Bitcoins Case Study

In this essay, the author

• Explains that the difficulty of the mathematics problem is such that bitcoins will be discovered at a limited and predictable rate system wide.
• Explains that the total number of bitcoins that can be generated is arbitrarily capped at 21 million coins, which is predicted to be reached in 2140.
• Explains that bitcoin offers users the advantages of lower transaction costs, increased privacy, and long-term protection of loss of purchasing power from inflation. however, there are a number of disadvantages that could hinder wider use.
• Explains that bitcoins are portable. mobile payments can be made almost instantaneously by using a digital wallet. cross-border transactions may take only minutes.
• Explains that the bitcoin system eliminates intermediaries and reduces transactional costs that are otherwise present in conventional credit card transactions or electronic funds transfers.
• Explains that bitcoins' private nature protects users against identity theft because personal information is kept hidden. having a public ledger means anyone can verify transactions in the bitcoin block chain.
• Argues that because bitcoin transactions cannot be reversed, do not carry with them personal information, and are secure, merchants are protected from potential losses that might occur from fraud.
• Explains that bitcoin's exchange platforms (such as for buying and selling bitcoins) are generally not regulated, which means that if the platform fails or is hacked, the bitcoin user is not protected and have no statutory recourse.
• Explains that the value of a virtual currency such as bitcoin can fluctuate wildly based on its popularity and ease of trading, use or storage.
• Explains that the contents of a digital wallet can be stolen by computer hackers, similar to how real wallets are. an australian bitcoin bank was hacked, resulting in the theft of more than $1 million in bitcoin.
• Explains that bitcoin transactions cannot be reversed and there is limited accountability or recourse available should user disputes arise through use of the system.
• Explains that bitcoin has been associated with black market sales and illegal conduct.
• Explains that all purchases made on silk road, an illicit online marketplace, must be paid for by bitcoins. in one case, the hacker set up a bitcoin account and, with the assistance of other hackers, used that to buy heroin.
• Explains that if you hold bitcoins as an investment, you will pay cgt on any profits when you dispose of them.
• Explains that if you are trading bitcoins for profit, the profits will form part of your assessable income.
• Explains that if you accept bitcoins as payment for goods or services, the transactions will be subject to gst.
• Explains that if you are mining bitcoins, any profits will be included in your assessable income.
• Explains that bitcoins are stored in a digital wallet on the user’s computer or at an online digital wallet service. technological advancements in bitcoin wallets continue to fascinate the world and offer to make the environment more secure for users.
• Explains that businesses that have started accepting bitcoins have enjoyed increased media exposure, which in turn could help attract customers and improve profits.
• Explains that bitcoins’ private nature is attractive to criminals who use them for money laundering and other illegal activities.
• Explains that the bitcoin market price is highly volatile, creating uncertainty in its practicality as a store of value. valuing bitcoin is difficult as it has "no intrinsic value."
• Explains that mtgox, the world's largest bitcoin exchange, has been in bankruptcy proceedings since a major hack in february 2014 in which nearly 850,000 bitcoins were missing and likely stolen by hackers.
• States that the australian taxation office (ato) released a guidance paper titled "tax treatment of crypto-currencies in australia – specifically bitcoin."