitcoin in 2009, the world has been highly divided on the cryptocurrency debate. Some of its supporters refer to the cryptocurrency as a new monetary system. However, the legal status of the cryptocurrency differs from one jurisdiction to another, and governments around the world are closely observing the fast-rising cryptocurrency debate on how to control it. 

In some countries, buying and selling BTC is not illegal as regulators are more concerned about bitcoin use cases. Although some countries are completely against bitcoin thereby banning its citizens from participating in any crypto activities.

Meanwhile, El Salvador signed a bill to adopt bitcoin as legal tender, making it the first country to officially legalize Bitcoin. This opened a window for other countries to adopt the idea of Bitcoin legalization.

Back in November 2021, The Library of Congress (LOC) reported about 103 countries whose governments instructed its financial watchdogs to develop regulatory policies for financial institutions regarding BTC and other cryptocurrencies and their use in AML/CFT. 

Major economies such as the United States have been adamant towards Bitcoin legalization. Although the digital currency is fully regulated by several financial agencies such as the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) both at the federal and state level. 

Financial regulators have issued warnings and laid out rules and regulations regarding Bitcoin activities. So far the crypto industry is still booming and who knows these  regulations may not have negative effects on Bitcoin. 

Read More: Crypto Regulations

How to buy Bitcoin for the first time

The steps to buy BTC for the first time are not as complicated as you may think. However, you will need to access a crypto trading platform to complete the process. 

There are many crypto exchanges that you can choose from, but we recommend that you use a reputable company like Binance or Coinbase for your first purchase.

You can use the steps below to buy BTC on Binance.

Step 1: Create your Binance account

Millions of customers from all over the world use Binance to buy and sell BTC. By creating an account you agree to the terms and conditions of the crypto platform. 

To sign up, head to Binance’s official webpage or download the Binance trading app available for both Android and iOS users. 

Step 2:  Verify your Binance account

Binance implemented a know-your-customer (KYC) as part of its security protocol on the platform which requires users to provide their personal information such as a phone number and a valid identification card. 

Step 3: Time to buy BTC

Once your Binance account has been verified, it’s now time to buy BTC. Head on to the homepage and click on the buy crypto option. Then select BTC and choose your preferred method of payment. After that input  the amount of BTC you wish to buy. 

Step 4:  Choose payment method

Binance offers users two payment options and customers can choose to pay by card or from an existing cash balance.  However, if you choose the card method, simply tap on add a new card and input your card details. 

Step 5: Activate fiat currency/share account details

Before proceeding to add the card details, you will be required to activate the fiat service. To do this, simply click on the box to accept the terms of service and then start.  Once done, a menu will pop up asking you to share your account details. Tap on confirm and you are all set to continue with the purchase.

Step 6:  Final Step

Input your card details and click next to proceed with your purchase. 

Best Bitcoin Wallets

After you have purchased BTC, the next thing that comes to mind is to make sure it’s properly stored in the right wallet. 

Bitcoin wallets contain a pair of cryptographic keys known as private and public keys used by the owner to send and receive BTC. Private keys must be kept safe away from unauthorized persons. Anyone who has access to your private keys can control your wallet. 

Let’s explore some of the types of wallets you can use to store your BTC.

Hardware wallets: Hardware wallets are the most secure type of wallets that allow users to store their private keys in a separate offline device. This wallet is recommended for storing large amounts of bitcoins. Unlike paper wallets which require you to import your keys to software in order to access your funds, hardware wallets can be used interactively. 

Web wallets: These are online Bitcoin wallets used mostly on centralized exchanges to send and receive BTC. Web wallets store private keys on an online server controlled by a third party.  One of the amazing features of this type of wallet is that users can access their funds on the go from any device connected to the internet. However, the funds are not totally controlled by you as the organizations running the platform can gain access to your private keys. 

Apart from gaining access to your funds, there have been reports of exchanges shutting down and users were unable to withdraw their funds.

Desktop wallets: Just as the name implies, desktop wallets are downloaded and installed on your computer which gives the users total control over the wallet. Private keys are stored directly on your hard drives or solid-state drives (SSD), although they are still connected to the internet. 

Mobile wallets: These are wallets designed for small phones. Since we live in the era of smartphones, mobile wallets are considered the best choice for small investors. The wallets are designed differently to meet your needs. Some focus on security, some on convenience while some are focused on decentralization. 

Frequently Asked Questions About Bitcoin 

Is Bitcoin a bubble?

Bitcoin has gained more than five billion percent in profit since it first started trading in 2010. This has given critics the impression that the entire crypto market is nothing but a speculative bubble waiting to pop.

For clarity, a speculative bubble refers to a situation where the meteoric rise in the price of an asset is not supported by its underlying fundamentals. 

Many Bitcoin critics have described the digital asset as a bubble, even though fundamental growth have been nothing short of awe since its inception. 

For instance, renowned investor and vice-chairman of  Warren Buffett’s Berkshire, Charlie Munger, warned investors in December 2021 that BTC is a serious bubble.  According to a BusinessInsider report, the billionaire investor said that the crypto market is worse than the infamous dot-com bubble.

“The dot-com boom was crazier in terms of valuations than even what we have now. But overall, I consider this era even crazier than the dot-com era,” he said. 

Similarly, financial adviser Ryan Payne, president of Payne Capital, also commented on BTC, saying it’s going to be ugly when the financial bubble bursts. 

“This whole Bitcoin (BTC) thing — this whole cryptocurrency — is one of the biggest bubbles ever,” Payne said. 

Despite this, Payne also believes that the price of bitcoin can still go higher because of its excessive liquidity. 

“There’s too much money out there that can funnel into this market. It’s just becoming a bigger and bigger casino,” he added.

For the crypto community, Bitcoin is the utmost store of value and the most solid hedge against inflation. Irrespective of criticisms from critics around the world, the value of BTC has remained glued to the forces of demand and supply.

Is Bitcoin a Metal?

Bitcoin is not a metal. The digital asset has no physical appearance, which means you can’t hold it. Bitcoin is best described as a string of numbers and letters stored on a computer.

Is there a physical bitcoin?

The short answer is no.  However, there are some physical coins that claim to be physical bitcoins that you can touch like regular coins and fiats. 

The first physical bitcoins are called Casascius Bitcoin which was created by a user named Mike Caldwell. These physical coins have been around for years with only a few firms associated with them. 

Casascius Bitcoins were later banned by the US Financial Crime Enforcement Network (FinCEN) after being classified as money transmitting. Other physical Bitcoins include Alitin Mint, Titan Bitcoin, Cryptmint coin, Antana Coins, and the rest. 

How old do you have to be to buy Bitcoin?

Bitcoin is a digital currency with no law that says you have to be a certain age to buy it. However, because of the know-your-customer (KYC) policy implemented in some crypto exchanges,  teenagers younger than 18 are not eligible to buy BTC. 

Underaged teenagers can still buy and sell BTC on anonymous crypto exchanges without using these platforms. Parents and relatives can also purchase BTC for their kids like this 12-year-old who went in all on bitcoin

Can you buy partial bitcoin?

Yes, you can buy partial bitcoin. A bitcoin is made of smaller units called satoshis while one BTC consists of 100 million satoshis. This means that you can buy BTC in fractions with a minimum of one Satoshi. 

Some crypto exchanges such as Coinbase allow you to buy as little as $25 worth. You can also buy fractions of BTC using Bitcoin ATMs available in your location. 

How did people buy Bitcoin in 2010?

The first known use of BTC in real-life payment happened in May 2010 when Laszlo Hanyecz used 10,000 BTC  (now worth $460 million) to pay for pizzas worth around $25. But before that trade, bitcoin was mostly obtained via mining since it required less computational power unlike today.

Can Metamask hold bitcoin?

No. Metamask cannot store BTC because it’s an Ethereum wallet designed to host only ERC-20 assets and other assets that run on networks powered by the Ethereum virtual machine. However, you can store Wrapped Bitcoin (WBTC) on Metamask. WBTC is a wrapped version of BTC built on the Ethereum blockchain. 

What happens to my bitcoins when I die?

Unless someone can access your Bitcoin or other cryptocurrency accounts when you die, your assets will be lost forever and there is nothing anyone can do about it. It is important to maintain a will which includes detailed information on how to access your crypto portfolios.

But this might change in the future because there are some smart people who are currently building solutions to solve the “crypto death problem.” 

Are there taxes on bitcoins?

The Internal Revenue Service (IRS) addressed BTC and other cryptocurrencies as assets similar to property in 2014. This means that bitcoins are taxed in the same way as gold and other stocks. In countries like India, crypto investors are subjected to pay up to 30% of their crypto gainsThe taxes are paid after you have realized  profits from trading cryptocurrency and not when you’re still holding the asset. 

Can the government take your bitcoin?

The government can take your bitcoin if used illegally. As a matter of fact, Uncle Sam has done pretty well in this aspect since the invention. Back in 2020, the United States Department of Justice raided a dark web marketplace called the Silk Road and seized over one billion worth of bitcoin which were used to buy illicit products. 

It is also worth noting, however, that the government cannot take your bitcoin if they cannot access your private keys.

What happens when all bitcoins are mined?

Bitcoin has a fixed supply of 21 million coins. Once all the coins are finally mined in the year 2140, the amount of BTC in circulation will be permanently fixed. Bitcoin mining will become less profitable and miners will only receive rewards from processing transactions. 

Conclusion

Understanding Bitcoin and how it works is important if you must participate in the cryptocurrency market. In this comprehensive guide, we answered important questions such as what is Bitcoin?  Who created Bitcoin? Who is Satoshi Nakamoto? What does a real bitcoin look like? Who is backing Bitcoin? Is bitcoin a good investment? etc.

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