Bitcoin (BTC) is the first and most popular cryptocurrency, created in 2009. Bitcoin is a decentralized currency that is not controlled by any government or bank. If you want to earn Bitcoin or save your savings with it, you will need to start by creating a wallet – this can be done in both Russian and English. It will store not virtual coins, but digital keys. They open access to bitcoin addresses and allow you to sign transactions.
Currency Rate Analysis
Before creating a Bitcoin wallet, it is useful to familiarize yourself with the current price and dynamics of the rate. At the time of writing this article (March 2023), the price of 1 BTC is $24,137.6. However, the cost can fluctuate significantly, so it is important to monitor its dynamics and prospects. Some analysts believe that the Bitcoin rate may continue to rise in the near future, but this is not a guarantee.
Types of Wallets and Their Requirements
Cold (Hardware) Wallets
Cold wallets are the safest way to store Bitcoin. They are physical devices that store your private keys offline. Cold wallets are the most secure way to store Bitcoin as they are protected from hacking and viruses. Examples of cold wallets: Ledger Nano S, Trezor.
Hot (Online) Wallets
Hot wallets are wallets that are stored online. They are software that can be installed on your computer or mobile device. Hot wallets can be vulnerable to hacking and viruses, so it is not recommended to store large amounts of Bitcoin on hot wallets. Examples of hot wallets: Coinbase, Blockchain.info.
Paper wallets are a paper sheet with your public and private keys printed on it. Paper wallets can be a secure way to store Bitcoin if you keep them in a safe place. But if you lose your paper wallet, you will lose access to your Bitcoin. Requirements for paper wallets: you need to use quality paper and printer, you need to store paper wallets in a safe place.
Mobile wallets are applications that can be installed on your smartphone. They are a convenient way to store and use Bitcoin as you can make transactions anytime and anywhere. However, mobile wallets can be vulnerable to viruses and hacking, so it is not recommended to store large amounts of Bitcoin on mobile wallets. Examples of mobile wallets: Mycelium, Breadwallet.
Creating, Using, and Recovering a Wallet
Creating a Wallet on a Cryptocurrency Exchange
Creating a wallet on a cryptocurrency exchange is one of the easiest ways to store Bitcoin. To do this, you need to register on the exchange, log in to your account, complete the verification process, and choose a Bitcoin wallet. Then you can create a new wallet and get your public and private keys.
Using the Wallet
To conduct Bitcoin transactions, you need to know the recipient's public key. By specifying it and the transfer amount, you can send Bitcoin. And to receive BTC, you need to provide your public key to the sender. Using the private key, you can check the balance of your wallet and transaction history.
Recovering the Wallet
If you have lost access to your wallet, you can recover it using your private key. If you stored your private key on a cold wallet, you can use the backup to regain access. If you stored your private key on a hot wallet, you can recover access using your account credentials.
In case of loss of access to a Bitcoin wallet on a cryptocurrency exchange, you can restore it using the following data:
- Seed phrase (a set of words created when the wallet was created).
- Private key (a unique code created when the wallet was created).
- Wallet address (a unique address created when the wallet was created).
Risks and Security
Using cryptocurrency can be associated with risks such as:
- Wallet hacking - if attackers gain access to your private keys.
- Cryptocurrency theft - if attackers gain access to your public keys.
- Loss of access to the wallet - if you have lost your private key or if your cold wallet has been lost or stolen.
To ensure the security of your Bitcoin wallet, you need to take the following measures:
- Use a cold wallet to store large amounts of Bitcoin.
- Use two-factor authentication to log in to your wallet.
- Update your wallet and operating system software.
Taxes and Fees
Transaction fees for Bitcoin can vary depending on the current network congestion. Typically, the higher the network congestion, the higher the transaction fee. This is because miners who process transactions choose those with the highest fees.
The transaction fee usually amounts to a few cents, but it can be significantly higher during periods of high network congestion. However, if you are sending Bitcoin from one wallet to another within the same exchange, there is usually no fee.
Tax legislation for cryptocurrency may vary depending on the country. In Russia, for example, income from Bitcoin, like any other type of income, is subject to taxation. In accordance with Russian legislation, the tax on personal income is 13%.
If you receive income from the sale of Bitcoin, you must calculate and pay the tax yourself. To do this, you need to fill out a declaration for personal income tax and pay everything within the time frame established by law.
If you mine Bitcoin, your mining income is also subject to taxation. In this case, you need to take into account the costs of electricity and other expenses related to mining, which can be deducted from your income when calculating taxes.
Bitcoin is a new form of currency that can be used to buy goods and services, as well as for investment. However, before buying and storing Bitcoin, it is important to understand its features, including security, fees, and taxes.
If you decide to invest in Bitcoin, it is recommended to use a reliable and secure wallet, as well as keep an eye on current news and changes in legislation.
Despite the fact that Bitcoin can be a high-risk investment tool, many people see its potential for growth and development in the future.