The bitcoin is worth more than ever. The digital payment method now stands at almost 3000 euros and is still the most popular of all cryptocurrency for dummies. But what is this digital means of payment actually, and what can you do with it?
What is a cryptocurrency?
A cryptocurrency is a digital means of payment. Digital money is not new in itself, much of our money is already digital on the bank. Cryptocurrency is a new currency than that on your regular bankroll, which can increase or decrease in value and supply. The best-known cryptocurrency is, of course, the Bitcoin, but there are hundreds of cryptocurrencies. There is even a Dutch crypto coin, called ‘Golden.’
What can you do with Cryptocurrency for dummies?
In principle, you can only pay on it, especially on websites where it is convenient for you to remain anonymous. For example, the Bitcoin is used as a means of payment for a ransomware attack, so that the detainees to whom the ransom is paid can remain anonymous. But most people use cryptocurrency as the investment because their value has risen in recent years. For example, the number of bitcoins that you bought a hamburger years ago now has the value of a pepper car.
How do you exchange for real money?
There are exchanges where you buy and sell the different cryptocurrencies. The cryptocurrencies are stored in a digital wallet, a “wallet,” either on one of the stock exchanges or your computer. If you want to sell cryptocurrency, you can exchange them for euros, which will then be deposited into your regular bank account.
Do you have to pay tax on your cryptocurrencies?
Yes, cryptocurrencies are considered as assets, and you have to pay taxes like ‘normal.’ Your capability in these digital coins will give you up to your annual declaration, as “other assets” in box 3. As a value, you will retain the value of your cryptocurrency on January 1 of the year for which you report. The Tax Administration then determines whether and how much tax you have to pay for your digital currency.
Are cryptocurrencies reliable?
Because cryptocurrency is often used as a means of payment by criminals, it has a reputation that it is not reliable. The bitcoin exchanges can also be hacked, leaving criminals with the value. But the advantage of these digital coins is that all payments are fully public and visible to everyone; so everyone can check what happens to them. That’s a big difference with money on a bank, which is controlled by a party and where transactions are not insightful to all.