Introduction to cryptocurrencies
What is cryptocurrency?
A cryptocurrency is a decentralized digital currency, which uses cryptographic algorithms and a protocol called blockchain to guarantee the security and traceability of the transactions. Cryptocurrencies are completely virtual, they can be stored in a digital wallet protected by a secret code belonging to its owner. Exchange platforms are used to buy and resell cryptocurrencies online. (Source: futura-sciences.com)
How are cryptocurrencies created?
A general principle: scarcity value, as for precious metals. Most cryptocurrencies are designed to create a set and limited amount of tokens. In the case of the Bitcoin, 21 million tokens are expected to be created by 2140. The new tokens are automatically assigned to the miners: those are the nodes of the blockchain that confirm the blocks of transaction by solving cryptographic algorithms. (Source: futura-sciences.com).
What is a Bitcoin?
The term Bitcoin comes from the contraction of two English words Bit and Coin. The first refers to a binary unit of measurement, while the second refers to a coin. Bitcoin was the first digital currency created in the world in 2009 by Satoshi Nakamoto. It is important to notice that the states have no control over this cryptographic currency.
Within a few years, Bitcoin has become an alternative method of payment and has now reached the status of a safe-haven currency.
What is the Blockchain?
Developed since 2008, the blockchain is a digital technology that allows information to be stored and digitized in a safe way. This technology offers high standards of transparency and security because it operates without a central organ. By extension, a blockchain constitutes a database that contains the history of all the exchanges carried out between its users since its creation. This database is secure and shared by its various users, without any intermediary, allowing each user to verify the validity of the chain.
More specifically, the blockchain allows its users to share data without an intermediary.
Is the use of Bitcoin legal in the European Union?
There is no legal provision that prohibits the use of Bitcoin in France or in the European Union in general. This is why merchants or companies accept payments with Bitcoin.
Moreover, by implication, cryptocurrencies are taken into account by some countries for taxation purposes. For example, in France, you must declare your crypto currencies portfolio and the profits made with digital currencies to the French tax authorities (see the taxes section).
It should be noticed that some countries restrict crypto-currencies (e.g. China and India) or prohibit them completely (e.g. Saudi Arabia, Algeria).