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Bitcoin Stock! What should I know about Bitcoin?

 



What should I know about Bitcoin?

Bitcoin (BTC) is a cryptocurrency, a virtual currency that functions as a money and means of payment and does not fall under the control of any individual, group or organization and does not require the involvement of third parties in financial transactions.

Blockchain miners working on validating transactions are rewarded and can be purchased on multiple exchanges. Bitcoin was introduced to the public in his 2009 by an anonymous developer or group of developers named Satoshi Nakamoto. Since then, it has grown to become the most famous cryptocurrency in the world. The development of many other cryptocurrencies was inspired by the popularity of Bitcoin. Competitors want to replace it as a payment system or use it as a utility or security token in other blockchains and new financial technologies.

You know Satoshi Nakamoto?

Everyone loves a good crime thriller. The world of cryptocurrencies has created one of the 21st century's greatest mysteries.

Satoshi Nakamoto claims to have created the world's first cryptocurrency Bitcoin. There is little doubt that Bitcoin was created by someone named Satoshi Nakamoto, but no one knows who he is.

About Satoshi Nakamoto

We know Nakamoto created Bitcoin. This fact is described in the famous Bitcoin white paper "Bitcoin, Peer-to-Peer Electronic Cash System". Published online in October 2008.

Nakamoto is the author of a white paper describing the theory and operational structure of the Bitcoin payment system.

In February 2009, Nakamoto created his first online forum post about cryptocurrencies on his P2P Foundation forums. In that post, Nakamoto explained:

“I have developed a new open source P2P electronic cash system called Bitcoin. Everything is based on cryptographic proof, not trust, so there is no central server or trusted party and it is completely decentralized. Give it a try or check out our screenshots and design papers. "

Since this post, millions of people have followed his advice.

As of 2021, he has verified the data of at least one million Bitcoin miners that make up the Bitcoin blockchain. But those 1 million miners represent only a fraction of the total number of Bitcoin holders, which is estimated to be over 100 million. Bitcoin is currently the world's largest cryptocurrency in terms of market capitalization, surpassing other major cryptocurrencies such as Ethereum (ETH), Binance Coin (BNB) and Cardano (ADA). However, despite the astronomical value and acceptance of BTC, the identity of Satoshi Nakomo is still unknown.

Is Bitcoin safe?

Bitcoin and its virtual currency siblings have been a hot topic for years. Wealth is often created and lost through investing in cryptocurrencies, and may continue to do so in the near future. Cryptocurrency proponents see cryptocurrencies as the currency of the future, coexisting with or replacing government-issued currencies, while critics believe cryptocurrencies have no future at all. Combined with the speculative frenzy with which traders buy and sell cryptocurrencies, it's no wonder cryptocurrency prices are in a constant tug-of-war.

With this in mind, Bitcoin is something of an “oldie” as it is the first, oldest and largest cryptocurrency ever. This adds a certain level of "security" to Bitcoin, but the word should be used with caution. Bitcoin itself has many risks and is not considered “safe” compared to traditional investments such as bonds and stocks.

Here are the key aspects of investing in Bitcoin that you as an investor need to know in order to determine how "safe" Bitcoin is in your portfolio.  

  • Inherent value

Bitcoin is unique in the investment world because it has no intrinsic value. Created from essentially nothing, Bitcoin is not backed by profits or profits like the stock market, or promises of payment by companies or governments like bonds.

Even options and other derivatives, which technically have no intrinsic value in themselves, derive their value from their ties to other securities.

    • Bitcoin value

Bitcoin, on the other hand, is only valuable because investors buy it believing it will go up in price in the future. There are many reasons for this support, from the belief that cryptocurrencies are being legalized to pure speculative frenzy. But as an investor, you must be prepared to buy an investment that has no inherent value. 

  • Volatility

Investing in cryptocurrencies like Bitcoin certainly takes a lot of courage. The price of Bitcoin can fluctuate greatly due to various factors. A look at Bitcoin's annual earnings history only tells part of the story, but it's still insightful.

    •  Price change

Since its inception in 2009, the lowest annual volatility in the Bitcoin price was he in 2015, when it rose 35 percent. However, Bitcoin's biggest annual gain was in 2010, when it recorded an astronomical 30,203 percent gain. This sounds like the kind of return investors want, but downside volatility should also be considered. Bitcoin's price has fallen more than 60% in his three years, surpassing his massive 73% drop in 2018.

  • Hype, Speculation, Advertising

More than any other asset class, cryptocurrencies are subject to hype, speculation, and publicity. Since cryptocurrencies like Bitcoin have no intrinsic value, they will only rise in price if investors buy more, believing that other investors will follow suit and rise in price.

Entire forums are dedicated to promoting cryptocurrencies such as Bitcoin, and rumors are spreading rapidly. It can be difficult to tell which news stories or "news" are real and which are simply the work of speculators looking to boost stock prices. For this reason, investing in Bitcoin is inherently risky.  

  • Taxation
Many speculators who buy and sell bitcoin, or who use bitcoin for everyday transactions such as buying coffee, may not be aware of the tax obligations associated with bitcoin.

    • Capital gains tax
In terms of investments, the IRS considers Bitcoin an investment similar to stocks. In other words, if you buy or sell bitcoin, you are responsible for reporting those transactions on your tax returns and must pay taxes on any capital gains made.

    • Capital transactions
However, in addition to buying and selling bitcoin as an investment, the IRS also considers using bitcoin to buy other goods a taxable transaction. For example, if you use Bitcoin to buy coffee, from the IRS's point of view, you are converting Bitcoin into something else of value. In fact, technically, you exchange bitcoin for dollars and use those dollars to buy coffee. If the value of Bitcoin is higher at the time of transaction than at the time of purchase, it is a taxable capital transaction, just like buying and selling Bitcoin on the open market.

  • Internet security

Cybersecurity is a serious issue when it comes to Bitcoin, another type of risk that you need to understand as an investor. Bitcoin is an intangible digital asset, so it must be stored electronically somewhere.

Bitcoin has a wide variety of wallets and storage options, but ultimately all digital assets and storage systems are vulnerable to cyber theft. While you can take steps to protect your Bitcoin as much as possible, cybersecurity can always be an issue.

  • Competition

All investments derive their value based on the principle of supply and demand. However, with no tangible profit or value behind Bitcoin, the price of Bitcoin is likely to fall as the hype and anticipation behind Bitcoin fades. What is keeping buyers away from Bitcoin? Competitions.

    • Other cryptocurrencies
There are literally thousands of other cryptocurrencies, and new ones are being created all the time. Bitcoin is still the elephant of the universe, but support for Bitcoin could weaken if developers create a comprehensive cryptocurrency that meets the needs, hopes and dreams of cryptocurrency buyers. In this scenario, Bitcoin could be a historical footnote, a “first mover” that started the industry but ultimately failed to keep up with the latest developments. 

How do I do mobile cryptocurrency mining?

Mobile cryptocurrency mining can be done on iOS and Android systems through solo or pool mining services.

Cryptocurrencies like Bitcoin are created using a distributed computing process called mining. Miners (network participants) mine to ensure the security of the network by verifying the validity of transactions on the blockchain and preventing double spending. Miners are rewarded with a certain amount of BTC for their efforts.

You can try different methods to mine cryptocurrencies. In this article, learn how to start mobile cryptocurrency mining from the comfort of your own home.

Is Cryptocurrency Halal?

What Islamic scholars and the Indian government seem to have in common is their concern about the “intrinsic value” of cryptocurrencies and the risks associated with investing in them.

As for India, the Treasury Department's latest economic survey submitted to parliament on Tuesday said crypto-assets "do not pass the test as financial assets because there is no intrinsic cash flow associated with them." The topic of cryptocurrencies was also conspicuously absent from Finance Minister Nirmala Sitharaman’s budget speech on Wednesday. These may or may not be the latest developments in India, but the government has historically been cautious about regulating cryptocurrencies.

On the other hand, in Islamic countries like Saudi Arabia, whether investing in cryptocurrencies is Islamic law compliant as investing in cryptocurrencies can be comparable to gambling, which is haram prohibited by Islamic law. A great mystery remains about Other Shariah red zones include interest claims and payments and economic speculation.

In recent years, various Islamic scholars and clerics have issued fatwas against cryptocurrencies, but cryptocurrencies in general are a theological gray area.

In this uncertainty, machine learning based on input from Islamic scholars to help Arab computer science researchers decide which cryptocurrencies Muslims should invest in without violating Shariah principles proposed a model. Shahad Z. Al-Khalifa, a student at the Faculty of Computer and Information Sciences, King Saud University, said, “Cryptohalal: It is an “intelligent decision-making system for identifying Halal and Haram cryptocurrencies” and is available on the freely accessible, non-peer-reviewed platform arXiv.

“From an Islamic finance perspective, cryptocurrencies raise many questions among Islamic scholars regarding their compatibility with Shariah law especially whether they meet Islamic requirements for currencies, such as intrinsic value,” the paper said. is written in “Islamic finance needs to adapt to modern changes and support the provision of Shariah-compliant products and services to Muslims,” he said.

Al-Khalifa wrote that the purpose of his research was to “explore and identify the features and characteristics that play a role in establishing cryptocurrency case law.” Based on these identified characteristics, an “intelligent system” was developed using machine learning models to classify cryptocurrencies as halal (allowed) or haram (banned). 

How does the system distinguish between halal and haram?

The system was trained to determine whether a cryptocurrency is haram or halal based on 20 characteristics commonly found in cryptocurrencies. This classification is based on interpretations and decisions regarding cryptocurrencies found on Telegram channels "monitored by Islamic scholars", also known as "CRYPTOHALAL".The Telegram channel specializes in cryptocurrency market observation and legal research to “help Muslims with cryptocurrency jurisprudence”.“Until this day, there are no published datasets containing halal or haram classifications of cryptocurrencies,” said the paper, which could be used by decision-making systems by moving away from manual selection from the functioning of cryptocurrency.

Telegram channel decisions are passed to a system that automates this selection using deep learning models. The system classified 20 features common to cryptocurrency projects into two categories labeled “high priority” and “low priority,” based on a Telegram channel run by Islamic scholars.“High priority indicates features involving only haram cryptocurrencies, while low priority indicates features consisting of both halal and haram cryptocurrencies,” the paper reads.“This split helps determine the level of Shariah compliance of a cryptocurrency.

For example, if the majority of the cryptocurrency's priority characteristics are met, it is haram with a score of 'probability of being haram'. If not, it is rather halal in terms of "halal probability". ' added. 

High-priority haram-related functions include speculation (if the virtual currency project is assumed to be based on speculation) and borrowing (if the virtual currency project provides credit services). Less harassing and lower priority features include staking (where crypto projects offer some incentives to long-term crypto holders) and governance (tracking direction using crypto project tokens). “While 45 of the 50 haram cryptocurrency projects use decentralized finance (DeFi) and liquidity pools, none of the halal cryptocurrencies are involved in lending or credit services, leverage, margin or prediction markets. No, it turned out," the newspaper said.