Everything about Crypto Currency, Crypto Mining, Crypto Tax and Block Chain

Cryptocurrencies have exponentially grown in popularity over the past 6 years, they first gained attraction during the Bitcoin boom that t...

Cryptocurrencies have exponentially grown in popularity over the past 6 years, they first gained attraction during the Bitcoin boom that took place between 2013 to 2017, which saw the price of Bitcoin surge almost 2800%. Their massive popularity and the technology linked to these currencies are disrupting the traditional financial market and that is why it is a great idea to learn all you can about them.

Cryptocurrencies are digital-based mediums of exchange which use strong cryptography to secure transactions, perform functions and conduct financial transactions. Crypto Traders are searching for basic and natural crypto tax calculator. They leverage blockchain technology to give cryptocurrencies decentralized control and transparency. The decentralized nature of blockchain makes cryptocurrencies theoretically immune to external control and interference.

Everything about Crypto Currency, Crypto Mining, Crypto Tax and Block Chain

What Is Blockchain?

Blockchain is a technology that uses an open-ledger to record transactions. The blockchain as a whole can be considered a time-stamped series of immutable records of data that are linked together through strong cryptography and is managed by a cluster of computers and not a single entity.

What Are The Advantages Of Blockchain?

Blockchain as technology carries some inherent advantages when it comes to security and transparency.

• As all the transactions are immutably linked to one another through strong cryptography, it is next to impossible to change any of the entries. Any changes would require the whole blockchain to be altered.

• Blockchain can provide a detailed transaction history and the history of ownership of the asset.

• Blockchain allows for almost instant transactions. As soon as a transaction is authenticated it is added to the block.

• The strong cryptography used to link blocks provides a high level of security.

Why Were Cryptocurrencies Created?

Cryptocurrencies can be considered a byproduct of blockchain. The first digital cryptocurrency was Bitcoin, which is part of the Bitcoin Blockchain that is a public ledger to record all Bitcoin transactions. The creator of Bitcoin never intended on creating a digital cryptocurrency, their intention was to create a decentralized digital cash system. This cryptocurrency was developed to incentivize users of the Bitcoin Blockchain network to use their computation power to help authenticate Bitcoin transactions and the first Bitcoin Block, known as the “genesis block” was mined on 3rd January 2009. Bitcoin Taxes is one of the soonest and most well-known duty adding machines for a crypto addict.

What Is Cryptomining?

Cryptocurrency mining or cryptomining is the process of authenticating transactions and adding them to the blockchain digital ledger. Cryptocurrency mining has gained popularity as the usage of cryptocurrencies for making transactions has grown exponentially over the past years. For every cryptocurrency transaction made on the blockchain network, a cryptominer is responsible for the authentication of the transaction. The mining process itself involves competing with other cryptominers to solve complex mathematical problems with cryptographic hash functions associated with the block containing the transaction data.

What Are The Advantages Of Cryptocurrencies Over Fiat Currencies?

There are a number of advantages cryptocurrencies have over the traditional fiat currencies, we have mentioned a few below:

Decentralized Control

Since there is no centralized control over the production and distribution of cryptocurrencies, it prevents volatility due to a change in policy or other external factors.

Transparency

Since cryptocurrencies are developed on the open-ledger concept of blockchain, all transactions need to be authenticated and verified by all members of the network. Any discrepancies will cause an error and the transaction will fail.

Efficiency

Cryptocurrencies are considered highly efficient mediums of transactions as they do need to go through multiple layers of verification to complete, this reduces costs attached to making transactions.

Time-Saving

The blockchain system is highly efficient at authenticating transactions, and as the transaction does not go through multiple intermediaries it can be performed almost instantly.

Tax On Cryptocurrency

Currently, in most part of the world, there are no specific tax regulations regarding cryptocurrencies. The government has also prohibited all financial institutions from making any transactions based on cryptocurrencies until they can formulate solid regulations for it. So the information provided below on cryptocurrency tax is purely speculative. However, it is important to note that tax laws in the United States change frequently. It would be wise to speak to a tax expert online with TurboTax Live, which you can readily do from the comfort of your home in Los Angeles, New York, Dallas, or anywhere else in the country. Let’s see how cryptocurrency might be taxed in different countries.

Tax On Transfer Of Cryptocurrency To Fiat Currency

When a cryptocurrency is exchanged for a fiat currency, the difference between the buying price and the selling price of the cryptocurrency is considered taxable income. If the cryptocurrency is held for a period longer than 36 months it is considered a long-term capital asset and the transaction is taxed at a flat rate of 20%. If the cryptocurrency is held for a period shorter than 36 months it is considered a short-term asset, and the transaction will be taxed under the head Income from Business and will be taxed according to the relevant tax slab.

Tax On Cryptomining

Cryptomining is a capital intensive activity that consumes a lot of electricity and requires expensive hardware. The income generated from mining is self-generated and, thus, the cost of acquisition cannot be determined. Section 55 of the Income Tax Act, 1961 lays down the calculation needed to be done in case of self-generating assets, but this does not include cryptocurrencies. Therefore, it is not clear how cryptomining will be taxed under future regulations.

Payment Received In Cryptocurrency

If a business receives payment for goods or services through cryptocurrency, it will be considered a business income. This means that tax will be levied under the head of Profits or Gains from a professional business.

Cryptocurrencies could become the future of currency due to the simplicity and accuracy of the system they are based on, so it is good to know all the laws and tax regulations that will govern it in the future.