Bitcoin, the blockchain and mining. Who needs cryptocurrency and how state control

Lately in the world actively discussing cryptocurrencies and ways to earn. Most of the hype revolves around bitcoin (eng. Bitcoin) which since inception (about 10 years ago) has grown considerably in price. Now buy bitcoin is more than 5.5 thousands of dollars.

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The popularity of bitcoin forced to talk about it at the international level, and governments of individual countries to be reckoned with. Some countries even recognized the bitcoin currency. For example, in Switzerland in 2013 consider bitcoin as a foreign currency. However, the majority still leans towards the recognition of bitcoin a property asset, which should be taxed.

The main issue facing the international financial organizations and the leadership of individual countries, is the issue of control over the circulation of cryptocurrency, because the uncontrolled – it creates a large space for the development of the shadow economy.

Video settings Kiev, a terminal for purchasing cryptocurrency

Snidanok 1+1

September 5, 10:01

In addition, the unresolved field of cryptocurrencies with great opportunities for fraud, which cannot be classified, and then to punish the malefactors, in the absence of relevant legislation in the country. For example, if you bought bitcoins for goods that you did not provide, and you came up with this to law enforcement authorities, neither the police nor the court will know what to do with it.

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Fraud cryptocurrency is different. Recently there was a case of illegal interference in the work sites of the group “1+1 Media”, the objective of which was hidden mining cryptocurrency Monero is probably in the interests of the international startup Newzmate.

“Department “1+1 digital,” conducted an investigation and found that the API company Newzmate in the browsers of readers of news sites of the group from the domain was loaded with hidden script Shop-hive for mining cryptocurrency Monero. Thus, fraudsters were enriched by the resources of users ‘ computers without their knowledge. After the discovery program for mining has been removed from all sites of the group “, – stated in the message of press-service of group “1+1 Media”.

The history of bitcoin

The first version of the code of bitcoin in 2008, created Satoshi Nakamoto. However, this is likely to be an alias of a person or group of people, as the author pagelli not disclose its identity.

A unit of cryptocurrency is the code that appears in the result of complex mathematical calculations on the computer.

In view of the mathematical formulas the appearance of new bitcoins, propisanni in his code, the number of possible bitcoins is marginal and limited to 21 million. That is, the additional emission of bitcoins is impossible. According to the calculations, all the bitcoins are mined approximately by 2034. Now produced three-quarters of units of cryptocurrency.

By the way, failure of emission, which usually leads to devaluation of money and inflation adds bitcoin advantages over the official world currencies.

Another advantage of bitcoin is considered a decentralized system of production of currency. That is, no control center, which could affect the price of the cryptocurrency and its volume. On the other hand, in this case, no one is responsible for possible failures of the system, therefore, the risks of investing in bitcoins is high enough.

However, this does not stop supporters of the cryptocurrency. On the contrary, many are attracted to such anarchic system format, which operates samoreguliruetsja without rigid control from the centre.

“I learned about bitcoin in 2012 when I went on a business forum, now can’t even remember what. It gives me the opportunity to believe that it’s my money and I can dispose of them as you want and wherever you want. I’m a rebel at heart and do it because it’s a great punch in the stomach the archaic Fiat money system “, – told the Ukrainian miner Andrew Hunter Hunting, which in addition to mining bitcoins makes a living selling computer equipment.

In fact, bitcoin is secured only by the demand for it and resources that are ready for him to give. However, the same is now happening with any other currency, according to experts. The days of the gold standard (a monetary system based on gold) is long gone.

How to earn bitcoin

Bitcoins are mined by mining – the process of creating new blocks in the database (the blockchain) using the power of a computer and special equipment, which was called “the farm”. During hashing on a farm in the data blocks are written conducted a bitcoin transaction. For creating the blocks the miner gets bitcoins as a reward.

It is noteworthy that the system responds to the increase in the number of miners, increasing the value of capacities required for bitcoin mining. So now it became unprofitable to do in private. According to a study by Dutch Bank ING, of the electricity needed for a single bitcoin transaction, will be enough to power the house during the month.

By the way, Ukraine is one of the countries where most of the miners and the owners of the cryptocurrency. According to the declarations of the officials, among the deputies there are a few of bilinovich millionaires. This Alexander Urbansky (5328 bitcoins, or almost $ 30 million), Dmitry Golubov (4376 bitcoins or $ 24 million), Dmitry Belotserkovets (398 bitcoins or $ 2 million).

Bitcoin against the official currency

Since the bitcoin exchange rate to the dollar increases, and consequently increases its popularity, there is a need to unify its definition and place in the financial-economic system of the world.

To discuss the issue joined, and Ukraine. Finance Minister Alexander danyluk on the results of the meetings during the annual meetings of the International monetary Fund and the world Bank in Washington, noted that bitcoin is “not a problem, which must be fought, but it is a challenge for traditional markets and regulators”.

“Cryptocurrency and what to do with it, how to regulate or not to regulate – it was dedicated to even a large event organized by the IMF,” – said the Minister.

It is particularly noted that although in Ukraine the status of crypto-currencies is not determined by laws, but the cryptocurrency is not prohibited.

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“In Ukraine we also now, together with the NBU and other regulators of the financial market with the involvement of experts working to better explore the nature of cryptocurrency and to form a position in relation to the corresponding regulation in Ukraine. There are many open questions, and in Ukraine the status of a cryptocurrency is not defined by law, but that doesn’t mean that cryptocurrency is prohibited. Ukraine needs to follow global trends and not lose the chance to use new technologies and innovations in the financial sector “, – Danilyuk wrote on the Facebook page.

Nevertheless, the NBU is currently working on the question of the legal status of bitcoin. In September, the regulator said that could not accept the bitcoin currency and warns of risks of fraud. Later, the NBU stated that it is willing to define bitcoin as a property asset.

There are unpleasant news for owners of bitcoins, as a financial transaction with property asset, as it is known, are accompanied by a taxation.

Now in the Verkhovna Rada registered two draft laws that claim to the regulation of the cryptocurrency market – on the treatment of cryptocurrencies in Ukraine (No. 7138) and the stimulation of the market of cryptocurrencies and their derivatives (No. 7183-1).

Andrei Blinov, an economist, a leader of the project “Successful country”:

– Ukrainian financial authorities in the face of the NBU ready to recognize bitcoin as a tangible asset. Accordingly, operations, and gold trading, provide for the taxation the tax to incomes of physical persons and military training.

With regard to the experience of other countries, then it is possible to argue long, because it is not unified. The main problem is that today there is no international Convention on the treatment of cryptocurrencies, in particular bitcoin. He is still too young. Why different countries have different interpretations of this tool.

However, I think that within five years at the International monetary Fund and other international organizations will be created by the Convention.

Individual countries, such as China, are actually the maximum limit or prohibit transactions with bethenny. However, despite the decision of Beijing, neighbouring countries, primarily Japan and South Korea have started to work with this tool. Accordingly, trade with this tool in Asia, moved there.

To a large extent the manufacturing and mining bitcoins is the chance for developing countries, in particular in search of capital, especially when there is a large concentration of miners.

Another thing is that this tool is risky. There are people who are kicking themselves that they did not at the time I bought bitcoins for $ 50, and now would sell for 5000. Or now run out and buy for 5000 in order to sell for 10 000. But the fact that we don’t know the prospects of this currency. At any time it is in a very dangerous area, and to invest in it risky.

We understand that we will be prepared when the regulatory framework on this issue, the Bank will consider the transaction without payment of the tax as a violation of the law. If a particular Corporation will be engaged in the conversion of this cryptocurrency in foreign or national currency, then there will be a question about the origin of these funds. And if the source of funds will be mining bitcoins, it may be asked, and paid from that tax.

Bitcoin has a lot of competitors, especially Ethereum and Litecoin. And there is a possibility that as soon as participants of the “coalition” bitcoin will lose talent or pace, another cryptocurrency could become more popular and supplant bitcoin.
Andrei Blinov

Now the NBU starts pretty tough test of the financial sector relative to the sources of origin of the individual capitals. And it seems to me that the authorities are afraid that bitcoin will become an instrument of legitimization of assets acquired in violation of the law, about the origin of which is unknown.

Regarding the popularity of bitcoin we can say that it is associated with the development of postindustrial economy, i.e. the economy of the virtual world in which there are a variety of electronic money. So bitcoin has a lot of competitors, especially Ethereum and Litecoin. And there is a possibility that as soon as participants of the “coalition” bitcoin will lose talent or pace, another cryptocurrency could become more popular and displace bitcoin, especially if bitcoin will remain quite rigid rules, in particular relative to the total number of bitcoins.

And one of the problems is that, in the absence of clear agreement between market participants, or the number of such cryptocurrencies and rules of their circulation in the world there will be hundreds of thousands less attractive and more risky instruments.

At the same time, the issue of cryptocurrencies still will not long remain unresolved. I do not think that States and international organizations that guarantee the existence of operating parameters of the financial system, will release one of the key elements of this system, which is really growing very rapidly. It may happen that individual States will implement significant restrictions on the calculations of the bitcoin and mining, or they will take it under control or to change certain parameters of their treatment. So quotes bitcoin in the next few years will resemble a roller coaster with consequences.


Eric Naiman, managing partner of investment company Capital Times:

– Practically in all countries of the world do not define bitcoin as money but as a sort of asset. And this raises the tax on General grounds. For example, if you change bitcoin to any other asset, product or service, it is regarded as a contract of exchange (barter) with the appropriate taxation. While there are certain subtleties assessment – how to assess for taxation, that is, how much was the deal. Likely to take a average bitcoin exchange rate or the exchange rate at the time of the transaction.

The key question now is still a tax – what taxes and how to tax the turnover of bitcoin. If it is a common product or service, then it should be charged VAT. At the time of the swap agreement occurs including VAT. In case of non-payment will occur penalties. And the biggest problem is how to calculate VAT.

Now in all the major countries of the world, bitcoin is a commodity, because it means paying tax. Countries don’t want to abandon the tax treatment of cryptocurrencies.

On the issue of reinforcement of bitcoin, the key difference between crypto-currencies from tickets MMM pyramid or other papers is that in the latter case do not have any security, and the issue of tickets MMM could be infinite – in any amount and any denomination. Bitcoin and other cryptocurrencies emissions is pre-determined, that is all you know how much and at what point in time will this cryptocurrency. Accordingly, no one can simply “print” cryptocurrency.

Therefore, in the system of bitcoin disappeared an element of distrust to this issue. After all, the state can at any time to print any amount of dollars or hryvnias. And invalidate them. And bitcoin does not.

Bitcoin as one element of mistrust was replaced by another. Namely, who controls the whole system and who will ensure that this crypto currency actually worth something.
Eric Naiman

On the other hand, it is theoretically possible that someone will press the button and cancel. And all your assets will just disappear. This raises the question of trust. But it’s the same as a question of confidence in official currencies – the dollar, the hryvnia and other things. If we trust the government that it will take them printed money as payment for public services, regulated tariffs and taxes, cryptocurrencies such obligations, that they will be taken as payment, no. It is based solely on participants ‘ trust of the system, and it is unclear to whom.

It turns out that the cryptocurrency is one element of mistrust was replaced by another. Namely, who controls the whole system and who will ensure that this crypto currency actually worth something.

The cryptocurrency gained massive popularity from may 2017, that is actually several months passed. And now it’s turned into a full-fledged mental mania. And all the delusions in the history of mankind ended very badly. Another issue is that after this mania cryptocurrencies will find their niches and survive as a class. Because certain parts of society there is a need in crypto-currencies as means of exchange. It is primarily the shadow economy. Indeed, the popularity of bitcoin has begun once began strengthening financial controls in the economy.

Alexei Gerashchenko, the financier, lecturer of Kyiv Mohyla business school:

– In the case of bitcoin we are talking about a supranational one. If we define a particular currency, we usually can identify a certain area, country or on the Issuer. But cryptocurrencies don’t fit the reality concerning monetary regulation, because they have no single center of issue and, accordingly, they are not amenable to standard regulation, because we don’t know who to write letters.

On this basis, the national Bank of Ukraine can not do otherwise, how to accept bitcoin certain property asset, as the standard definition of the monetary unit always has a binding to a particular regulatory jurisdiction, which the national Bank could enter into agreements and contracts.

In addition, most participants in the system consider bitcoin as money, but rather as a property asset or speculative way – buy today to sell tomorrow more. We monitor that, relatively speaking, yesterday a bitcoin was worth $ 3,000, and today almost 6,000 dollars. That is, it is treated as property, measuring the cost of a particular understood by all currency.

By all indications it’s more of an asset than a currency or means of payment.

At the same time, I don’t think that attempts to regulate this system something will fundamentally change. Now we are talking about a fundamental challenge to the General established rules, when there is neither a national anchor nor a territorial authority or Issuer. This is a challenge for the future, when all the known systems, which are built with a single point of control, will be subject to criticism. The desire to regulate the cryptocurrency is an attempt by traditional methods to respond to non-traditional phenomenon. And the emergence of a legislative act de facto nothing will change.

Bitcoin runs on the fuel of trust. Once that trust begins to disappear, the value of bitcoin can fall from five thousand to five cents.
Alexei Gerashchenko

In fact, now the value of any currency in the world that supports the flow of goods, to a large extent determined by the level of credibility. When you buy a dollar you don’t study what is behind them. In this case just triggered some sort of tradition, history, which you believe. In the same sense, Bitcoin, Ethereum or other bitcoin is no better and no worse than gold as an asset.

The paradox of bitcoin is that its price increases because they buy, that is demand, and buy it because it is expensive. And this demand is not completely unsubstantiated. Sooner or later there will be a collapse of value of bitcoin, because the vast majority don’t see it as a means of payment, but only as a means of enrichment and accumulation. And this is the key idea of any money. Money arises as a medium of exchange, to help move the weight of the goods and services. Bitcoin runs on the fuel of trust. Once that trust begins to disappear, the value of bitcoin can fall from five thousand to five cents.

It should not be surprising, because there is not one fundamental formula that would show how much it should cost. For example, the artist’s paintings, which at first were given for a pittance in a few years may increase the price. This is due to people’s ideas about what these paintings are special or brilliant. And with bitcoin, its popularity is growing due to human irrationality.

Olga Skichko