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Bitcoin Loan Guide

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Bitcoin took the crypto world by storm with his coronation as one-hundred million dollars were exchanged in just ten minutes, marking him out immediately to be a force that would not be reckoned with soon enough!

The market cap is currently sitting at around 500 billion dollars – more than 40% share on both bitcoin cash and ethereum combined (though these two still have quite some way ahead).

Cryptocurrencies are becoming more and more popular with investors, especially those who believe in cryptocurrency as a store of value or an inflation hedge. Bitcoin is seen by these groups due its premier status among all cryptocurrencies- it has grown tremendously over time which gives credibility to this investment decision!

Bitcoin has grown beyond being just an investment and can now be used for all sorts of things. You even have Bitcoin ATMs where you exchange your digital currency into cash easily!

Let’s discuss why that is in this article.

What Is A Bitcoin Loan?

Bitcoin loans are a new and exciting way to get your hands on some bitcoins. You can either borrow money using the cryptocurrency as collateral, or lend it out in exchange for an interest rate that’s either determined by professional lenders around the world who want this type of exposure to diversify their portfolios with greater risk-adjusted returns than traditional financial products offer – but with lower risks associated too!

Though it is now possible to find many crypto lending platforms that provide this service, Bitcoin probably started as a peer-to-peer transaction between two parties.

The recent growth of Bitcoin as an investment and technology has led to a new industry, where people can borrow cryptocurrency for short periods. This is not only safe but it’s also highly profitable!

Why Take a Bitcoin Loan?

Why should you bother with Bitcoin loans? Here are a few reasons to consider:

Bitcoin Loans vs. Traditional Loans

Instant Disbursement

Bitcoin loans provide a quick and easy way to get money, without all the hassle. Unlike traditional lending practices which can take days or even months before approval-disbursement process is completed; with bitcoin it’s almost instant!

No Geographic Limitations

Bitcoin loans are a way to get funds when you need them without moving your assets, letting people who don’t have bank accounts take advantage of this financial service. The process is simple and quick-you just submit an application online or over the phone!

Lower Interest Rates

Those who want to get a loan for cryptocurrency should look no further than Nexo. With an APR of only 13%, it’s much cheaper than other platforms which charge up 35,99%.

Little or No Credit Check

The average person would be denied a traditional loan because they don’t meet the requirements. But with Bitcoin loans, all you need to do is deposit some collateral and your application will go through!

There’s no need to worry about meeting bank-high standards when you apply for a Bitcoin loan. The process is much easier than traditional banks and doesn’t require any identification or credit checks!

 

Bitcoin Loans vs. Other Crypto Loans

Deeper Liquidity

With Bitcoin’s market cap at over twice that of Ethereum, there is less risk in loan liquidations with bitcoins because they are more stable.

A Wider Variety of Lending Platforms

The demand for bitcoin is at an all-time high, with more crypto lending platforms offering the currency as a service. Some even offer only bitcoins in loan proceedings!

Higher Loan-to-Value Ratio

While most cryptocurrencies have low LTV ratios, Bitcoin offers you the opportunity for high-interest loans because it comes with such a good rating.

What Are The Risks?

Before making the decision to invest in Bitcoin lending, it is important to balance the potential risks with the benefits. Some of those risks include:

Liquidations

Liquidations are always possible when the price of your collateral decreases to a certain threshold. This can be especially true for Bitcoin, since it’s so volatile and has experienced many extreme shifts in value over short periods on multiple occasions already!

In the event of a crisis, it is important to keep an eye on your LTV ratio and have some cash handy in case you need extra collateral.

Platform Security

You’re way too deep with these guys. If they go bankrupt or if their site gets hacked – what was your collateral? You’ll never get it back!

You can reduce this risk by finding out as much about the Bitcoin lending provider before entrusting your collateral to them.

Regulation Problems

Crypto loan providers are not insured, which means you don’t know what to expect when dealing with them. The Nexo andBlockFi offer insurance policies for unexpected events but it’s the exception rather than rule in this industry of unlicensed businesses that often lack transparency or honesty about their business practices – something we can’t accommodate at Anonymizer Pro .

How to Get a Bitcoin Loan

So now that you know what bitcoin loans are, it’s time to get your hands on one. The next step is straightforward – just sign up for a lenders platform and complete KYC registration!

In some cases there’s no need to provide any collateral, or even verify your identity. You just come with the funding you want and get it approved instantly!

Factors to Consider Before Getting Bitcoin Loans

The Loan-to-Value Ratio

The loan-to-value ratio (or LTV) is a measure of how much money you will get back when your house sells. The higher this number, the less likely it’ll be for lenders to give out any more loans because there’s not enough equity in their portfolio!

That’s right, if your Bitcoin LTV ratio is 50% or higher then you’re entitled to get up to half of what remains after a loan. The lower this number goes down the more risk there will be in getting repayment from others for their cryptocurrency assets as collateral on an advanced contract with them which has been incurred at today’s rates and conditions set by market forces beyond our control!

The Interest Rate

This is a common misconception that the lower your interest rate, the better. It’s important to remember this when applying for loans from different platforms because they all have their own rules and regulations regarding eligibility which can vary based on what type of lending institution it is.

Nexo’s loyalty program, for instance, allows you to take advantage of their low interest rates by getting 0% APR on lending out NEXO tokens when at least 10% is invested in that cryptocurrency.

Tax Regulations

The tax on bitcoin loans may be complicated. You should know how much of your earnings will go towards paying off the debt, as well as if there are any provisions in place to reduce what you owe taxes wise!

Where to Get a Bitcoin Loan

The four following platforms offer reliable Bitcoin lending services.

YouHodler

Youhodler is a unique platform that provides crypto loans and allows users to spend cash while saving or holding their digital assets. The choice for which cryptocurrencies are supported on YouHodler run into the thousands – including Bitcoin, Ethereum and more!

When you hold onto crypto with YouHodler, your digital assets are protected by a partnership between Ledger Vault and other top-tier security providers. Not only does this protect the health of every last penny in our reserves but it also provides insurance up to $150 million dollars should any harm come near them!

Users of YouHodler have access to a variety of products, including crypto loans and exchanges. The company also offers savings accounts with interest rates higher than those found on traditional banks for those who want more control over their money or just need some extra cash when needed!

Nexo

Nexo is a cryptocurrency lending platform that supports 33 different cryptocurrencies. It offers its users banking services by allowing them to loan Bitcoin and other digital assets based on blockchain technology instead of traditional banks who only provide fiat currency accounts or credit cards for purchasing goods with money you haven’t earned yet as soon as possible after saving up all those coins in your crypto wallet!

The platform’s security is second to none. It has third-party audits and a $775 million insurance fund, meaning your Bitcoins are safe with them!

Nexo offers a variety of services that can be useful to crypto enthusiasts. For example, you get 2% cashback on all your purchases when using the card and there’s also an impressive referral program!

CoinLoan

CoinLoan is a revolutionary platform that offers users daily interests on their bitcoins. All you have to do in order for this service to work, deposit funds and then access them from anywhere at no cost!

The opportunity to earn cash by staking your crypto assets is one you should not miss! You can find all the information on which coins are supported and their rates here, it doesn’t matter what currency or token type (unless there’s something specific I haven’t seen yet). And with just one click of a button; offering/buying sell swap contracts becomes easy as pie.

CoinLoan is like having an insurance policy for your assets. You can use biometric authentication in the apps, so that no one but you know what’s going on with them!

Binance

The world’s largest cryptocurrency exchange is also one of its most popular. Binance has near-instantaneous transactions and accepts a wide variety of coins, making it easy to trade altcoins or Bitcoin alongside more established ones like Ethereum with ease!

Binance offers crypto lending and borrowing where you can get an instant loan backed by Bitcoin that lasts up to six months. The interest charge is hourly, but there’s a 65 percent LTV ratio if your request for funds comes in at the beginning of any given hour – meaning it won’t take much before this becomes profitable!

The Binance platform is not like many other lending sites that charge prepayment fees. You can pay back the entire loan even before your period of use ends!

Final Thoughts

Bitcoin loans are a fantastic way of keeping your Bitcoin without selling it. While the security risks and lack of regulation might make some hesitant, these types of loans offer numerous benefits that should not be ignored.

Your Ultimate Guide to Understanding Stablecoins

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Stablecoins are cryptocurrencies that maintain a stead value, by being pegged to anothercurrency, commodity or financial instrument. They provide an option for investors of high volatile cryptocurrencies, such as Bitcoin (BTC), who want to partake in common transactions without the worry of outrageous swings in their investment.

Bitcoin, though still the most popular cryptocurrency, is highly volatile in price. For example, its value increased from $5,000 to over $63,000 within a one year time span; however it then decreased almost 50% in worth just two months later. Furthermore, intraday swings are often large; at times the currency will move more than 10% in less than five hours.

This volatility can be ideal for traders, but those performing regular transactions, like buyers and sellers, are left to speculate on the risks. Those investing in cryptocurrencies for long-term appreciation don’t want to become famous for paying 10,000 Bitcoins for two pizzas. Most merchants also don’t want to take a loss if the price of a cryptocurrency plummets afterthey’ve been paid in it.

A currency that’s not legal tender must remain relatively stable to serve as a medium of exchange, meaning those who accept it are assured it will retain purchasing power in the short term. Among traditional fiat currencies, forex trading daily moves of even 1% are rare.

As the name implies, stablecoins aim to keep the value of cryptocurrency from changing rapidly.

While some argue that stablecoins are unnecessary given the ubiquity of the U.S. dollar, many cryptocurrency investors believe digital tender not regulated by central banks is the future. There are three types of stablecoins, which each use a different method to maintain their value.

Fiat-Collateralized Stablecoins

Fiat-collateralized stablecoins derive their value from being backed by a reserve of fiat currency, such as the U.S. dollar. In theory, other forms of collateral could be used to back these stablecoins (e..g precious metals or commodities), but most currently in circulation are only backed by USD reserves.

Tether (USDT) and TrueUSD (TUSD) are popular stablecoins backed by U.S. dollar reserves that are maintained by independent custodians and regularly audited for parity to the dollar.

Crypto-Collateralized Stablecoins

Stablecoins that are backed by other cryptocurrencies are known as crypto-collateralized stablecoins. Because the reserve cryptocurrency may also be volatile, these types of stablecoins are overcollateralized— meaning that the value of cryptocurrency held in reserves is greater than the value ofstablecoins issued.

In order to issue $1 million in a crypto-backed stablecoin, MakerDAO holds $2 million in reserve. This is done as an insurance policy against a 50% decline Ethereum’s value (which Dai is pegged to), should it happen. For example, though DAI is pegged the USD, 150% of all circulating DAI is backed by ETH and other cryptocurrencies.

Algorithmic Stablecoins

Algorithmic stablecoins are those that use an algorithm, or a set computer program, to stabilize the value of the coin by controlling its supply. This is as opposed to holding reserve assets which some stablecoins do and some don’t.

In contrast to central banks, which rely on a reserve asset to maintain the value of their currency exchange, cryptocurrencies are not backed by anything. Rather, the issuing organization establishes monetary policy in public and its status as tender reinforces credibility.

Algorithmic stablecoin issuers don’t have the same advantages as traditional issuers, and thus can’t fall back on them in a crisis. On May 11, 2022, the price of TerraUSD (UST) plummeted more than 60%, decoupling it from the U.S. dollar peg overnight. This was caused by an over 80% Luna token value drop that is related to Terra’s pegging system.

Stablecoin Regulation

Stablecoins have come under fire by regulators recently, as the market has grown rapidly to be worth $130 billion. In October 2021, IOSCO said that stablecoins should be regulated in the same way as other financial infrastructure, including payment systems and clearinghouses. The proposed rules would focus on those stablecoins which are considered systemically important by regulators- i.e., those with potential to disrupt existing payment and settlement transactions..

Furthermore, politicians have advocated for stricter regulation of stablecoins. For example, in September 2021, Senator Cynthia Lummis (R-Wyoming) called for audits of stablecoin issuers to become routine, while others support replicated bank regulations for the sector.

Prepare for the ‘Scourge’, A New Stage in Updated Ethereum Roadmap

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The goal of the project is to “establish reliable and fair credibly neutral transaction inclusion, and address MEV issues.”

Recently, Ethereum Co-Founder Vitalik Buterin shared an updated roadmap for network upgrades in a technical infographic. The purpose of this roadmap is to make the Ethereum network more censored and decentralized.

A few changes include a new milestone for the merge and the creation of a stage called the scourge.

Since September 15, when Ethereum switched to a proof-of-stake (PoS) network, it has been trying to reach 100,000 transactions per second by implementing rollups.

The Scourge has now been updated to the third stage on the technologically roadmap. The stages that will follow are known as the Verge, the Purge, and finally the Splurge.

According to Buterin, the purpose of the project is to “support reliable and fair credibly neutral transaction inclusion while addressing MEV issues.”

Big changes:

* The Verge✅ is not just about “verkle trees”, it’s about “verification”. Endgame: fully SNARKed ethereum

* The Scourge🧟(new): ensure reliable and fair credibly neutral transaction inclusion, solve MEV issues

* Single slot finality as stage 2 Merge🐼 milestone

— vitalik.eth (@VitalikButerin) November 4, 2022

MEV, otherwise known as an “invisible tax,” is a term used by miners to indicate the maximum value they can gain from moving transactions around while producing a block on a blockchain network.

By having this, miners are able to copy any successful deals from the mempool and carry out their own transactions before those seeking profit have a chance.

The Merge has caused Ethereum to become more centralized and censored.

The scourge is designed to keep transactions unbiased and reduce centralization. It could also include Proposer Builder Separation (PBS), in-protocol pre-confirmations, and frontrunning protections.

The Ethereum development team is investigating possible improvements to the network and updating the roadmap.

Bitcoin Fail – 80% Of El Salvador’s People Believe President’s Crypto Program Is A Disaster

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Bitcoin took the internet by storm in 2021 when El Salvador—the smallest country in South America—announced that it would make the cryptocurrency a legal tender.

El Salvador President Nayib Bukele shared the nation’s plan to adopt a bill that will make Bitcoin legal tender during the 2021 Bitcoin Conference in Miami.

The move, Bukele said, was to make it easier for Salvadorans living abroad to send money home to their relatives.

62 out of the 84 deputies voted in favor of Bitcoin Law on June 9, 2021, and it was then adopted by the country’s Legislative Assembly.

The government set $150 million to be used as a fund to support the approved legal measure. Officials even said they would give individuals $30 in BTC who sign up for an electronic wallet called “Chivo.”

El Salvador’s government expected great things for the cryptocurrency after it was adopted by the country, but more than a year later, things haven’t turned out as planned.

A research study conducted by the University of Central America (UCA) found that around 77% of El Salvadorans believe the adoption of Bitcoin as legal tender in their country was a massive failure.

To everybody’s surprise, 75.6% of the people revealed they haven’t used cryptocurrencies this year even though Bukele’s administration exerted great efforts in popularizing them.

A large number of the citizens, 77% to be exact, said that they believe the government should stop using public funds to accumulate BTC.

A September 2022 report from the Salvadoran Central Bank revealed that only 2% of Bitcoin remittances were used for digital currencies.

Bukele’s choice to invest in Bitcoin last year proved advantageous as the cryptocurrency ultimately reached an all-time high around $69,000 last November.

However, because cryptocurrency prices are always changing, the El Salvador government lost a lot of money when BTC’s value decreased and is now having difficulty making back that money.

As of this writing, based on Coingecko data, Bitcoin is being traded at $19,173 which is a 70% decrease from its record high.

Even though there are protests to rescind the newly implemented Bitcoin Law, Bukele is still optimistic because their plan has not been carried out yet.

The government is focusing its time and resources into realizing its goal of making the country a global crypto hub, instead of worrying about the negative reception from citizens.

Is DeFi on Bitcoin the Next Hype Wave?

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The future of finance is decentralized, and today the DeFi (decentralized finance) environment is flush with possibilities. Bitcoin’s DeFi ecosystem is still in its early phases of growth.

Currently, the decentralized finance (DeFi) world is full of potential, with over 200 DeFi applications running on the ten most popular smart contract platforms. However, until recently Bitcoin wasn’t even contenders as a platform for DeFi projects. The main reason was due to its limited programmability which made it hard to develop complicated DeFI applications like those found one smart contract platforms. But in November 2021, Bitcoin went through an upgrade that might make DeFi on Bitcoin more doable and appealing.

The Taproot upgrade changed the way that transactions are verified and opened the doors to DeFi on the platform. It improves the platform’s efficiency by condensing complex transactions and reducing both memory utilization and fees while increasing scalability.

Now, with this verifiable progress made, catapulting them into a better position than ever before, it’s no wonder that they’re taking their place in enterprising into new economic ecosystems like DeFi which (if industry predictions hold any water) could be set to expand considerably in coming months and years.

Bitcoin’s DeFi ecosystem is still in its early stages of development, and the technology is not yet widely used. Only a small number of projects currently use its smart contract features, and even fewer can be considered genuine DeFi applications.

Although Bitcoin’s Taproot upgrade gave it more native programmability, its scripting capabilities are still limited compared to other smart contract platforms. This is becauseBitcoin can only use the 100+ opcodes that come with its script. While these opcodes can be combined to form more complex scripts, they cannot compete with full-fledged smart contracts found on other blockchain networks.

This is why most Bitcoin DeFi platforms use a separate chain, such as the Bitcoin side chain or layer 2, to host their smart contracts. This links to the Bitcoin blockchain to settle transactions and utilize Bitcoin as a storage, data availability, or security layer.

Here are some of the most popular Bitcoin-backed DeFi apps:

Wrapped Bitcoin (WBTC)

Wrapped Bitcoin is currently the most famous Bitcoin DeFi software, allowing consumers to shift their native bitcoin from the Bitcoin blockchain to another platform by simply wrapping it.

Users deposit their bitcoin with a custodian, who then creates wrapped bitcoin (WBTC) on a separate blockchain. This WBTC can be utilized in the DeFi ecosystem of the chain it is produced on, such as Ethereum or BNB Chain.

Users who redeem their BTC (a procedure known as unwrapping) must again interact with a merchant that validates them and communicates with a custodian that burns the WBTC and releases the original BTC to them.

Stacks

Stacks is an open-source blockchain network that supports smart contracts and decentralized applications. It aims to revolutionize the capabilities of the Bitcoin network by providing a parallel execution layer, which promises to significantly enhance its functionality.

Since the Stacks blockchain launched in January 2021, its ecosystem gradually expanded to accommodate dozens of DApps, including NFT marketplaces, digital identity solutions and DAOs.

Stacks is powering NOVA Miningverse — an ecosystem of games that gives rewards to players in BTC.

The platform functions by connecting to the original Bitcoin blockchain through a system called Proof-of-Transfer (PoX). By doing this, Stacks dApps can use Bitcoin’s resources and be safeguarded by its security.

Portal

Portal, billed as the “gateway to unrestricted apps,” is a new platform that will enable Bitcoin-based DeFi.

The company has raised $8.5 million in an effort to bring Bitcoin to the world’s first blockchain, according to Fortune. It will do so by creating a multi-layered architecture that sits a decentralized exchange and DeFi ecosystem on top of Bitcoin’s basic layer.

Portal, a Fabric project, will provide several censorship-resistant levels on top of Bitcoin to make general-purpose computations for decentralized apps, atom trades, new financial instruments, and more possible.

Rootstock

Rootstock (also known as RSK) is a Bitcoin smart contract platform that has been under development since 2015 and was first launched in 2018.

To access the Rootstock ecosystem and utilize its Bitcoin virtual machine platform, users must lock up their BTC to receive an equal number of RSK Smart Bitcoins (RBTC).

The Rootstock DeFi ecosystem can utilize this RBTCT in the same way that Ethereum dApp projects may use WBTC.

Today, Rootstock is employed to create a wide range of Bitcoin-based dApps. Sovryn is widely regarded as one of the most popular since it aims to integrate DeFi into Bitcoin using RSK’s technology.

The Future of DeFi on Bitcoin

According to data from DeFi Llama, Bitcoin has a TVL of $111.58 million (as of writing), the majority of which is linked with Lightning’s layer-2 payments platform. The total TVL for existing Bitcoin DeFi platforms isn’t yet measured.

In comparison, it took Ethereum less than three years to grow its DeFi TVL from $100 million to $100 billion. If Bitcoin follows a similar route, its DeFi ecosystem and TVL should expand significantly over the next several years, reaching $100 billion in 2025.

Some of the earliest versions of now popular blockchain innovations were seen on Bitcoin. This includes the first non-fungible tokens (often called colored coins) and early smart contracts.

Bitcoin DeFi platforms are different from Ethereum and other smart contract-oriented sites. Bitcoin’s DeFi mostly uses either an independent layer that is connecting to Bitcoin or just settles/records all the transaction purchasing on Bitcoin like a standard layer 2 system.

Developers who want to operate on these platforms must overcome the technical difficulties that come with the territory. Aside from RSK, many of these have a modified virtual machine (not standard EVM) and restrict themselves to specialized programming languages — such as Stack’s Clarity language — in addition to supporting broad-spectrum languages.

This might make developing DeFi apps more difficult, yet it will help to avoid the Cambrian explosion of such applications on EVM platforms like as Avalanche, Fantom, and Binance Chain due to developer migration and DApp porting.

Developers will also need to tackle the problem of blockchain bloat, which is preventing the network from becoming more centralized.

For DeFi on Bitcoin to become widely used, it needs to offer a clear advantage over existing DeFi solutions, host brand new DeFi applications that can’t be found elsewhere, and attract a large number of users.

Bitcoin is known for being progressive and disruptive, so it’s not entirely implausible that this could happen – but it’s still too soon to tell. If retail investors and venture capitalists put money into the system, though, DeFi might not stay in its current state for long.

What’s the Difference Between a Fork and an Airdrop?

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If you’ve been following the cryptocurrency world for any length of time, you’ve undoubtedly heard the phrases “hard fork” and “airdrop” before. Perhaps you’ve even observed your cryptocurrency wallet’s total rise for no apparent reason, only to find out it was caused by an airdrop.

Airdrops and hard forks have several similarities, which has led to uncertainty among cryptocurrency traders at times. However, there are significant differences between the two procedures. When code is modified, a fork occurs; this results in two possible routes. The new blockchain is represented by the “new chain,” while the original blockchain is referred to as the “old chain.”

Airdrops happen when a new cryptocurrency token is given to users. If there’s a fork in the virtual currency, an airdrop might be used to send the new cryptocurrency straight to people’s wallets.

A hard fork is when the developers of a digital currency create a second branch using the same basic code. Usually, this happens after deliberation and discussion among the development team, miners of cryptocurrency, and other investors. If people want to take the currency in different directions, then ahard fork may be necessary.

Because of this, the two copies of the digital currency aren’t precisely identical; rather, the original currency generally continues as normal, while the new version makes some modifications to the code. Hard forks are occasionally not caused by a dispute between developers and miners but are instead a deliberate attempt to develop a different version of a previously existing coin.

Some of the most-talked-about times in the cryptocurrency world have been fork events. When Bitcoin has split, it has generated a huge amount of investor interest and discussion. The Bitcoin cash hard fork was just such an instance. Of course, over time, there have been many Bitcoin forking events, with many of them going unnoticed.

The term airdrop refers to the act of giving cryptocurrency to a selected group of people. This might be accomplished through ICO purchases and developer freebies. In an airdrop, tokens are typically given to investors who own a previous blockchain, such as Bitcoin or Ethereum.

The last point is what typically causes confusion between an airdrop and hard fork. Oftentimes, those who hold the former digital currency are given new tokens in both cases—and usually in volumes equal to their current holdings. For example, when the Bitcoin cash hard fork occurred, holders of Bitcoin were given an equivalent amount of Bitcoin cash tokens as designated by the developers of the fork.

In some cases, an airdrop is done primarily to raise the profile of a new cryptocurrency or coin. Holders of Bitcoin and Ethereum may be surprised to discover that new currencies have been added to their wallets (as many airdrops happen unannounced). Some in the digital currency community believe that free giveaways of this sort are largely a waste of time, since they end up generating an overabundance of coins in the market.

When investors obtain tokens for free, they frequently sell them. If enough people do this, the price of the new cryptocurrency will tend to fall significantly. In certain circumstances, an airdrop is distinct from a hard fork in that it doesn’t create two iterations of the same basic currency. Rather than creating two variations of the identical fundamental currency, an airdrop leads to the creation of a new cryptocurrency with potential long-term success.

Cryptocurrency Burning

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Cryptocurrency burning is the process of removing tokens (also known as coins) from circulation, resulting in a decline in the number of coins in use. The money is transferred to a wallet address that can only be used to receive funds. The wallet is isolated outside the network, and the tokens are no longer usable.

An address is associated with each cryptocurrency user that may be used to transmit and receive coins. The address is comparable to an email address, in which you can send and receive emails from anywhere. Your wallet address is similar.

When a coin is delivered to a wallet address that can only receive coins, it is “burnt.” These addresses are also known as “eater” or “burner” addresses.

The private keys to cryptocurrency wallets enable you to access the tokens stored in them, but burner addresses do not have a private key, thus the assets are lost for good.

It’s not unusual to remove an asset from circulation in order to adjust its availability and value. Central banks, for example, change the quantity of circulating money in order to alter a currency’s purchasing power.

Although cryptocurrency is digital, there are still a few reasons you might want to burn it.

Companies that are listed on the stock market typically buy back shares in order to decrease the number of outstanding shares. In general, this technique is intended to boost the worth of the stock while also improving a firm’s financial success. Unfortunately, it doesn’t always work as planned, and sometimes has the reverse effect. Shares may also be purchased as a form of corporate control—companies can employ this method to prevent a hostile takeover—the purchase of shares to acquire a majority ownership of the firm.

Many believe that tokens are destroyed to achieve similar goals. The entities behind the burning endeavor to make the coins more valuable and less accessible—trying to regulate the coin supply and preserve or enhance their own wealth. Some cryptocurrency entrepreneurs, on purpose, burn tokens to complete these objectives.

PoB is a method that blockchain networks use to make sure all participating nodes agree on the state of the network. A consensus mechanism is a set of protocols involving multiple validators agreeing that a transaction is valid.

PoB stands for Proof of Stake Without Energy Wasted, and it’s a type of proof-of-work system that doesn’t waste energy. It follows the principle of allowing miners to burn virtual currency tokens in order to earn the right to create blocks (mine) proportionally.

To burn the coins, miners send them to a burner address. This process does not consume many resources—other than the energy used to mine the coins before burning them—and ensures that the network remains active and agile. Depending upon the implementation, you’re allowed to burn either native currency or currency from an alternate chain, such as Bitcoin. In exchange for doing this action, you receive a reward in the form of native currency token.

Essentially, all of this fire activity keeps the network nimble, and participants are compensated for their contributions (both burning their coins and those of others).

The PoB system has a built-in mechanism to periodically burn cryptocurrency coins. By doing this, it balances out the early mining adopters with new users and prevents any unfair advantages.

The number of new coins generated by PoW decreases over time. This encourages miners to be active since they must burn their early coins and mine new ones instead of mining one coin when the mining begins. Because more new proof-of-work currencies are minted as time goes on, it becomes more difficult for early investors—or well-funded individuals with big mining farms—to keep a majority of the coins.

 

 

Stablecoin Taxation Explained in Depth

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Wondering how stablecoins are taxed in your jurisdiction?

Stablecoins have increased in popularity in recent years and are now a more significant element of the cryptocurrency world. It was predicted that stablecoins would conduct $1.7 trillion worth of transactions during Q2 2021.

Right now, you could be using stablecoins like USDC, Tether, or DAI in your transactions. We’ll go through how to report these transactions on your tax return in this post.

What is a stablecoin, and how does it differ from regular cryptocurrencies?

Many crypto investors are hesitant to utilize virtual currencies like Bitcoin and Ethereum for everyday purchases. Many consider these assets to be long-term investments and don’t want to spend them, incur capital gains, or miss out on future price increases.

Stablecoins were created to address this issue and give cryptocurrency users a currency they could use on a regular basis.

Stablecoins aren’t meant to gain in value over time; instead, they’re intended to track the cost of external commodities or currencies. Stablecoins have been developed that track gold, oil, and the South Korean Won as reference prices. However, the majority of popular stablecoins are linked to the dollar’s value.

How is stablecoin activity taxed?

Despite the fact that stablecoins were created to be utilized in routine purchases, they are handled equally by the IRS as any other cryptocurrency.

Buying a decent or service with a stablecoin/trading a stablecoin for another cryptocurrency is considered taxable.

You will have to pay capital gains taxes based on the price fluctuations of your stablecoins. Because most popular stablecoins are intended to track the value of the US dollar, it’s probable that your capital gain will be near zer o. However, you should record all of these transactions on your tax return.

Trading cryptocurrency for stablecoin

The disposal of a cryptocurrency for a stablecoin is called a trading event. Depending on the price movement of your assets since you received them, you will have capital gains or losses.

Receiving stablecoin as a payment

If you accept stablecoin as payment for your products and services, you must declare it as ordinary income. Depending on where you fall in the tax bracket for the year, your tax rate on these earnings will vary.

What if I’m transferring stablecoin between wallets?

You should not report on your tax return the transfer of stablecoins between wallets, which is a non-taxable event.

How is stablecoin interest taxed?

Users of popular cryptocurrencies such as BlockFi and Celsius can make money by investing in a stablecoin. Your bonuses in this case will be classified as regular income and taxed accordingly.

Staking your crypto IRAs – What You Need to Know

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Staking your crypto IRAs – What You Need to Know

Staking has become a word that many cryptocurrency investors, particularly Crypto IRA investors, are familiar with. Staking is the practice of validating transactions using a growing number of cryptocurrencies. POS is a more environmentally friendly method to mine cryptos and get rewards to confirm transactions than Bitcoin mining, which is based on the proof of work (“POW”) principle.

Key Features

  • Staking cryptos is a method for generating income in the background using your cryptos.
  • The Proof of Stake method is becoming more popular among cryptocurrencies.
  • Staking your crypto IRAs might have tax consequences that you should be aware of.

This article will explain how POS works, how a Self-Directed IRA can benefit from POS bonuses, and how it may be taxed in the context of a Crypto IRA.

What is Proof of Stake (POS)?

POS, also known as “Proof of Signature,” is a cryptocurrency that uses a variant of the proof-of-work system.

Staking cryptocurrencies is the process of committing one’s cryptocurrency assets to a blockchain network in order to confirm transactions on the blockchain. POS is available for cryptos that use the proof of stake approach for transaction processing. Because POS consumes less energy than POW, it has become more popular than it was previously.

POS, in a nutshell, is the process by which new transactions are added to a blockchain for a certain cryptocurrency. The cryptos that employ POS with the highest market capitalization are Solano and Cardano. Although, Ethereum 2 is anticipated to go live in the middle of 2022 and will improve the Ethereum network through switching from POW to POS. In addition, Polygon and Commit Chain connectivity help scale the Ethereum network by using their own POS blockchain and Commit Chain connection.

How Does Point-of-Sale (POS) Technology Work?

The first stage is to invest one’s assets in the cryptocurrency protocol. The protocol then selects the participant who will serve as a validator to confirm transactions blocks. The more coins a person pledges, the more likely he or she will be chosen as a validator.

Each time a block is added to the blockchain, new coins are “minted” and given out as rewards to the block’s validator. POS can be compared to a lottery. The greater the amount of tokens committed, the higher the chance is that the participant will be chosen as a validator and earning a reward.

POS eliminates the need for bitcoin miners by introducing validators instead, resulting in significantly less energy usage than POWs. In essence, if you want to stake your cryptos using a POS, all you have to do is move them to a wallet, create a smart contract, and employ blockchain code. Staking coins individually or via a staking service allows users to pool resources together.

A Beginner’s Guide to IRS & The Crypto IRA

The IRS considers cryptocurrencies, such as Bitcoin, to be goods. Cryptocurrencies are treated by the IRS the same way as equities or real estate. The IRS provided guidance on the tax treatment of cryptos in IRS Notice 2014-21. The IRS made it clear in the notice that cryptos will be taxed as a capital asset from a tax standpoint. As a result, selling bitcoin held in an IRA is not subject to taxes; instead, all gains are tax-deferred or tax-free if invested in a Roth IRA.

The tax treatment of a P.O.W.

The IRS released a new Revenue Procedure on October 12, 2014 that provides some clarity on how the agency will treat crypto rewards earned through POW. The notice adds that “if” a taxpayer’s mining of virtual currency is considered a trade or business, the funds received as part of the mining operation would be deemed business income.

A tax known as UBTI, which can reach up to 37% in 2022, may apply to a Crypto IRA if the investor engages in an activity that generates business income. As a result, if the proceeds or coins generated by a crypto mining operation are deemed to be a trade or business for purposes of the Self-Directed IRA’s investing standards, the income or tokens earned from that activity could be subject to the UBTI tax.

The use of the word “if” in Notice 2014-21 emphasizes the fact that not all mining operations will be considered a trade or business. As a result, an argument may be made that if you invested in some mining activity and viewed it as passive rather than as a trade or business, the cryptos earned as part of the activity would not be subject to ordinary business income.

Aside from Notice 2014-21, the IRS’s position on the tax treatment of POW mining activity is largely unaddressed.

Tax Treatment of POS

The IRS’s position on the tax treatment of earning rewards via POS may be revealed in a recent court case. Joshua Jarrett of Nashville, Tennessee, ran a small-scale virtual currency staking business using a home computer in 2019. Jarrett owned several hundred thousand Tezos tokens, which is a POS platform. He generated 9,000 new tokens over the course of a year and reported them to his federal income tax return.

The IRS was asked to pay out a $1 million bonus to Jarrett, who would then be taxed on the new tokens he generated through staking but had not yet transferred or sold. Jarrett felt that he couldn’t. The IRS attempted to avoid an unfavorable decision that might limit its ability to tax staking activities as complete ordinary income transactions in the future by offering to return all of Jarrett’s compensation in exchange for dismissing the case.

On February 3, 2022, he announced that he had decided to decline the IRS’s offer and pursue a final court decision instead. The case will now be decided by a U.S. District court in the Middle District of Tennessee, having significant consequences for both individual investors and Crypto IRA investors when it comes to tax treatment.

The Jarrett case is intriguing from a Crypto IRA perspective because he was involved in POS activity passively, not as a trade or business, which the IRS guidance on Notice 2014-21 appears to exclude. As a result, the court’s decision in Jarrett may have significant tax ramifications for passive Crypto IRA investors engaged in POS operations.

Conclusion

The tax treatment of POW and POS rewards will become more clear as the popularity of cryptocurrency investments rises. In general, if an activity is labeled a trade or business, an individual investor would be subject to ordinary income tax and a Crypto IRA investor would be subject to UBTI on the reward received. Despite this, POS Crypto IRA investors may get a definitive answer to their tax treatment sooner than later thanks to the Jarrett case. Stay tuned!

‘Staking does not always deliver the profits you may be looking for. This is especially true if the gains are taxed. Before engaging in staking, Crypto IRAs, please consult a financial advisor.’

Veladero: Our Story

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When we think about our story, we just couldn’t stop the smile occurring on our faces. The thing about our story is that it’s a little sour and sometimes, it’s just a little too sweet. Our journey began ourselves making our way from absolutely nothing to turning ourselves to one of the largest gold mining companies in the entire world. Plus, did you know that we offer a massive discount of about 2-4% when you buy Bitcoin from us? Well, that’s totally a different story. So, how did it all begin? We ain’t telling this story to brag about our accomplishments. Instead, we are happy about the way the things turned out to be. Our journey hasn’t yet ended. However, the hard part is now dealt with, and we would like you to join us in our journey and stick till the very end. So wouldn’t you like to take a little sneak peek at our bitter-sweet adventure?

Before we narrate our entire journey in front of you, we would like to inform you that, “We are one of the largest gold mining companies in Argentina. Not only Argentina, but we have also made our impact all over the world.” So how did we do it? Let’s take a look.

Pre-Foundation in 2010

We haven’t been in the industry for a long period of time. However, we have successfully made our way around the industry. The year was 2010. Bitcoin wasn’t a huge thing back then. It was just available to people at reasonably cheap rates. People used to sell 4-5 Bitcoins in order just to buy themselves a pizza. So, it was the year 2010, and the current founder of Veladero, Jeremy, wasn’t quite satisfied with his life. He always dreamt of reaching the heights that his friends usually talked about. Instead, the thing about Jeremy is that he wasn’t quite able to earn a huge amount of money through his Pizza Delivery job. After working for about 6-7 months, Jeremy realized that his life wasn’t just limited to delivering pizzas to people all around the world. Instead, he wanted to conquer his dreams.

 

His father used to take him for a visit to the gold mines. His father was a worker there and knew too many people that could boost Jeremy up. In some days, Jeremy started working with a gold mining company and started digging out gold. He was really impressed with the amount of gold that could be obtained through the mining process. He kept working with the gold mining company for about six months and learned everything he could.

Foundation of Veladero in 2012

Jeremy quit his mining job and instead, started working for himself. He started his own company named “Veladero” in the year 2012. It was the year when the technology started making its way around the world and had already made an impact on the lives of the people. With the help of his skills that he acquired through his gold mining job, he used to take up individual contracts and assist various gold sellers in the market. With the help of his contacts at the gold mining company, he successfully sold a huge amount of gold to the individual gold sellers in Argentina. He used to take up their orders and offer them gold at a reasonable price. But, he didn’t believe that he would be able to achieve all of his dreams by simply selling gold. He invested in a lot of sectors. He took up individual contracts for an oil and gas company. Plus, he had come across the term ‘Bitcoin.’ One of his nerd friends insisted him to buy some of them as he considered that it would have a major impact in the near future. Guess who was right? He was able to gather a huge amount of money during his time as an individual contractor.

The Rise Of Veladero – 2016

With the help of his friends at the gold mining company and from various parts of the world, Jeremy had turned Veladero into a huge organization already that dealt in gold. Selling gold was not an easy job. However, people at Veladero knew how to do it. In his journey, Jeremy always dreamt of operating a gold mine under the name of his company, and that’s what he insisted on doing. With the help of his friends and his contacts all around the world, his team at Veladero was able to work in collaboration with Barrick Gold. And the rest is all history. Veladero is one of the largest gold mines all over the world, and nobody can deny the fact that it is. Did you know that the mine has estimated reserves of about 10 million oz of Gold? And do you remember the bitcoin that Jeremy bought during his bitter-sweet journey? Well, he just forgot about it, and those Bitcoins just generated a huge amount of profits for Veladero. This was the time when Jeremy realized that he must also start focusing his way around Bitcoins and must provide the world with it at cheaper rates.

Who Are We?

Who wouldn’t love to buy Bitcoin at cheaper rates? And that’s what Veladero has to offer. Our vision is to provide Bitcoin to each and everyone in this world at really cheaper rates comparatively. And how do we do that? We mine gold. Based in Argentina, Veladero holds expertise in mining gold and holds a long and successful history. Everyone loves gold. And with a huge amount of gold reserves at our disposal, we trade-in the gold in our hands successfully with our joint venture partners in return for Bitcoin. This allows us to offer Bitcoin to our customers at a value particularly cheaper than the other wallets. Can you guess the difference between our and their rates? That’s a tremendous difference of about 2-4%. Calculate the money you would save and invite a huge amount of profits in your pocket right now. We know that you want to. So why not start climbing the stairs to your success right now!