Bitcoin is a digital means of payment.
It is the first decentralized peer-to-peer payment network operated only by users and without any central authority or intermediary.
From the user's perspective, Bitcoin is more or less cash for the Internet. Bitcoin can also be seen as the most prominent example of an already existing
triple-entry accounting system .
Cryptocurrencies have brought profits to many a savvy investor in recent months. Because cryptocurrencies are not legal tender in Germany, tax authorities consider trading in cyber money to be a private sale.
Unlike securities, such transactions are not subject to withholding tax; profits, like other assets - such as works of art, antiques or real estate - must be declared in the Other Income (SOE) section of the tax return.
However, it depends on how long the buyer keeps their Bitcoins. If they sell after more than a year, they can receive any potential profit tax-free. If an investor sells their Bitcoins within the speculation period, they must tax the profit at their personal income tax rate. This is unless the profit from all private sales is below the exemption limit of €600. This is the amount investors can receive tax-free. If this limit is exceeded, the entire profit is taxable.
Trust in Bitcoins is ensured by an encryption technique that is so time-consuming and computationally intensive that any copying is impossible. The number of monetary units created in this way is limited to 21 million. This makes Bitcoins as scarce as gold.
With Bitcoins you don't have to trust banks
The advantages of Bitcoin
Bitcoin has several advantages over credit money. Since money is no longer created as a liability through lending, neither a state nor a central bank is needed for its regulation, insurance, and administration. The security of transactions and the storage of value is ensured by the blockchain, which also simplifies transaction execution. Transaction costs are financed through seigniorage, which is paid to computer operators as compensation for proving the validity of transactions in the blockchain.
In a traditional banking system, you have to trust banks to send or receive funds. These organizations require important, sensitive information from you. Because Bitcoin is decentralized, you don't need to trust banks; you are your own bank. When transactions are sent, they are digitally signed and therefore secure. An unknown miner will verify it, and then the transaction is completed. The merchant doesn't even need to know who is behind the payment.
You own the Bitcoins yourself and can even store them on your own hardware. Bitcoin belongs to you, and you have control over the use of the digital currency. No other electronic cash system can prohibit this. Other payment services can lock your account at any time, and then all the funds are gone, freeze it indefinitely, or deny transactions to certain merchants or service providers. With Bitcoin, this isn't possible; the digital currency coins belong to you, and no one has the right to access them.
Bitcoins are not inflationary
"Normal" currencies like the euro and the US dollar are so-called fiat currencies. These can be reprinted in any quantity, as the respective government and/or central bank sees fit. This makes the money vulnerable to inflation, and its value can drop significantly at any time. This is primarily done to quickly pay off national debt. If the economy falters, the government can take newly created money and inject it into the economy through a process known as quantitative easing. This reduces the value of a currency. This is not possible with Bitcoin. Only 21 million units of the digital currency can be created under the original specification. This means that the number of coins of the cryptocurrency is finite, not infinite, as with fiat currency. Bitcoins are therefore comparable to gold; the amount of gold is also finite, and it is becoming increasingly difficult to find new gold.
Bitcoins have value because they are useful as a form of money. Bitcoin has all the characteristics of money (permanence, portability, transferability, scarcity, divisibility, and knowability), but is based on mathematical instead of
physical properties (like gold or silver) and trust in central authorities (as with legal tender). In short, Bitcoin is secured by mathematics. With these attributes, only trust and acceptance are necessary for a form of money to retain its value. As with all currencies, Bitcoin's value is created directly and solely by the people who accept it as a means of payment.
Scarcity means protection against inflation
Bitcoin's cap of 21 million units is unique. There is no comparable commodity in the world that is verifiably as scarce as Bitcoin. Anyone who purchases a certain amount of BTC knows at any time what percentage of the total supply they own. This scarcity is Bitcoin's ultimate value proposition —and a good reason why people attribute value to digital gold.
4. Bitcoin has all the qualities that good money needs
Money accounts for half of every transaction. A good form of money is therefore essential for an efficient economy. For a good to be suitable as a monetary medium, it must possess certain properties. It should be scarce, divisible, fungible, non-consumable (money must be reusable), and forgery-proof. Bitcoin simulates all of these properties digitally better than any previous monetary medium.
The more people recognize these qualities in Bitcoin, the greater the perceived utility – and the higher the price.
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5. Bitcoin's incentive structure attracts investment
The fact that the reward halving occurs every four years is more or less arbitrary. Satoshi could have chosen a somewhat less drastic disinflation rate instead. However, economic supply shocks like this regularly cause a severe shortage of circulating supply.
This is likely the reason for Bitcoin's cyclical growth. According to the stock-to-flow model, the mere expectation of a supply shortage in the run-up to the halving causes market participants to accumulate coins .
Transparent and independent limited number, max. 21 million BTC Decentralized peer-to-peer value creation, indestructible forgery-proof trust, cryptography protocol Be your own bank, without third parties Available worldwide Transactions, fast, cheap, borderless Censorship-free, 2.3 billion people have no bank account, everyone can join, huge market No organization or person can control Bitcoin and the network remains secure, even if not all of its users are trustworthy.
Point 1: Transparency and independence of Bitcoin
The Bitcoin system was limited to a limited number of coins from the beginning. In the end, a maximum of 21 million units should exist and be in circulation on the market. Currently, the quota worldwide amounts to about 17 million Bitcoin. Anyone who invests here knows that it is not possible to "mined" endlessly. Mining or "mining", by the way, refers to the process of the creation of new Bitcoins within the blockchain. The blockchain reproduces all transactions since the Bitcoin start and serves via other users as confirmation of the correctness of executed transfers. Bitcoin users arrange themselves system-internally and decentralised, without authorities or banks
Can influence.
There are no account balances in the Bitcoin currency. Although a current "account balance" of the Bitcoin address is visible in the wallet of choice, this number is not stored in the Bitcoin network (the so-called blockchain). Instead, since the beginning of Bitcoin in 2009, all transactions between all Bitcoin addresses that have ever been made have been publicly displayed. If you were to see through all transactions from the beginning until today, it would be exactly possible to understand which amount must have been moved to which address and when.
In this way, it is determined which address currently has which account balance. A single participant cannot therefore cheat and omit or add transactions, because all other participants in the Bitcoin network would see the fraud.
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Point 2: the decentralisation of the Bitcoin universe
Under point 1, the term already appears briefly. The decentralisation means that the Bitcoin system - more precisely the blockchain - cannot be assigned to a specific location as a central database. Unlike the normal banking system, in which the control function is (central) banks, control over the payment model is in the hands of all participants of the blockchain.
Once again, this ensures the highest level of transparency. Decentralised in the sense of independence also means in the context: No bank is involved in the execution of transactions. The term "peer-to-peer" (P2P) is used here. A user of the system transfers data or coins directly to other users.
Advantages of Bitcoin: Users can do without other financial service providers
In addition to the abbreviation "P2P", you will often encounter the credo "Be your own bank" in explanations of Bitcoin. This refers to the aforementioned independence from the banking system. This ultimately also affects the costs of transactions. In addition, Bitcoin payments can be made around the globe across national borders. In addition to the limitless useability, you as a user also benefit from the very fast processing of your transactions. Furthermore, the transaction costs in the blockchain, especially for international transfers, remain significantly behind the fees of most other payment options in a positive sense
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Point 3: Added value and confidence in the Bitcoin
In particular, it is positive that entries in the order book (all transactions are recorded here) are largely forgery-proof. A system that, like normal currencies, is dominated by a few, is much more vulnerable. The Bitcoin blockchain is generally considered unhackable. "Indestructible" is another attribute that is often attributed to the world's first digital currency. New coins are generated up to the mentioned upper limit of members of the blockchain themselves. Despite current efforts at crypto regulation, states have no opportunity to influence here. The fact that the blockchain works "independently of banks and states" ensures several Bitcoin advantages.
Bitcoin not susceptible to risks such as inflation & interest rate corrections
Independence makes the Bitcoin like the bulk of cryptocurrencies as a whole (apart from perhaps so-called stablecoins); inapprone to consequences of political or economic crises - a keyword: inflation rate. The Bitcoin as such also remains unaffected by central bank interest rate targets. However, the past has shown that Bitcoin is particularly interesting for investors when other asset classes such as stocks promise little return. In conjunction with the secure crypto logging, the comprehensible Bitcoin concept is increasingly convincing not only real "technology nerds" for good reason. Many normal Internet users worldwide are also increasingly convinced of the Bitcoin advantages and the qualities of the current number one on the market. Important for cautious beginners: Large investments are not needed at the beginning. For the first test, you can also buy tiny units of Bitcoin and store them in your new wallet.
Manage money yourself
If you put your money in a bank, the bank promises that you will get the money back at a later date. However, you do not manage the money yourself, and you have to trust that the bank will not go bankrupt, lose money through speculation or actually keep part of the money available. With Bitcoin, no trust in banks or financial service providers is required, because as a user you hold your money in your own hands at all times.
Corporations and institutional investors like Black Rock have already entered the market through their Bitcoin ETFs, and pension funds and other corporations are currently preparing their entry. This means that a lot of capital will flow into the crypto market in the coming years, which is bound to result in significant price increases.
Investment giant Morgan Stanley (MS) sees Bitcoin entering a new phase, stating that it has completed a transition to an institutional asset class. This is according to a report dated October 31. It is an update to MS's December 2017 introduction, "Bitcoin Decrypted! A Brief Teach-in and Implications."
Bitcoin price development of the last few years.
Bitcoins have now become mainstream, as the most famous cryptocurrency is constantly being reported on. The main reason is probably that the prices of the various currencies have risen explosively, setting one record after another. A look at the price development over the past few years clearly shows how much the price has risen. Of course, there are always setbacks, but over the long term, the price has always continued to rise.