Cryptocurrency is a world full of “firsts”. Bitcoin was the first coin, Litecoin was the first scrypt coin, Peercoin first established POS, Darkcoin was the first successful privacy centric coin, things like that. Today I’m here with Robert Murray, owner and founder of Umbrella Holdings. Umbrella plans on releasing cryptocurrencies which will help insure losses against Bitcoin and Litecoin right now, with potentially more in the future. What is Umbrella? Umbrella is an insured cryptocurrency that is designed to be merged-mined alongside a parent coin, usually the industry leader in terms of market cap for its particular algorithm. You can also solo mine Umbrella like you would any other cryptocurrency. In regards to Umbrella-LTC, we have just announced a beta program to insure its parent coin (Litecoin). Starting in November, if you hold a predetermined amount of Umbrella-LTC (let’s call this the premium) your Litecoin will be insured. Umbrella differs from other cryptocurrencies by automatically sending a portion of each block reward to a secure wallet as it’s mined. This growing fund serves as collateral should a claim arise due to a hack or insolvency on the exchange. To combat fraud and reduce our risk, we put the exchange through a security audit. By leveraging our background in security, we essentially try to hack the exchange (with consent of course). Once the exchange is deemed secure, we guarantee all Umbrella Holdings while held on that exchange. It’s important to note that while any exchange can list Umbrella cryptocurrencies, only those listed as certified have gone through the security audit and are insured. What do you plan on providing with Umbrella? We want to fix the biggest problem in crypto, which is security. If we ever hope to see mass adoption this needs to be addressed. How does Umbrella achieve this? With our multifaceted approach to security, we work at the exchange level and user level. We can reduce risk by a large magnitude simply by increasing transparency at the exchange level and performing regular security audits. At the user level we offer insurance to protect the user’s assets, and in the near future a secure trading environment to store assets locally while still being insured. We see a lot of coins bringing new innovations and products (2.0 technologies) to the table but no one is really solving the problems that still plague our first generation coins. We want to be at the forefront of this movement. Can you tell me a little bit about your relationship with CDIC? The CDIC is a group of individuals I have worked with for many years. They are day traders based out of New York trying to break into the cryptocurrency space. They played a small role in the coins initial development but had bigger plans of launching their own exchange. They were going to provide third party services to us for claims and investigations. Enter the Bit License: Once word came down about regulation in New York they got cold feet. At this point Umbrella started to pick up a little steam in the community and had some really great people reaching out to us wanting to get involved in any way possible because they believed in the vision. This is when we decided that we can fulfil the duties of the CDIC with a dedicated board. As long as the board members get voted in and are vetted we should have no problems rendering judgments on claims and conducting our own investigations. We will officially be bringing the insurance portion in-house at the end of this month. Sadly, the CDIC will be closing up shop. I think this all worked out for the betterment of the coin, some people were a bit weary of a third party controlling the insurance fund. Now this process is less centralized with voted-in members holding the insurance fund in a multi-sig wallet. What motivated the creation of Umbrella? I got into cryptocurrencies last year during the mining craze. I started building high-end mining frames out of my garage. The company was called SLUICE_BOX Cases, and we did very well before scrypt ASIC’s arrived on the scene and killed us. Our first month we moved over 100 cases and I was working 100 hour weeks. We managed to get every order out and maintain 100% positive feedback during the process. During this period I got to meet a lot of miners and witnessed firsthand the struggles and hardships of mining. They dealt with ever shrinking profits, outrageous electric bills, price gouging from once trusted retailers (I’m looking at you Newegg). Then on top of all that we had exchanges and pools closing up shop taking what little profits remained. It was a real nightmare and a very clear problem. The development of Umbrella was spurred by these experiences. I wanted to be part of the solution and figure out a way to help the situation. Realizing there was no easy way to fix this, I began work on the multi-pronged approach that is Umbrella. Will there perhaps be an Umbrella coin for X11 and other algorithm coins? Umbrella is a brand, not a coin. We will be making several Umbrella products in the coming months. There are plans on the table for Umbrella cryptocurrencies at each algorithm. This will allow almost everyone to merge-mine insurance without giving up on their primary coin. What can we expect in the future? Short Term: In the next year expect more Umbrella cryptocurrencies, proof of liabilities software that the exchange must have installed, our own Linux distro (Umbrella-NIX) for locally insured coins and some other secret stuff I can’t tell you. Long Term: We envision cryptocurrencies going mainstream in a big way. I think in the next two years we will start to see large companies acquiring established cryptocurrencies. Coins that complement the company’s portfolio or industry, or simply to shorten their own development cycle. Why would Geico Insurance create their own cryptocurrency when they can just buy us for a few million? That’s a few years down the road though….Thank you for the interview! The XRP price has trended upward over the past few months, which vaulted Ripple up the market cap charts (XRP is the Ripple platform’s native currency). Thus far, the XRP price has avoided entering a cooling-off period. It may be time to certify Ripple as cryptocurrency’s #2, at least by market cap. Also Read: Ripple Labs Cracks U.S. Banking with New Deal XRP Price Rise Solidifies Ripple as Crypto’s #2 In late September, Ripple passed Litecoin for 2nd-place on the cryptocurrency market cap charts. Since then, Ripple has widened the gap between the two cryptocurrencies to more than $25 million. Ripple continued its climb over the past seven days. The XRP price began the week at 1,221 satoshis. From October 17-19, the XRP price hovered between 1,250 and 1,295 satoshis. The price began to incline over the next two days, reaching 1,345 satoshis on October 21. The XRP price held steady at ~1,345 satoshis the next day but experienced a small spike on October 23. The XRP price was 1,423 satoshis on Friday–a 17% weekly increase. CCN: Worlds Largest & Leading Independent Bitcoin News Source The XRP price inclined over the past week. Ripple now has a comfortable lead over Litecoin in market cap. Chart from CoinMarketCap. The XRP price rise has increased Ripple’s market cap to ~$150.5 million, which ranks the coin 2nd on the market cap charts. Ripple now has a very comfortable lead over 3rd-place Litecoin and its ~$125 million market cap. CCN Analysis Ripple has now held the 2nd-highest market cap for nearly a month, which is quite a remarkable feat. Litecoin resisted all challengers for a sustained period, but cryptocurrency’s “silver standard” has been unable to reclaim the #2 spot from Ripple since losing it in September. Ripple appears poised to hold the #2 spot for the near future. Of course, it is important to note that the vast majority of XRP remain in the hands of the creators. What do you think? Comment below! CCN Disclosure: The author is paid in and holds investments in bitcoin. He is not invested in or affiliated with any of the altcoins discussed in this article. Any advice contained in this article is solely the opinion of the author and does not reflect the views of CCN. Neither the author nor CCN is liable for your investing decisions, so do your homework and never invest more than you are willing to lose. Introduction: What is Bitcoin? Bitcoin is more than a currency. Bitcoin is a concept, an idea. The idea of peer-to-peer payment, with no middleman or central authority. This means less transaction fees, and faster transactions. Also, as there is no middle man security is greatly increased, with everyone hidden behind long strings of digits. History of Bitcoin Satoshi Nakamoto, the creator of Bitcoin, had supposedly started working on the concept of Bitcoin in 2007. No one knows who Satoshi is, or if it’s more than one person (more on that later). From the general consensus of the Bitcoin community however, people usually agree that he is living in Japan, but that can be disputed as well. Who is Satoshi Nakamoto? According to Satoshi’s Bitcoin foundation account, he (for lack of a better word) is in his 40s now probably, and lives in Japan. But as you soon realize, there is no way to prove that. I believe his pseudonym, or false name expresses what Bitcoin is trying to do. An anonymous peer-to-peer currency that is tracked by no one, but public for everyone to see at the same time. Many people debate over who actually is Satoshi Nakamoto and disregarding the one found in California (as Satoshi Nakamoto on his Bitcoin foundation account openly stated that he isn’t), there are several big contenders, with one being possibly a joint effort between Samsung, Toshiba, Nakamichi, and Motorola and that these companies together created Bitcoin. And the second rather being one person, is a group of people. On August 15, 2008 3 people file a patent for encryption application. Neal Kin, Vladimir Oksman, and Charles Bry. Thanks to Adam Peneberg, he cross-referenced phrases from the patent application and the Bitcoin white paper. One phrase did matchup, which was “computationally impractical to reverse”. Also, the domain name for Bitcoin’s official website, bitcoin.org, was registered 3 days after the patent application was filed. On top of that, it was registered in Finland, where one of the patent authors had went 6 months before the domain was registered for. Unsurprisingly, all 3 strongly denied. In fact, all possible identities of Satoshi have all strongly denied it, with some even going public with it and denying it there. So we are left at square one, with very little solid information known about him/her/whom. Transactions A coin, in essence, is a chain of digital signatures. To send to the next person, behind the scenes the owner is actually digitally signing a hash, a long string of numbers, that include the details of the previous transaction and the public key , think of your public key as a receiving address. The person being paid then verifies the signatures to authenticate the chain of ownership. This is where our first problem occurs. How does the person receiving payment. Make sure that the coin wasn’t “double spent” or used in another transaction before? Typically, what is implemented is a trusted third-party, but that would defeat the purpose here; Bitcoin was meant to be decentralized. What Satoshi implemented was a timestamp server, which is the backbone of the blockchain. Timestamp Server and Blockchain A timestamp server, as previously mentioned, works by taking the hash of a block of items that need to be timestamped and widely publishes the hash. By doing this, timestamp proves that the data needed to make the hash did indeed exist at that time, authenticating the transactions. Each sequential timestamp includes the hash of the previous one, creating a chain that is strengthened with every timestamp. There is still one part of the problem, however. How do we make this timestamp server decentralized? In Bitcoin, and many other cryptocurrencies, they use a “proof”. Proofs If you have seen miners with their rigs, with usually several high end graphics cards on one motherboard, you are seeing proof of work going on. Otherwise known as “mining”, which will be discussed more in depth later on. Proof of work basically is looking for a value that when hashed, with the correct algorithm, in this case SHA-256, that the hash begins with a number of zero bits. For it to work in the timestamp network used to verify transactions, Bitcoin has included a nonce as well. A nonce is a is a value when included in the block, it makes it to where the hash of the block will contain a set of zeros somewhere in the hash. When the blocks proof of work are correctly satisfied, they are then added to the chain. As more and more blocks are chained together, it makes a blockchain. And the longer this blockchain is, the more work that is required for a malicious entity to reverse even one transaction, as it must redo the work of all the blocks. Blockchain The blockchain is essentially, you guessed it, a chain of blocks. But is much more than that. To put something in the blockchain is a digital equivalent of setting it in stone, arguably even stronger than that. You see, as previously mentioned before, the longer the blockchain is the more work you will be required to redo in order to change even one transaction. This made a very attractive for people that want to store data in the long term, as it’s very unlikely that it will be altered or otherwise changed. The blockchain isn’t just set to storing transactions however. You’re able to store files on the blockchain, or even artwork. This proves that you indeed are the owner of your work, which is getting harder to prove in this digital world. Mining is the process of finding a hash that correctly satisfies the proof of work of a block, verifying the transactions and maintaining the blockchain. While mining can be done theoretically with anything that supports SHA-256, and in the earlier days, it was with CPUs and GPU’s, the most efficient way of doing it now is using ASICS, or application-specific integrated circuits. What are ASICS? ASICS are in a nutshell something that is very good at one thing and can only do that. Mining ASICS, can only do SHA-256, but they do it very efficiently and high-speed. But what many beginners believe is that an ASIC is equivalent to a money making machine. That is entirely false. Due to the way Bitcoin and other cryptocurrencies are programmed, the coin itself will adjust what is known as the “difficulty” of the coin. What is difficulty? The difficulty is the measure which is used to gauge how hard it is to completely satisfy the proof of work for a block. This difficulty changes every 2016 blocks; ideally around every 2 weeks. New ASIC comes on the block? No problem, Bitcoin’s difficulty will adjust accordingly to try and keep the block times as close to 10 minutes (may differ for different cryptocurrencies). The opposite is true as well. A lot of people are exiting the mining game? That’s cool too, because difficulty will lower at the next difficulty change. Due to this, new bitcoins should come in at a steady stream, allowing for exchange rates to not be affected by massive sells or massive buys. This usually increasing difficulty, usually anywhere between a 10%-20% increase in difficulty makes most mining calculators very deceptive as well. When you’re looking for a new ASIC, and the calculations show ridiculous numbers, a one-month break even period for example. It’s probably not taking increasing difficulty into factor. The phrase “if it’s too good to be true, it probably is.” Is paramount when it comes to Bitcoin mining and cryptocurrency general. How fast you can crunch through numbers is measured in hashes. Due to the competitive nature of mining, typically hash rates are measured in gigahashes or its abbreviation, Gh/s. 1 gigahash is equivalent to 1 billion hashes per second, which is a phenomenal amount of computational power, but that will get you nowhere. Assuming you want to make income from mining. Nowadays, things are more commonly measured in terrahashes, (TH/S) and even petahashes (PH/S) to a lesser extent. Due to this arm race, with many data centers dedicated to just mining Bitcoins, the blockchain security is second to none. ASIC Performance and Terms If you’re in the market for an ASIC, knowing two terms will help you narrow down what ASIC is right for you. Those 2 terms are $/GH/s ratio and a mining calculator. $/GH/s ratio, in simplest terms, is how much compute power you are getting for the dollar. Also known as, “bang for your buck”. If we take famous the Antminer S1, and divide its price (0.428 BTC ~ $222.3) by its hashrate (180 GH/s) you get a phenomenal ratio of 1.235. This means for every $1 and 23 ½ cents, you are getting gigahash of compute power; Antminer S1 is a great entry point for people that want to get into mining. Mining Calculators A mining calculator does exactly what it sounds like. It calculates how much Bitcoin you would receive if you had an ASIC. With most good mining calculators, all you need to enter in the calculator is your hashrate, electricity rates, and wattage consumption of the unit. If you are having trouble looking for a good calculator, We suggest either https://tradeblock/mining/ or bitcoinx/profit/ . They both have up-to-date information and fully adjustable parameters to adjust your own specific situation. Cloud Mining If you’re not in the mood to put up with high electricity bills, massive heat and noise output and maybe cloud mining is the thing for you. Typically, you pay a slight premium (to help the provider cover AC cause, electricity, etc.) and you can receive either mining contracts which are contracts that only run for a set amount of time at a set amount of hash rate; this isn’t good because difficulty will most likely increase. A legit company we could recommend is Cloudhasing. Or you can buy the gigahashes in shares, which https://cex.io/ is known for. At CEX, gigahashes are treated as a commodity, you can keep them to accumulate Bitcoin, or sell them for Bitcoin. Why Should I mine? As previously stated, the whole timestamp server and blockchain is supported when someone is confirming the transactions through proof of work. But what motivates these “miners”? Block rewards. You see, whenever a blocks proof of work is successfully satisfied, the minor is rewarded coins. Bitcoins typical block reward is 50 coins, but every 4 years the block reward cuts in half, leaving us with the current block reward of 25 coins. There is also a hard set limit of 21 million coins ever to be created. But we will still need miners to confirm and verify transactions on the blockchain long after all 21 million coins are made. So what will keep them motivated to continue to use compute power and electricity? Transaction fees. Now at first, you’re saying to yourself, “You said there are no fees”. That is correct, but if you’d like to put your transaction in a higher priority, you may attach an optional fee known as the “Miners Fee”. This fee is very small, even with high priority fees usually being less than $0.40. If mining is not your thing, but you would still like to get into Bitcoin, then perhaps buying them outright is more of your thing. • • • • • • • • Where and how can I buy Bitcoin? There are several main ways to purchase Bitcoin outright. The most popular and easiest way to buy Bitcoin is from exchanges, or in person. There are also websites that help you find people willing to sell or buy Bitcoin if you would like to have in person transactions. Exchanges When it comes to Bitcoin another cryptocurrency, there are 2 types of exchanges. One that allows you the ability to exchange Bitcoin 2 other cryptocurrencies and vice versa, and the other type that allows you to buy and sell cryptocurrency with USD or your locally currency. Usually you can only buy Bitcoin, but sometimes more established altcoins as well such as Dogecoin, Feather coin, and Litecoin. For starters You want to go to an exchange that accepts USD. For that, https://coinbase/ , https://moolah.io/ , and https://bitstamp.net/are all good options. They all offer the ability to purchase or sell Bitcoin to fiat and vice versa, as well as a high level of security and excellent customer support. All you need is a credit card and/or a bank account. Once your financial information has been confirmed, you are now able to transact Bitcoin and fiat quickly. This is usually with very little fees, if any at all. The second type of exchange you will stumble upon are known as cryptocurrency exchanges. They allow you to sell your cryptocurrency for Bitcoin, or vice versa. Some of them, such as https://cryptsy/ are starting to open up USD markets for more of the established coins, such as the previously mentioned Dogecoin, Litecoin, Feather coin, and Bitcoin. It is done in same way, where you give your financial information and once it’s confirmed, you’re able to purchase cryptocurrency exchange for even different cryptocurrency faster than if you were to purchase from let’s say Coinbase and transfer it to an exchange. Local exchanges If giving your financial information isn’t something you’re comfortable with doing, which is completely understandable, then perhaps local transactions is more of your thing. https://localbitcoins/ is sort of like a Craigslist for bitcoins, allowing people to buy and sell Bitcoin. Here you’re able to narrow results by location, payment method, etc. All transactions are held in escrow, a third-party that receives both the payment and the product to protect both the consumer and provider. This ensures that all transactions are safe, instant, and private. Other It is possible to purchase cryptocurrency through some places where you not expect. You can purchase from eBay, in fact they have made a cryptocurrency section to their US website, which they plan on expanding to other countries. If you’re in other countries, do not worry, you can still post in classified ad listing. Do note that these are not protected by eBay’s regulations, so tread carefully. You can also find some pretty reputable traders over at https://bitcointalk.org/ and https://litecointalk.org/ in the “Currency Exchange” sub-section under “Marketplace” which is under “Economy”. If you’re having trouble discerning someone’s reputation as a trader, you could also look under “Trading Discussion”. Usually people here accept a wide variety of payment methods, ranging from Western Union to Skrill. Also, as they don’t want to be scanned as much as you do, security is mutually assured. The forums also have the ability to mark fraudulent traders with a “scammer” tag. This will also replace their coins under their username with large X’s, making it easy for you to spot out scammers. You should still remain vigilant, as the forum can’t mark people that haven’t scammed yet. The last place you can also check is numerous Reddit subreddits. There are several good places to check, below are some of the more established subreddits. Vertmarket If you’re looking for vertcoin, here’s a good place to start. The vertcoin communities known for its open and friendly enthusiasm towards newcomers and this place is no different. Besides buying vertcoin for fiat, usually via Google wallet or PayPal, people are also offering physical and digital goods. Cryptotrade Dubbing itself as “Reddit altcoin exchange”, all sorts of trades are going on right now. Some of the most recent ones being now are a pair of Beats Tour 2.0 headphones for Bitcoin, or an iTunes gift card for bitcoin. Note people do pay a premium for Bitcoin. For example, the previously mentioned iTunes card is worth $15 and the person is only looking for $10 in Bitcoin, so if you’re looking to cash out your Bitcoin looking here first might be a good option. Bitmarket Exclusively physical or digital goods to bitcoin, in fact, they explicitly say in the subreddit rules, “don’t even mention PayPal”. Besides that, this is arguably one of the most diverse markets with people selling anything from iPads to Steam games to even graphics cards. LTCmarket From some casual glancing on some of the recent posts, this market is more focused on exchanging Litecoin for fiat and vice versa, as well as computer hardware, especially graphics cards. It doesn’t seem as active as the other subreddits however, so I’d recommend looking elsewhere first. The subreddit of the coin itself(Anecdotal Evidence) – if there is no dedicated subreddit “market” for the coin you’d like to exchange in, I find that it’s acceptable to post one in that subreddit. But do check first for a dedicated market, as people that want to learn about the coin or keep up with recent news don’t usually like to sift through market listings as well. Where to spend my Bitcoin and/or What can I buy with it? The options are increasing day by day, but still offer a wide selection. Listed below is quite a comprehensive list of places where Bitcoin is an accepted payment method. Overstock-Arguably one of the largest major retailers; they are also one of the first to accept Bitcoin. Selling everything from furniture to electronics, Overstock is one of the places you should check first when trying to buy something with Bitcoin. Precious metals-there are now many places that sell gold and silver as well as accept Bitcoin. Two of the more renowned places are Euro Pacific (just started accepting Bitcoin) and Amagi Metals. As well as taking traditional payment methods such as PayPal, credit card, etc. they also take Bitcoin, and Amagi metals even takes Dogecoin and Litecoin. Gyft - From Amazon to Zales, Gyfts got you covered. If you’re looking for gift cards of all brands and prices, With features such as a point system that rewards you for doing business with them, to the ability to upload gift cards online to their mobile app so you don’t have to carry them around Gyft has become a huge hit with the Bitcoin community. TigerDirect – If you’re looking for computer hardware and electronics in general, TigerDirect accept your bitcoin. Also, TigerDirect has a whole mini-website dedicated to educating newcomers to bitcoin, with a video and easy to access links to ASICS or mining hardware. The ASICs they do sell? The selection is quite limited and rather outdated. For example, they’re still selling Butterfly Labs ASICS rated at 10 GH/s for $350, which are in the same ballpark as a 180 GH/S Antminer S1. Shopify – If you’re looking to start an online business, and would like to accept Bitcoin as payment, Shopify allows you to do just that. Sure you can set up a separate payment processor with Coinbase or Moolah, but Shopfiy allows it to be easily done all, under one roof so to speak. Just because its Bitcoin doesn’t mean that it’s any less secure or convenient as cash or traditional methods, if anything perhaps more secure and convenient. BTC Trip – Want to go to island where your mansion awaits because you’ve reached the “moon” (Stay long enough around Bitcoin community, you’ll get it.) but all you have is Bitcoin’s? BTC Trip got you covered! Like any other travel agency website, you can look for flights and book them as well, but the unique part is you can pay in Bitcoin. ASIC brands – Unsurprisingly, companies that manufacture ASICS, such as KNC Miners or Butterfly Labs, as well as the upcoming scrypt ASICS miners, like Zeus Miners. This situation, some exclusively take cryptocurrency, which you should see as a double-edged sword. On one hand they want to support the network are only accepting cryptocurrency. But due to the irreversible properties of cryptocurrency, they can also just run away with it or “delay shipments” which some brands (not going to name) are infamous for. A good indicator of an ASIC brands reputation is the bitcointalk forum; look under “mining hardware” and the child board “scam accusations”. If you can’t find the specific product you’re looking to purchase, just ask. Someone will most likely answer you promptly and politely. Gigs, services, etc. – Many people now are accepting Bitcoin as payment, sometimes exclusively. If you need a job done, posting under “services” in the Bitcointalk forums for the subreddit “jobs4bitcoin” will usually get you a response or two reasonably quick. Bitcoin Boulevard As it’s famously known is a street in Cleveland, Ohio where every shop accepts Bitcoin. This means actual POS transactions otherwise known as point of sale, not to be confused with proof of stake. Goods and services at Bitcoin Boulevard vary from fine wines to the chocolates to even fries and ice cream. I call it the world in 5 years. Gambling If you’re feeling lucky, you don’t have to look far to find an online gambling websites that accept Bitcoin. In fact, stick around the Bitcointalk forum long enough and you’re bound to notice someone that has included an advertisement of a gambling website in their signature. Exchanges If you want to get in the market for try your hand in some investing/trading, exchanges is the way to go. Once you’re there, it’s reminiscent of NASDAQ or other investment agencies. You have the ability to look at buy or sell orders, order depth, recent trade history, etc. Except for one major thing, which is that cryptocurrency values fluctuate. Now confronted with the statement, there are usually two typical responses. One is a positive response, usually from people that would like to make some money off of daytrading, profiting off of the fluctuations. The second response you usually get are from people that would like to maintain a long-term position in cryptocurrency. While it is possible to do this, diligent research is necessary. On this one, you’re on your own. You can’t really rely on a stranger’s advice when it comes to investing your money. Everything else – all4btc and The Crypto Depot allow you to basically buy anything on Internet as long as you have 3 things. Payment (Bitcoins, Crypto Depot accepts LTC, DOGE, and VTC as well), shipping address, and a URL. Then you just submit the following information, pay for it and boom! You have just bought xxxxx item with BTC! This is only a work around till more merchants accept Bitcoin directly, but I see it fulfilling a much needed niche market right now. Now you’re thinking to yourself “anonymous, untraceable, private money? I’m in!” Not so fast. As of now it’s still very in the grey area, even for some of the more accepting countries. To find out what your countries current stance is on Bitcoin and cryptocurrencies in general, a good website to check out is bitlegal.io/ . They have a color coded map with green showing friendly, yellow showing in between, and red showing hostile. A good contender for most accepting country legally for Bitcoin is the USA. Now with politicians and even a political party accepting Bitcoin as donations, Bitcoin use is quite friendly here, and has some of the better guidelines. Here Bitcoin is taxed as capital gains, for exchanges and mining. The IRS considers mining gains to be ordinary income and is treated as such by the IRS according to Notice 2014-21. It is also treated as General income for exchanges, commerce, and mining again. However, due to the decentralized process of Bitcoin, the IRS really has no way of enforcing this unless they really expend effort to follow transactions through the blockchain or something. So yes, legal guidelines are available, but there’s really nothing to back them. The IRS and the rest of the government (Federal Reserve, politicians, etc.) have different views and guidelines on Bitcoin as well so there are no clear cut legal guidelines. If you would like to start a mining company or something major, I’d suggest going to an attorney or tax specialist to make sure you are abiding by regulations. But for now, most hobby miners should be unaffected. Canada is also quite friendly when it comes to Bitcoin. Canadian government officials seems to be okay with people using Bitcoin, shown through the fact that they have not required cryptocurrency exchanges to adhere to anti-money laundering and know your customer procedures like so in the USA with FINCEN. Canada has also issued one of the easier guidelines stating that transactions without using legal tender currency are taxable income upon the seller under Canada’s barter rules. With all this friendliness towards Bitcoin, it’s no wonder that many Bitcoin conferences, such as the one in Amsterdam recently, and the amount of ATMs for Bitcoin there as well. On the other hand we have economic superpower, China. China has had many bans on Bitcoin all of which have been appealed or lifted in one way or another. It’s very unclear how China stands legally with Bitcoin, and companies that work in Bitcoin must tread carefully. In the same boat is Russia, with mixed responses. With the government trying to clamp down on Bitcoin use, and people trying to advocate it, guidelines have been very neutral edging to restriction however. Russia has tried to put “limits” on transaction volume of “anonymous virtual currencies” that has failed too. As more time passes by and Bitcoin becomes more and more mainstream, I imagine Russia’s stance will change. Then we have Iceland, which plain is against Bitcoin. What causes quite an upset was Auroracoin, the first country coin that planned on distributing certain amount of coins to every Iceland resident. After its all time high of around $90 it fell hard, and is now available for less than $0.50. Iceland does not allow for any currency to fight with the national currency of Krona due to capital controls from 2008. For example it allows the selling of Bitcoin, but not the other way around. The reason why is that selling means money is moving into Krona, and not into Bitcoin. Aboard this train is Vietnam as well. Even more extreme than Iceland, Vietnam bans the flat out use of it period. How they enforce that is another question, but it’s banned. It wasn’t always like this however, with Vietnam only having this stance on February 27 of this year. This is only for financial institutions however, and non-financial organizations and individuals can use it as they please, but they are strongly discouraged and warned of using it. There is hope however, as Vietnam’s government never made a paper, rather using the media to spread this information. Perhaps a change later in the future, but for now no. Most of Europe is okay with it, implementing some tax or another for it. This applies for mining, exchanging, capital gains, etc. All of their guidelines are all similar but different, so be sure to do research for your individual country. For example, Poland has a 23% VAT (Value Added Tax) which was quite recent in the news. With Poland, Bitcoins are treated as a commodity and taxed as such in sales and exchanges. Then you have Germany, with also one of the more straight-forward guidelines with regulations on how Bitcoin should be described as, taxed, and when a Bitcoin business should register with the government and have KYC and AML compliance. As such, most companies that specialize in Bitcoin related endeavors are German, Canadian, or another friendly country. Even for the more accepting countries, cryptocurrency is a hard topic to put down legally. Is it a commodity, currency, or a security? With trial and error, guidelines will improve and one day Bitcoin will be used as an everyday payment. As more mass adoption occurs, prices will become less volatile, making governments that put Bitcoin to the side reconsider.
Posted on: Fri, 24 Oct 2014 04:37:22 +0000
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