Have you ever heard of the word “crypto-currency?” And if so, do you know what it is? Is it:
- An ancient coin found in a crypt.
- A virtual currency that is encrypted.
- A radioactive rock from Krypton, Superman’s home planet.
- None of the above.
If you answered “2,” you’re correct!
The word “crypto-currency” comes from the Greek word “kruptos” which means “hidden, concealed, or secret.” It’s where we get the English word “crypt,” a vault used to bury the dead. Also, it’s where we get the English words “encryption” and “decryption.”
What exactly is crypto-currency?
Crypto-currency is a virtual currency that doesn’t use any personal information. It’s completely anonymous, unlike debit or credit card transactions. And each crypto-currency coin is encrypted with a special code. In 2009, Bitcoin was the first crypto-currency ever created.
The Mystery Behind Bitcoin
The story behind Bitcoin’s creator has been as intriguing as a good detective novel.
Bitcoin was created by a person or a group of people known as “Satoshi Nakamoto.” In spite of the popularity of Bitcoin, the founder has always remained anonymous.
But in a surprising twist to this story, Newsweek reporter Leah McGrath Goodman, made waves when she wrote an explosive cover story in early March 2014. She claims to have discovered the true identity of Satoshi Nakamoto—a 64-year-old man named Dorian Nakamoto who lives in California. However, Dorian Nakamoto denied the claims that he was the “face behind Bitcoin.”
In an interview with the Associated Press, Dorian Nakamoto continued to dispute Newsweek’s claim by repeatedly saying, “I got nothing to do with it.” Leah McGrath Goodman continues to stand by her story.
The world desperately wants to know the true identity of this mysterious Dorian Nakamoto. However, it remains an unsolved mystery for now.
The New Tax Laws Imposed On Bitcoin
Although crypto-currencies have been used for five years, the IRS does not recognize them as legal currency. In March, CNBC reported that the IRS will begin to tax crypto-currencies in the United States like property.
“For investors, bitcoins will be treated like other commodities,” the IRS said. “If they increase in value, you have to pay capital gains taxes after you sell them. If they lose value, you can recognize a capital loss.”
What does this mean for the millions of Bitcoin users? According to the Ryan Tracy of the Wall Street Journal, it means that the new IRS regulations will hurt Bitcoin.
Story continues below video
“That means anyone who spends bitcoin, even on a $2 cup of coffee, may have to pay taxes based on any ‘gain’ over that bitcoin’s original value. The rules are similar to reporting a ‘capital gain’ on selling a stock: The spenders would have to figure out a ‘cost basis’ for a transaction and report a gain or loss, calculated by comparing how much they paid for the bitcoin originally and its value when they traded it for a cup of joe.”
The Instability Of Bitcoin
Bitcoin offers a few benefits. One of the best benefits is that its users enjoy privacy and anonymity. Another benefit of Bitcoin is that it should prevent inflation, unlike the Federal Reserve System that controls the value of currency through printing fiat money.
The future of Bitcoin is uncertain. Like any commodity, crypto-currency is susceptible to the market fluctuations. And the worth of a single Bitcoin has taken quite a plunge lately. It was worth $1,200 per coin in 2013, but right now each coin is worth less than $500.
Clearly, investing in Bitcoin is a gamble compared to investing in a precious metal like gold or silver. And let’s face it: if the economy crashes—your Bitcoins will be worthless.
Whether crypto-currency will take over the world or not still remains to be seen. However, one thing is clear—we live in unstable times. As our financial future becomes more and more unstable, it’s in God that we should place our trust—not the dollar. And certainly not Bitcoin.