Cryptocurrency - what is it in simple words. Difference between electronic money and cryptocurrency Electronic money cryptocurrency

In the 21st century, new opportunities appear every day, financial instruments outputting economic relations to a qualitatively new level. A striking example of this is cryptocurrency and related concepts, which have already been appreciated by both large business representatives and ordinary Internet users.

Only a lazy person does not speak about cryptocurrency today, but what is it? In simple terms, it is a digital currency; coins (coin) act as its unit. They are protected from the possibility of forgery, representing encrypted information that cannot be copied, thanks to the use of a cryptographic method.

Do not confuse concepts "Electronic money" and "Cryptocurrency", because:

• Electronic money can appear on an account in any of the modern systems only after they are deposited into the account in their real, physical embodiment, for example, through a cash register or payment terminals, so the electronic form is only one of the forms.
• Cryptocurrency it is issued immediately on the Web, and it is in no way associated with conventional currencies or the state system.

Anyone can start earning cryptocurrency, having on hand special software and equipment. It is the computing power that will be responsible for solving constantly complicated algorithms, mining a coin, or, more precisely, encrypted information. What is the evidence of the coin's presence on the Web? Blockchain is a kind of account, which will be discussed below. Currency is stored decentralized on users' crypto wallets.

1. Since the algorithm code is open, anyone who wishes can get it.
2. All transactions are anonymous, that is, there is no information about the owner of the crypto wallet!
3. The cryptocurrency has a decentralized nature - there is no single bank, there is no control over payments and transactions.
4. Cryptocurrency is not subject to such a process as inflation, since only a limited number of coins can be issued.
5. High level of protection - currency cannot be copied.
6. Minimum fees.

Among the most famous cryptocurrencies on modern market worth highlighting:

• Bitcoin (BitCoin)
• Litecoin (LiteCoin)
• Ethereum
• Satoshi
• Primecoin
• And many other altcoins.

Any cryptocurrency has its own structure, which demonstrates the difference from everything that came before.

1. The cryptocurrency does not have a single internal or external administrator, that is, the system is 100% self-organizing and independent.
2. There is also no central server. It is a decentralized system, and the database is not stored in one place, since copies of it are held by of each system participants who regularly check with each other.
3. Any payment is encrypted with a secret key available only to the owner of the funds. Each participant has their own special address (wallet) and key (i.e. password).
4. A new block is added to the system in a coordinated manner in the distributed databases, together with information on all transactions.

All cryptosystems, working with information, use computer power, and they are simply huge, so a logical question arises - where to get them, which contributed to the emergence of such a term as mining (mining of cryptocurrencies).

What it is? Mining coins through resource-intensive calculations. This is a task available to many users who donate some of the power of their computer to solve those tasks related to earning cryptocurrency. There are several ways to make money on mining:

• Through a PC, special software is downloaded, which allows you to send part of the power to the process of calculating cryptocurrencies. There is no need for any capital investment, however, you can earn a little in this way.
• You can mine through special equipment (special purpose integrated circuit), which is actively working and bringing a stable income. Popularly it is better known as ASICs - a special purpose integrated circuit, that is, such a circuit that is focused on solving one specific problem, in our case, it is earning a cryptocurrency, for example, Bitcoins. In this case, it is gentle to take care of the purchase of high-quality and powerful equipment, since further earnings on an industrial scale will directly depend on this. A farm is a set of computers that are capable of performing computations at the proper level, working around the clock without lunch breaks. To efficiently mine cryptocurrency, you will need appropriate powerful video cards and power supplies. Forming a farm is always a significant cost that is directly related to the purchase of equipment, payment for electricity.
• Miners often decide to lease such capacities. This is cloud mining. This model is characterized by the use of cloud services, as the name suggests. Groups of miners gather in certain structures, and their priority goal- getting a good profit, which is much higher than with individual mining. The scheme is as follows - the company acquires modern and powerful equipment, configures it and leases it to miners, and takes over all questions regarding the service, payment of utility bills and other aspects (see).
• If you do not want to invest large sums, and stable and small profit is a priority, you can consider the option of joining the pools. This is a node that integrates a certain number of miners (they all have different computing power). All participants have one goal - to find the correct block. For the first correct block, the reward will be received by the pool that distributes the profit between the participants, taking into account the contribution of each and them, pursuing the principle of justice.

It is interesting that the term "mining" itself is translated from English as "mining", but neither a pickaxe nor a shovel will be useful here, since it is enough to have a powerful computing system on hand to help the process of recording a block of transactions in the blockchain ...

The very first cryptocurrency in the world, which to this day is the most famous, is Bitcoin. The first mention of it appeared in 2008. Its founder was a certain person who chose to leave himself incognito and spoke to the public under a pseudonym. Today the rate of this currency is quite high, which attracts the attention of a large number of people. However, the number of units that can be mined, experts say, is limited.

According to forecasts, the last possible Bitcoin will be mined in a few decades. And mining it becomes more difficult every year, which is associated with the desire to retain its value. Let's find out more about its extraction, storage and use.

• Mining

One of the main ways to acquire bitcoin is to mine it yourself. This process is carried out using a computer and special program... But not every computer is suitable for this, but only one with a powerful video card. Some miners prefer to purchase several video cards connected to each other for faster currency extraction. However, the cost of such bundles is quite high, but the period for which these costs will pay off is several years. Another disadvantage of self-mining is that it requires a lot of electricity.

Since mining is an unattainable option for many, bitcoin can simply be purchased on exchanges, in exchange offices, or from a specific owner.

• Storage

As with any currency, you need a wallet to store bitcoin. There are plenty of such wallets on the network. They are all different in functionality and appearance. It is better to choose the most famous ones, since they are more secure and secure. The data for entering the wallet (login, password) should not be simple, it is preferable to make them more intricate, so that it is not so easy for fraudsters to hack into the wallet. In this case, it is imperative to write them down for yourself, so as not to forget and not lose, otherwise, if something happens, you will not be able to restore the data and contents of the wallet.

You should not store all the currency in one wallet, for the purpose of their safety. The best and safest option is to create a wallet on your computer and store funds there. But, unfortunately, such wallets have a large database volume and require constant updating. Mandatory condition in in this case- the presence of an anti-virus program on the computer. It is best to always back up your wallet whenever possible.

• Usage

1. In those countries where cryptocurrency is a legalized unit, it can be used to pay for any goods or services.
2. In addition, it can be withdrawn to the card, that is, exchanged for ordinary money or sold on the same exchanges or exchange offices at a higher rate and receive the difference in the form of profit.

Bitcoin discovery Satoshi Nakamoto. Bitcoin development in dates

Satoshi Nakamoto

As an independent currency and payment system, Bitcoin appeared in 2009, when a set of data in the virtual space began to be activated among serious businessmen and investors, and not just among ordinary enthusiastic users.

• In the summer of 2016, the geeks on information portal Slashdo noticed that they had a strange article on their file sharing site that hadn't been there before. It turned out to be the work of an unknown then Satoshi Nakamoto... It collected all the detailed information about what bitcoin is and what advantages it has over classic fiat money. At the end of the article, a source code file was attached. So its author showed that the bitcoin system is absolutely transparent and the authors will not patent the invention. With the creation of Bitcoin and the beginning of its popularization, a race of cryptocurrencies started in full swing in the world, which appeared as a result of the open publication of pieces of code on the network.
• Less than a month later, at the end of the summer, they tried to hack the still poorly optimized network, stealing some of their collected coins from the wallets of some large cryptocurrency holders. Luckily for them, the developers were able to restore the network, while removing malicious files from the computers of the members of the cryptocurrency support team. Learn more about how hackers tried to hack Bitcoin wallets.
• In the fall of 2010, there is a surge in the activity of miners and investors in the network, due to which the capitalization of the coin reaches a level equal to one million dollars. Now it is hard to believe that just seven years ago, the most expensive currency unit had a total capital of just over one million dollars. At the same time, one coin cost about half a dollar for one piece.
• In March 2011, the very first exchange trading virtual currency appeared on the network. Officially, with the support of the creator of bitcoin, this currency could be bought and sold only on MtGox and nowhere else. Unfortunately, for a number of reasons, the MtGox resource ceased to function in 2014. After him, several more large and reliable cryptocurrency exchanges appeared, such as EXMO and LIVE COIN.
• In October 2011, news appeared on the network that the very first fork was created based on the source code. It had the name "Litecoin" and claimed to be the second largest coin in the market by capitalization, but in 2015 it was replaced by Ethereum.

It is impossible to talk about cryptocurrency and not touch on such a topic as blockchain (from the English word "blockchain" - "a chain of blocks"). In fact, any block is a collection of data, zeros and ones. All of them are lined up in a chain, since any of the blocks "knows" which blocks go before or behind him. All data inside them are designed to describe everything that happens on the web. When a transaction is carried out, all information is written to the nearest blocks, a file containing information is formed, and the data is available to all users of the system.

In simple terms, in such a network it is impossible to do something "secretly", since every move is recorded, any participant has access to information regarding past transactions. However, anonymity remains, so users can only be identified by their crypto wallet number. You can compare the functioning of the blockchain with the work of torrent trackers:

1. The system also consists of many equal participants.
2. They transfer funds between themselves.
3. All operations are performed inside a special system.

Technology can be expressed for understanding in the following sequence of operations:

1. User X wants to transfer money to user Y.
2. The transaction is sent to the network, after which a new block is assembled.
3. Blocks are immediately sent to each of the system participants to pass the check.
4. All register blocks in their version of the database.
5. At the next stage, the block falls into place in the chain.

Many people think that blockchain and Bitcoin are one and the same thing. This is not true! Blockchain is a technology, and not only Bitcoin, but also many other cryptocurrencies works on it. The most important thing is that it is actively used by various spheres to solve important problems:

• Resource accounting
• Organization of entire enterprises
• Concluding contracts
• Conducting votes and so on

Every day there are more and more new developments in this area, so it is already possible to speak of widespread use throughout the world.

Speaking of cryptocurrency, one cannot but recall such a concept as a fork. It is due to the fact that Bitcoin is open source software, so everyone has the opportunity to duplicate, change and further use it for their own purposes, and this modification of the code is a fork, which in English means “fork "! Thus, a fork is a change in the rules by which a block in a chain will be recognized as valid.

In the cryptocurrency segment, a fork is a change in the existing rules of work, which is directly related to the need to transform the protocol. Practice shows that once for the formation of bitcoin, sometimes it is just a matter of security and efficiency of the system.

Today there are 2 types of forks: soft (soft modification) and hard (hard modification):

• Soft forks- in this case, when the rules are changed, a software update is not required to start the execution of the new rules. If the code does not accept them, then the nodes can still interact with those nodes that are already using the new rules. That is, a soft fork is a reversible change in the code that does not upset the balance in the protocol.
• Hard forks- a slightly different situation. Here the newly appeared rules strongly contradict the old ones, therefore the nodes that did not accept them are not able to perceive information from the nodes that accepted them. A hard fork is a transformation of the balance mechanism, so the network will be divided into 2 parts, and they will not be able to contact each other in the future, since the blocks that are recognized as valid in one of them will never be the same in the other.

Forks differ in encryption algorithms.

This is not to say that the attitude towards cryptocurrency today is unambiguous. From a legal point of view, its use is practically not regulated, although technologies such as, say, blockchain have long been recognized even at the state level.

We can say with confidence that today the authors of numerous projects are actively developing projects that can be applied in any service sector, in the economy, banking, medicine, law. All of them integrate only the strengths of the blockchain:

• Transparency
• Decentralization
• Maximum safety

It is most obvious that these technologies will become part of interbank transfers, cloud services, software, logistics systems ... This list can be continued for a long time, since the future of cryptocurrency and everything connected with it is huge.

The virtual world is complex and multifaceted. Almost any project can be implemented in it, including your own money. But the first digital currencies appeared only in 2009, when someone under the pseudonym Satoshi Nakamoto presented his project to the public - bitcoin, which became the world's first cryptographic coin.

True, after that, people had to explain for a long time what cryptocurrency is and why it is needed. The fact is that at that time a limited number of people heard about digital coins, and even fewer could use them. Nevertheless, the cryptocurrency quickly gained the status of a new generation of money, despite the fact that the history of these coins does not even count ten years. So, finally, we have acquired a worthy competitor. The most daring predictions about why a cryptocurrency is needed say that they can completely or partially displace fiat from everyday life and be used as a more convenient, safe and profitable replacement.

These statements can be justified by the fact that the most popular coin today - bitcoin - has grown in price so much that for one such coin you can buy a small apartment in a small town. Wait another year or two and it is quite possible that there will be enough for an expensive cottage in an elite area. Given such a rapid rise in the rate of bitcoin, people simply could not ignore the emergence of cryptographic coins. Therefore, the desire to understand what the essence of cryptocurrency is and how to work with it is natural.

The essence and principles of cryptocoins

The essence of cryptocurrency is trying to make money that doesn't depend on anyone. The very definition of "cryptocurrency" came from a couple of words. The first word is cryptography and the second is currency. That is, it is a currency that is based on the principles of cryptography. Money is essentially a kind of encrypted code. In addition, many coins run on blockchain technology, just like bitcoins.

All cryptographic coins exist only in the virtual space. But the essence of the concept of cryptocurrency is as follows - it is just a code that is encrypted in such a way that each coin is unique. This prevents them from being counterfeited. To perform some kind of financial transaction, you need to transfer this hashed code of the coin to another person who is the recipient.

This money is stored in virtual wallets or on wallet programs that are installed on the computer. But such wallets transfer the entire blockchain to the computer. If we take Bitcoin as an example, then its blockchain today weighs more than 150 GB and is constantly growing. Therefore, users who want to work with cryptocurrencies, for the most part, choose virtual wallets, which are easier to manage and maintain.

Virtual wallets are often located on cryptocurrency exchanges. Exchanges are platforms where financial transactions with cryptocurrency are carried out, traders play on the difference in the rate, thereby earning their capital. You can also store and accumulate digital finances there. But there is a risk that if something happens to the exchange, then no one else will be able to access their wallet.

In addition, unscrupulous exchanges deliberately block user accounts in order to get their coins. So this is a huge risk. Therefore, for bitcoin, it is better to use btc wallets created on the official website of the blockchain.info system, or by using other services, of which there are countless numbers on the Internet. But it's better to use trusted resources. Among them are the following wallets:

Transactions between wallet owners are done directly without intermediaries and almost instantly. But you have to pay a small commission for the transfer, though not for all cryptocurrencies. But for Bitcoin, for example, the commission is constantly growing. If you want your transaction to be carried out as quickly as possible, then the commission should be higher. If you are ready to wait, then indicate a small commission or do not indicate it at all. This is a voluntary deal.

But before you take care of the wallet, you need to choose the method in which you will mine the cryptocurrency. We are now talking about cryptocurrency mining. At the moment, there are three relatively realistic methods for mining (mining) cryptocoins:

The essence of working with cryptocurrency is to mine as many coins as possible. Some of them can be used as a means for long-term investment, while others are better used for quick earnings due to active fluctuations in the exchange rate.

Miners play a very large role in cryptocurrency. In particular, in the Bitcoin blockchain, miners prevent the possibility of double spending. It is the miners who must give their consent to the transaction.

Cryptocurrency principles:

Nevertheless, having considered the concept and essence of cryptocurrency, one should not forget about its versatility. Among the coins existing today, liquid and illiquid ones can be distinguished. As their name implies, the former have relatively high chances of becoming a full-fledged financial unit in the future, while the latter also have this opportunity, but the likelihood of its implementation is much lower.

Among the cryptocurrencies that are distinguished by high liquidity, in 2018 there are many cryptocurrencies, in addition to Bitcoin. Selectively, this list may include such coins as Ethereum (Ether), Litecoin (Litecoin), Namecoin, PPcoin and Primecoin.

What is the value of cryptocurrencies and why are they needed?

When considering why cryptocurrencies are valuable, it's important to talk about their positives. And the advantages of cryptocurrency financial system directly follow from its principles, which have already been voiced above:

Why did you come up with a cryptocurrency? Probably, this should be asked about the creator of the world's first cryptocurrency - bitcoin. Satoshi Nakamoto did it. But the prerequisites for creating digital money appeared a long time ago. The world of finance must develop, and cryptocurrency is just another step in development, and quite natural.

Fiat funds and securities mostly accumulate in a privileged group of people. If we consider the situation in the United States, then an example of such a distribution can be called: the Federal Reserve System - banks of the first tier - banks of the second tier - all the rest.

If the distribution participant is close to the FRS, then he receives more privileges. That is, a person has a large number of unique conditions to use the issued resources. And the FRS itself does not have any restrictions at all, both in the issue and in the declaration of money, and even more so in its distribution.

But cryptographic coins like bitcoin do not give any preferences to anyone. Including there is no influence in the distribution of the newly issued money supply... In fact, there is no control over the login - anyone can do it. The main thing is that it does not violate the rules of the system itself. And already participants with equal voting rights will distribute resources. This is the main thing that can be said when answering the question of what a cryptocurrency is for.

In addition, it does not need complex systems to ensure the movement of its funds. In particular, one or more cloud servers can replace a complex system from Swift, correspondent banks, data center and more. This will eliminate the main disadvantage of today's financial system - its closure for ordinary people... Cryptocurrencies for everyone. They may not be ideal, but considering who needs cryptocurrency, we can say that to everyone and everyone.

Well, at the very end - what is the use of cryptocurrency? She will turn over, if she has not already turned over, financial world... The economies of the countries must now adapt to the new conditions. In addition, those categories of the population that once could only think about wealth are now very wealthy people, having managed to invest in tokens, which later became giants of the cryptocurrency market.

In addition, digital coins are not just money, they are entire platforms that solve most of the problems of the banking industry. For example, many coins help to make instant international transfers completely commission-free, like, for example, Ripley. Although, in all fairness, there is a commission here, but it is one hundredth of a dollar, so because of the size it is practically invisible.

Ethereum generally positions itself not as a cryptocurrency, but as a platform using a new generation of blockchain - the second in a row. Although, if we go back to the same Ripley, it uses the third generation of the blockchain, even more refined and improved.

The fly in the ointment is still present

Given the peculiarity of the cryptocurrency, it is impossible to call this financial industry completely safe and ready for large-scale use. Nevertheless, the fact that cryptocurrencies appeared not so long ago affects what we have now. In particular, many projects are at the development stage, and it is too early to say what will come of them in the future. Other sites are rapidly and rapidly becoming obsolete, unable to keep pace with market demands. In particular, this applies to bitcoin, on the network of which it is very difficult to complete a transaction, because the blockchain performs only 7 transactions per second, while users are not satisfied with even advanced indicators.

Among the disadvantages of electronic cash, if we summarize all cryptocurrencies, the following points can be highlighted:

• 
  A person is forced to store all digital money on digital wallets, which we have already mentioned above. This is convenient, but also one of the weakest points of the cryptocurrency system. To access the wallet, you need to be the owner of the keys and access codes. They are usually stored on a computer if the wallet itself is installed on the device. If, for some reason, these codes go where you don't need them, for example, into third-party hands, you can say goodbye to money. Since when transferring them to another account, neither the legal owner nor the state will be able to return the cryptocurrency to its rightful place. The situation is exactly the same if for some reason the user loses or forgets his access keys. They are simply not stored anywhere else, so it will be impossible to restore access. The same situation on exchanges is the maximum penalty for closed accounts no more loss of reputation;
• 
  The second big drawback (or plus - as you like) is the volatility of the coins. Since the coins are not backed by anything, including the statements of the state, which supports the rate of fiat money, their price is subject to sharp and rapid jumps. Many people like the frequent change in the value of coins, but in fact it is a very dangerous thing. For example, now the bitcoin rate has grown (its rapid growth began at the end of 2017). The maximum price of the coin reached 18 thousand dollars and showed all the signs that it will grow and higher. But users who bought Bitcoin for $ 18,000 were in for a big disappointment, because after a while the coin dropped to $ 14,000 and continues to fluctuate somewhere around the 15,000 level. That is, people have suffered losses. But the situation could be much worse if Bitcoin started to fall even lower. Considering the factor of volatility, this decline could continue until the bubble called Bitcoin burst at all. But this coin has left on its reputation. Bitcoin is popular by inertia as a proven financial unit. However, it is difficult to predict how long this will continue;
• 
  Since cryptographic money is not controlled by anyone or anything in the virtual world, it can pose a serious threat to the global economy. The capitalization of currencies is constantly growing and regularly breaks records. Today, the total capitalization of the cryptocurrency market is $ 726.7 billion, whereas less than a month ago it was only $ 600 billion. Many countries do not want to accept such a rapid growth, but this does not force users to refuse to earn cryptocurrency. But the country can officially ban the use of crypto coins. Then people who want to keep up with the times and use coins will have a bad time. Exchanges will close, it will not be possible to exchange coins for fiat money, and exchanges will stop working - the use of digital money will become impossible;
• Over time, it will become more and more difficult to mine, earn bitcoins or other crypto-type coins that are being mined. The mining procedure itself provides for the complication of technology. Previously, it was possible to mine coins on an ordinary computer, but today it is almost impossible. More precisely, you can try, but it will be unprofitable. There are several alternatives to solo mining today.
• 
  Connection with crime. Since encryption provides complete anonymity, rumor has it that this industry has not been ignored by the criminal world. It is ideal for money laundering. But accusing the cryptocurrency community of being specially designed for the mafia is silly. The Internet is also used by criminal organizations, like ordinary money, but no one is going to give it up. Nevertheless, such a scheme for using cryptocurrency raises concerns, so the lack of control over the cryptocurrency market in this context is rather a minus.

And, of course, there is always a risk that crypto coins can disappear at any moment - burst like a soap bubble, instantly losing, if not all of their price, then half of their value. In particular, this applies to the sensational bitcoin. Even eminent experts call this coin something of a pyramid scheme.

In addition, users who invest their money in ICOs risk even more than those who invest in conventional crypto coins. Unfortunately, the statistics do not lie, and more than 90% of all IPO projects turn out to be unprofitable for users. But the other 10% can be beneficial.

To become successful, it is advisable to choose several coins at once with which you will work. And in order to protect yourself even more, it is important to use several exchanges at once. If another drop in the rate occurs, there is no need to rush to drain the crypto coins. This is often a temporary phenomenon that you can wait out.

Thus, the use of digital money is not distinguished by either legal or administrative security. All transactions are made by users at their own peril and risk. So if any illegal actions are committed with respect to cryptocurrency, there will be no one to turn to. Well, the biggest drawback is uncertainty. purchasing power virtual funds.

What experts say

The topic of cryptocurrency and why they are needed worries not only ordinary users, but also experts. They continue to figure out the reasons why cryptocurrency has such value and how it appears. This money is unique in its essence, because not all are similar to bitcoin. Let's take a look at a few expert opinions on why crypto coins are needed:

So, looking at bitcoins and other cryptocurrencies, professionals see the future in them. The point is to have time to introduce new technologies into the economy and do it right.

Cryptocurrency Is a digital (virtual) currency that has no physical expression.

The unit of such a currency is "coin", which means "coin" in English.

At the same time, the coin is protected from counterfeiting, since the coin is encrypted information that cannot be copied.

The use of cryptography has led to the use of the prefix "crypto" in the name of the cryptocurrency.

We can say that cryptocurrency is a digital (virtual) currency that is used by participants in the turnover for the purpose of making settlements on the Internet.

At the same time, a feature of the monetary unit is its protection from counterfeiting, since data that cannot be duplicated is encrypted in it.

The difference between cryptocurrency and ordinary money in electronic form

The main difference between electronic cryptocurrency and ordinary money in electronic form is as follows:

In order for ordinary money to appear in the account electronically, it must first be physically deposited into the account, for example, through a bank or payment terminal.

That is, for ordinary currency, the electronic form is one of the forms of physical embodiment.

The cryptocurrency is issued directly on the Web and is not connected in any way with any ordinary currency or with any state currency system.

Thus, we can say that “cryptocurrency is a kind of electronic money.

Advantages of cryptocurrency

The advantages of cryptocurrency include the following positive aspects:

• Availability of cryptocurrency - electronic money at any time.

At the same time, it is impossible to freeze the account or withdraw the cryptocurrency.

At any time, you can check the accuracy of the operations performed.

Open source code. Thanks to this feature, everyone can mine virtual coins.

Anonymity. Unlike classic electronic money, transactions with which are easily tracked, it will not work to obtain information about the owner of a cryptocurrency wallet. Only the wallet number and limited data on the amount on the account are available.

Reliability. Hacking, forging or performing other similar manipulations with virtual currency will not work - it is reliably protected.

In most cases, the commission is charged exclusively on a voluntary basis.

Limitations of cryptocurrency. As a rule, cryptocurrency is issued in a limited volume, which attracts increased attention from investors and eliminates the risks of inflation due to the excessive activity of the issuer. Thus, the cryptocurrency is not subject to inflation and is inherently a deflationary currency.

Cryptocurrency is an independent currency. Nobody regulates its issue and does not control the movement of funds on the account. It is this feature that attracts many members of the Network.

There is no commission for making a transfer Money between countries.

Disadvantages of cryptocurrency

The disadvantages of cryptocurrency include the following negative points:

Difficulty controlling translations. Banks and other supervisory and oversight bodies do not have the ability to control the issuance and movement of cryptocurrencies.

Risk of being banned. Government structures are wary of cryptocurrency. Many countries have imposed restrictions on its use, and violators can be fined.

There is no way to revoke the payment.

Volatility. Cryptocurrency is unpredictable, as it depends on the current demand, which, in turn, can change as a result of changes in legislation and due to other factors. For this reason, price fluctuations occur. virtual money.

Danger of loss. The "key" of access to electronic money is a special password. If you lose it, the crypto coins in the wallet become unavailable.

No Warranties. Each user is personally responsible for their savings. There are no regulatory mechanisms here, so in case of theft, it will not be possible to prove anything and return the money.

There is no common organizer of trade, which reduces the trust in cryptocurrency.

The cryptocurrency is not backed by anything.

Insufficient security of the safety of the cryptocurrency.

Thus, from the properties and features of the cryptocurrency, the following advantages and disadvantages can be distinguished in comparison with conventional traditional currencies:

Mining

Mining is the extraction of digital currency.

Anyone who has computer equipment of the required power and special software can be engaged in the extraction of cryptocurrency on the network (mining).

Previously, to implement such an idea, a PC and the Internet were enough, but today the conditions for earning money have become more complicated.

Mining involves the use of computer power to solve various problems in the formation of new blocks of the cryptocurrency network.

Calculations become more complex with each passing day, which increases the demand for equipment.

In the process of mining, the computing power of the equipment, solving algorithms, mines a coin - a set of encrypted information.

Confirmation of the presence of virtual currency in the network is the blockchain, which is a kind of account, and the crypto coin itself is a set of encrypted data.

This currency is stored in a decentralized manner, distributed among users' electronic crypto wallets.

Note that with the increase in the complexity of the formation of blocks, mining of virtual currency also loses its relevance.

The cost of purchasing equipment and the cost of paying for electricity simply do not pay off.

That is why in recent years special companies with the necessary capacities have been in demand.

What can you buy with cryptocurrency

Cryptocurrency can be stored in your crypto wallets, you can use it - sell it to those who do not have mining capabilities, you can spend it on those services that provide payment in bitcoins.

Which merchants accepting bitcoins are online stores selling mining equipment or gaming portals that provide quick earnings and quick withdrawals.

There are also regular stores and online services that accept bitcoins.

It should be noted that today the cryptocurrency market is small, unbalanced, largely dependent on the speculative sentiments of participants.

Types of cryptocurrencies

Today there is a lot of virtual money, but few have achieved popularity.

The most popular cryptocurrency today is BitCoin, which has all the advantages and disadvantages of cryptocurrency in full.

The reasons for the growing popularity of the BitCoin cryptocurrency are:

the ability to exchange bitcoins for regular money;

anonymity, decentralization and security.

As a result of these reasons, interest in BitCoin is increasing, and at the same time the rate of virtual money is growing and capitalization is increasing.

Currently, it is Bitcoin that is the most popular and well-known cryptocurrency, with the largest capitalization of $ 3.2 billion.

Today it can be exchanged at one of the many exchange offices for ordinary currencies, through special terminals and in other ways.

With the help of bitcoins, you can pay for goods and services, make transfers and perform other operations.

Bitcoin is also used on financial markets and in the real sector.

Note that Bitcoin is not the only cryptocurrency.

In addition to it, you can highlight Litecoin, Peercoin, Namecoin and other types of virtual money.

Many of them are built on the basis of the already existing Bitcoin, so they are unlikely to reach its level.

Still have questions about accounting and taxes? Ask them on the accounting forum.

Cryptocurrency: details for an accountant

• Legal status of cryptocurrency

  The distinctive features of the cryptocurrency and the risks that carry ... and the circulation of the most common cryptocurrencies are completely decentralized, there is no possibility ... the use of cryptocurrencies is the anonymity of users of such cryptocurrencies. In addition, the cryptocurrency is not ... the anonymity of the payment has led to the active use of cryptocurrencies in the trade in drugs, weapons, counterfeit ... also informs that the use of cryptocurrencies in transactions is the basis ...

• Taxation of operations with cryptocurrency

  Territories Russian Federation indefined. Cryptocurrency is not official currency, a... tax period from the sale of the corresponding cryptocurrency, over the total amount of documented ... the Federation has not determined the legal status of cryptocurrencies. A special procedure for taxing income with ... income of individual entrepreneurs from the sale of cryptocurrency within the framework of a simplified taxation system ... legislative acts that define the concept of mining, cryptocurrency, as well as the legal status of persons ...

• Review of letters from the Ministry of Finance of the Russian Federation for August 2019

  When they perform transactions with cryptocurrencies, the Tax Code of the Russian Federation is not established. In ... fees, the legal status of cryptocurrencies is not defined. In this regard, and ... related to the circulation and taxation of cryptocurrencies, when determining tax base according to ... received from transactions of purchase and sale of cryptocurrencies, proceed from the norm of the first paragraph ...

• Personal income tax in 2018: clarifications of the Ministry of Finance of Russia

  Related to the circulation and taxation of cryptocurrencies, when determining the tax base ... the period from the sale of the corresponding cryptocurrency, above the total amount documented ... taking into account the grounds for the application of preferential treatment stated in the sale of cryptocurrencies ... the legal status of cryptocurrencies has not been determined. A special procedure for taxing income ... related to the circulation and taxation of cryptocurrencies, when determining the tax base ... related to the circulation and taxation of cryptocurrencies, when determining the tax base ...

• Review of letters from the Ministry of Finance of the Russian Federation for November 2018

  Associated with the circulation and taxation of cryptocurrencies, when determining the tax base for ... the tax period from the sale of the corresponding cryptocurrency, over the total amount of documented ... the status of persons performing transactions with cryptocurrency is not defined by law. In connection with ... income of individual entrepreneurs from the sale of cryptocurrency within the framework of a simplified taxation system ... legislative acts defining the concept of mining, cryptocurrency, as well as the legal status of persons ...

• Income tax in 2018: clarifications of the Ministry of Finance of Russia

  Income from transactions with cryptocurrency, chapter 25 of the Tax Code of the Russian Federation is not ... income from transactions with cryptocurrency, nor chapter 23 of the Tax Code of the Russian Federation .... At the same time, the legal status of cryptocurrency and tokens, as well as activities ... Currently, the legal status of cryptocurrency in the territory of the Russian Federation is not ... defined. Cryptocurrency is not the official currency, but ...

• Review of letters from the Ministry of Finance of the Russian Federation for September 2019

  Related to the circulation and taxation of cryptocurrencies, when determining the tax base for ... received from transactions for the sale and purchase of cryptocurrencies, proceed from the norms of the first paragraph ...

• Review of letters from the Ministry of Finance of the Russian Federation for July 2018

  At the same time, the legal status of cryptocurrencies and tokens, as well as activities ... when they perform transactions with cryptocurrencies of the RF Tax Code has not been established. Letter ... fees, the legal status of cryptocurrencies is not defined. In this regard, and ... related to the circulation and taxation of cryptocurrencies, when determining the tax base for ... received from transactions of purchase and sale of cryptocurrencies, proceed from the norms of the first paragraph ...

• Review of letters from the Ministry of Finance of the Russian Federation for August 2018

  Income from transactions with cryptocurrency, Chapter 25 of the Tax Code of the Russian Federation is not ... income from transactions with cryptocurrency, nor Chapter 23 of the Tax Code of the Russian Federation ... The Federation does not define the legal status of cryptocurrencies. The head of the Tax Code of the Russian Federation also does not ...

• Review of Letters of the Federal Tax Service and Tax Changes for the II Quarter

  Persons »Income from operations with cryptocurrencies is subject to personal income tax. Currently ... the Russian Federation has not determined the legal status of cryptocurrencies, and the features have not been established ... received from transactions for the sale and purchase of cryptocurrencies, proceed from the provisions of paragraph one ... the tax period from the sale of the corresponding cryptocurrency, over the total amount of documented ...

• Blockchain technology will revolutionize auditing too

  Interfaces. Third, cryptocurrencies are susceptible to attacks. And finally, adjust the systems of work ... conduct an in-depth audit of transactions with cryptocurrencies. The proprietary technology is designed to help ... audit companies that deal with cryptocurrencies. In the future, there will be an opportunity for ... the tool provides support for testing various cryptocurrencies, including BitCoin, Ether, BitCoin Cash ...

• Review of letters from the Ministry of Finance of the Russian Federation for February 2018

  Currently, the legal status of cryptocurrency on the territory of the Russian Federation is not ... defined. Cryptocurrency is not the official currency, but ...

Zakon.Ru is an officially registered media outlet. The link to this article will look like this: Rozhkova M.A. Digital money: mobile fiat currency, currency of virtual worlds, currency of corporate value, cryptocurrency and national cryptocurrency [Electronic resource] // Zakon.ru. 2019.7 October. Url:

It seems right to start with a few quotes.

What characteristics should be obtained digital money?

Digital money

Initially, it is necessary to make a reservation about a certain convention of the name itself " digital money". This is due to the fact that, as indicated above, the term “ money"(Cash) can be used in relation to material things - paper banknotes and metal coins, whereas digital (electronic) form can only have .

In addition, one cannot ignore the fact that the generalizing concept of “digital money” encompasses phenomena that are different in their essence, which are classified and characterized in different ways in different publications. For example, in one article, it was proposed to differentiate digital money by mobile fiat currency, currency of virtual worlds, currency of corporate value and cryptocurrency, which in my opinion seems to be correct, provided that this classification is supplemented with one more variety - national cryptocurrency... But these varieties must be sorted out in order.

Mobile fiat currency.

In fact, this concept focuses on not even the very variety of funds - it is the same fiat National currency in the form of non-cash funds- but on innovative technical solutions (technologies) for storing these funds and making payments that allow users (without opening a bank account) to carry out transactions using various gadgets, including (and, probably, primarily) using a mobile phone. Such technical solutions in the literature include, in particular, systems "Electronic wallets" (for example, Pay pal, Yandex money), including special mobile applications designed exclusively for mobile phones(for example, M-Pesa), as well as issued by banks and non-banking institutions prepaid smart cards(plastic cards with a built-in microprocessor, where the equivalent of the monetary value that is prepaid to the issuing organization is recorded, for example, system cards VisaCash and Mondex, transport cards) .

In Russian law, mobile fiat currency is regulated by Federal Law No. 161-FZ of June 27, 2011 "On the National Payment System" (hereinafter referred to as the Law on the National Payment System), which uses a different concept - "electronic money" (which seems completely justified from taking into account the above). In paragraph 18 of Art. 3 of the Law formulates the definition of electronic money, and the Bank of Russia Leaflet "On electronic money" gives a more simplified concept, according to which "electronic money" means " non-cash funds in rubles or foreign currency, accounted for credit institutions without opening a bank account and transferred using electronic means of payment(hereinafter - ESP) ", and in turn ESP -" in particular, the so-called " electronic wallets"which can be accessed using computers, mobile devices, including through the special software installed on these devices, as well as bank prepaid cards". In other words, within the meaning of the Law on the National Payment System, electronic money is non-cash money, for the storage and implementation of which new technologies are used: "electronic wallets" and bank smart cards.

Electronic money is defined differently in European legislation. In particular, in Art. 2 Directives 2009/110 / EC of the European Parliament and of the Council of the European Union “On the establishment and activities of organizations issuing electronic money, on the prudential supervision of their activities, as well as amending Directives 2005/60 / EC and 2006/48 / EC and repealing Directive 2000/46 / EC "(hereinafter - Directive 2009/110 / EC) indicates:" electronic money "means stored in electronic form, including on a magnetic medium, presented in the form of claims to the issuer, the value in monetary terms, issued in the receipt of funds for payment transactions as defined in Article 4 (5) of Directive 2007/64 / EC and accepted by natural or legal persons other than the electronic money issuer ”. In other words, within the meaning of the Directive, electronic money is an amount of money, (1) which is pecuniary obligation the issuer, (2) a record of which is recorded and stored on an electronic medium that the user has access to, and (3) which is accepted as a means of payment by third parties.

The literature notes that, unlike the European Union, in the law of which electronic money is interpreted as monetary value, in the USA they are understood as new type of money services, in connection with which in the United States, the circulation of electronic money is subject to the regulation of the relevant rules for banking and payment systems adopted at the federal and state levels. At the federal level, in particular, the Electronic Funds Transfers (Regulation E), 61 Fed. Reg. 19, 696 (1996); payment services (these include both banks and non-banking organizations). In Regulation E, an access device means a card, a code and other methods of access to a user's account or any combination of them that can be used to transfer electronic money, however, the Rules do not apply to prepaid smart cards (including transport, store gift and telephone) ...

Virtual world currency (game currency)

The currency of virtual worlds (game currency) is a kind of virtual property, which also includes, for example, game weapons and equipment, the abilities and appearance of an avatar (character), potions and potions, artifacts, etc. Access to such "property" can only be obtained by a registered user of the corresponding game: upon concluding a user agreement, the copyright holder / operator of the game undertakes to provide the user with access to the functionality of your information product as a whole, including the ability to purchase, use and dispose of gaming property in accordance with the rules of the game (which I already wrote about earlier).

Is in-game currency money from a legal point of view? Undoubtedly not, and not only because it is not cash and not state currency.

Explaining, first of all, I must indicate that in any case, the "circulation" of the game currency is limited by the framework of the corresponding game: this currency is intended only for the purposes of this game, only for users of this game - outside of this game it simply does not exist(as well as other virtual property). Moreover, the game currency (means of payment in the game and means of circulation in the game) can be any virtual "object" - it can be not only silver coins, but also magic crystals, and golden eagles, and dragon teeth, and so on. depending on the preferences of the developers and the goals of the game itself.

The accumulation of game currency allows the avatar (character) to acquire virtual property and increase his level, opens up more opportunities for him to achieve game tasks, which ultimately improves the gameplay for the user. From the standpoint of understanding the game as an information product such improvements expand the functionality of the game for the user, which is of value to him as a consumer of an information product(and not an abstract "fouling" with virtual property, which can be lost, for example, if the game is closed).

Taking into account the foregoing, the following conclusion can be drawn: just as the avatar (character) of the game is not a real subject of law, so the game currency in the legal sense cannot be considered as money. This is due to the fact that virtual property has property value not by itself, but only in the context of the corresponding information product.

Corporate currency

Corporate currency is common for everyone customer rewards for loyalty to the company(these are, for example, bonuses or points for each purchase that can be spent on next purchases, or a discount in the form of a refund of part of the purchase price (cashback) in the form of bonuses or money for bank card, or the accumulated miles that can be taken into account when purchasing a ticket, etc.), encouragement of company employees in the training and motivation system(these are, for example, points or chips that can be exchanged for non-cash bonuses (an extra day of vacation or a day off) or spent on goods in a corporate store, payment for beauty or fitness services, etc.), social network promotion of its users(in the form of "loans" for the purchase of games and applications, etc.).

Like the previous one, the "currency" in question, of course, cannot be recognized as money. But, acting in many cases as a substitute for legal tender, the currency of corporate value should be reckoned among monetary surrogates, the release of which, as indicated above, is expressly prohibited by Art. 27 of the Law on the Bank of Russia.

With regard to the problem of monetary surrogates in general, experts pay attention to the following. First, despite the direct prohibition on the introduction of monetary surrogates, the law does not provide for liability for its violation. Secondly, the publications emphasize the absence in the law of the definition of the concept of "monetary surrogate", which creates uncertainty as to what falls under this concept. Thirdly, when characterizing monetary surrogates, lawyers focus on the negative nature of this phenomenon with references to the fact that, for example, in 1993-1994 it was widespread, when enterprises, due to their insolvency, introduced monetary surrogates for settlements with their employees.

Considering that the introduction of a corporate value currency is solely due to marketing purposes - market research, forecasting customer preferences, maintaining communication with them, providing goods and services that meet demand, etc. - there is no negative trail behind this "currency", it is one of the usual tools for doing business. Taking this into account, in 2016 it was proposed to exclude the currency of corporate value from the number of monetary surrogates by including it in Art. 27 of the Law on the Bank of Russia, paragraph two, containing the following provision: "Objects of property rights arising as a result of the parties' fulfillment of obligations under civil contracts and used to stimulate the acquisition of goods, works, services are not recognized as monetary surrogates" (draft Federal law"On Amendments to Certain Legislative Acts of the Russian Federation"). However, the above-mentioned bill, prepared by the Russian Ministry of Finance, was never submitted to the State Duma.

Cryptocurrency

Cryptocurrency is similar to fiat national currency in that it also has no real collateral, as a result of which it also deserves the name "symbolic money". But that's where the similarities end.

As mentioned earlier, the government, represented by the Central Bank, is responsible for issuing fiat national currency in the form of paper banknotes and metal coins; fiat currency has a par value and is accepted at that value; it is binding on the entire territory of the state, is used as legal tender, as well as to create savings and savings. Cryptocurrency, originally classified in Russia as prohibited by law, has completely different characteristics. monetary surrogates... But the identification of its features should be preceded by the differentiation of blockchain types, which predetermines the differences in the essence of the cryptocurrencies based on them.

Blockchain represents data storage and transmission technology based on a specific algorithm... This technology involves combining a set of transactions into a block, which, after its verification (validation), is linked to the previous blocks, forming a chain, which explains the name of the technology (eng. block chain- block chain). Within the framework of of this article what matters is the gradation of the blockchain into two main types - public and private (private).

Public blockchain publicly available- any person has access to data recorded in blocks and has the right to record data on transactions, which will be combined into new blocks. He transparent- all data in blocks are open, all transactions are public. This type of blockchain decentralized: first, he does not have a single storage location- all its participants are engaged in maintaining its performance, duplicating data, and secondly, it does not have a single center (body) of management- performed transactions are collected in blocks, each of which is checked by node computers - nodes, equal to each other. Blockchain security is due to its immutability: The data of blocks already included in the chain cannot be changed.

The most famous cryptocurrency based on the public blockchain is, of course, bitcoin... Actually, the blockchain technology itself (which is a kind of distributed ledger technology, developed back in 1970) has become famous since the publication on the Internet of an article describing the protocol and the principles of operation of the Bitcoin system. This article - " Bitcoin: A Peer-to-Peer Electronic Cash System"- was published under the authorship of Satoshi Nakamoto in October 2008, and in early 2009 the first version of the bitcoin wallet and the bitcoin network were launched.

Thus, the first global decentralized electronic payment system was created using its own digital coins(eng. coin- coin). This system of digital transfers and settlements did not require the involvement of intermediaries (such as banks or other financial institutions), so it is considered as alternative to traditional payment systems and excludes the possibility of national legal regulation: in various legal orders, only the issues of the admissibility of using such a cryptocurrency as a means of payment, taxation of activities related to the circulation of cryptocurrency, etc., can be resolved.

As a result of what has been said public blockchain-based cryptocurrency, being in the full sense of digital money, is alternative to fiat national currency(and therefore cannot be considered as foreign currency). It is noteworthy that such a cryptocurrency in many cases has a controlled and limited supply, while fiat cash can be issued in any quantities depending on the economic needs of the state concerned.

Within the framework of this article, it is important that the bitcoin system is considered today as the first generation of the blockchain, the first stage of its development. Melanie Swan, who distinguishes three stages in the development of blockchain technology, designated this stage as Blockchain 1.0. - currency(cryptocurrency). At the next stages, there was a consistent expansion of the scope of the blockchain.

So, at the second stage of technology development, designated by M. Swan as Blockchain 2.0. - contracts(smart contracts), the blockchain is becoming the basis for a variety of transactions, and not just settlements, as a result of which the technology has begun to be more actively used in various business segments. Decentralized platform is recognized as a bright representative of the second generation of blockchain ethereum(eng. ethereum), which allows not only making payments, but also, in particular, making smart contracts, automating investments, registering transactions with property assets, etc.

Private (private) blockchain was developed precisely at the second stage of technology development. When characterizing it, first of all, it is necessary to pay attention to the fact that this is a network, operated or controlled by one organization... In other words, a private blockchain is not decentralized... In this regard, it is often noted in the literature that a private blockchain is not a blockchain at all, but just a centralized database that uses distributed ledger technology. The very name of this type of blockchain and the lack of decentralization in governance confirm limited network access: only identified participants can participate in the operation of this network with the consent of the controlling organization, and access to data can have different levels for different groups members / users. An important difference from the public blockchain is that the private blockchain uses a special validation system, decisions are made by designated groups of administrators, etc.

Thus, private (private) blockchains are not a global decentralized electronic system, but electronic information systems using distributed ledger technology to solve specific problems... Moreover, they can be resolved using this type of blockchain as government tasks (and the most striking example here will probably be Estonia, in which blockchain technology has found practical application in medicine, the banking sector, exchange trading, notaries, etc.), as well as other, and primarily business tasks.

It is noteworthy that the development of a private (private) blockchain has contributed to a new stage in the development of technology - Blockchain 3.0. - applications. This phase is characterized by the development of a variety of applications, the scope of which extends beyond monetary settlements, finance and markets. The scope of their application is becoming completely different areas, and the main characteristic features, distinguishing it from the two previous generations, the speed and the possibility of self-development are recognized.

A significant point characteristic of a private (private) blockchain is the use of tokens(eng ... token- token, sign, symbol), which are referred to in the Civil Code of the Russian Federation as “digital rights” (see Articles 128, 141.1). Without delving into the analysis of the essence of the token, which clearly requires an independent in-depth study, and greatly simplifying, we can characterize tokens as a record in electronic (digital) form, certifying property, liability and other property rights or other, including an intangible benefit, of interest to the holder token.

In publications devoted to blockchain issues, it is often noted that a private blockchain should not have its own cryptocurrency. At the same time, projects based on the private blockchain prefer to issue "their own cryptocurrency", which in fact usually intended to play the role of not a means of payment, a investment instrument, i.e., in fact, it is - token only referred to as a "digital coin" (coin). In cases where the "own cryptocurrency" of a private blockchain is used as a means of payment, within the meaning of domestic law, it really can be attributed to monetary surrogate- similar to the corporate value currency discussed above.

National cryptocurrency

National cryptocurrency is fundamentally different from the cryptocurrency discussed above. National cryptocurrency represents fiat national currency in the form of non-cash funds, using blockchain technology for storing these funds and making payments.

The national cryptocurrency is not based on the public blockchain, therefore anonymity is excluded here, the payment system itself is regulated and controlled by the state, the transactions made are easily controlled (which allows, in appropriate cases, to block both the sender / recipient's accounts and the transaction itself), and the data on the transactions carried out is saved and are not subject to change. One of the obvious advantages of the national cryptocurrency (in view of getting rid of intermediaries in the person of banks and non-banking organizations) is the speed of money transfer transactions with a low commission.

Currently, national cryptocurrencies are being developed quite actively. For example, in October 2017, the Dubai government launched Emcash - a national cryptocurrency that can be used to pay for government and other services, including utility bills, tuition fees, etc. Estonia was planning to launch a national cryptocurrency Estcoin, but subsequently suspended the project and now the publications only say that this currency will not be an official means of payment, but will circulate within the framework of certain projects. Sweden plans to launch E-Krona- digital equivalent Swedish krona, and Japan is expected to release by 2020 J-coin- a national cryptocurrency supported by the state.

Thus, national cryptocurrency today represents digital money which are recognized as legal tender by the issuing state and are used to pay for goods and services domestically.

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