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Truly Private Transactions For Ethereum Are Here : CryptoCurrency

Asian, Black and Hispanic adults are more likely than White adults to say they have ever invested in, traded or used a cryptocurrency. There are no statistically significant differences by household income.

Truly Private transactions for Ethereum are here : CryptoCurrency

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China recently banned transactions using cryptocurrencies. U.S. Federal Reserve Board Chairman Jerome Powell said this summer that these currencies need more regulation, and the Biden administration is trying to combat ransomware by cracking down on cryptocurrency payments. At the same time, El Salvador in September became the first country to declare Bitcoin as legal tender.

The most popular and widely heard of cryptocurrency is Bitcoin. As of early January 2021, the total cryptocurrency market is over $1 trillion, and Bitcoin is around $700 billion. Believe it or not, there are over 7,800 cryptocurrencies in existence and growing. The top five, with over 80 percent of the market value, are Bitcoin, Ethereum, XRP, Tether, and Litecoin. (footnote 2)

Since cryptocurrency operates on a decentralized network that lacks a central authority, it is possible to exchange cryptocurrency without registering an identity. Yes, since the start there have been criminal activities with cryptocurrencies. However, the blockchain publicly records every transaction, and while names are not assigned to addresses, you can trace activity back to a crypto exchange, which knows the end user. The estimates vary for how many transactions are for illegal activities and proponents of cryptocurrency point to illegal activity with traditional currencies. (Source: NY Times article Jan 2020)

There are a couple of methods, but the simplest and least expensive is via an online cryptocurrency exchange. You establish an account and from there, you transfer in cash and purchase the cryptocurrency of your choice. The exchange will allow you to buy, sell, and hold cryptocurrency. The user experience, fees, and identification requirements all vary based on the exchange, so it is important to conduct research before you do anything. Some of the most popular are Coinbase, Gemini, and Kraken. Additionally, traditional online brokers are starting to offer services such as eToro and Robinhood. Further, fintech and technology companies are starting to offer these services (Square and PayPal as two examples).

These products are just starting to come to the marketplace. The design of these products is to gain exposure to cryptocurrencies like Bitcoin and Ethereum without having to directly purchase. Beyond the fees for doing this, these products currently trade at a very high premium to the underlying cryptocurrency prices. The premium could continue to persist in the future, but investors need to consider the price they are pricing for the exposure.

In 2014, the IRS issued a notice that virtual and digital currency is treated as property for federal income tax purposes. When you sell cryptocurrency for capital gain or capital loss, this will be recognized. Starting in 2019, the IRS specifically asks about cryptocurrency on the first page of Schedule 1. The expectation is for this to continue going forward and for CPAs to ask this question in their annual tax binder. Even if the exchange you purchased does not provide tax reporting forms, you need to record your transactions. Additionally, the IRS does provide a handy FAQ.

Unfortunately, there is a history of exchanges and online wallets being hacked. This is one of key reasons to thoroughly research where you trade cryptocurrency and securely store your digital assets. If you are hacked, there is not FDIC insurance or anything similar. If you have a large position, you can purchase individual crypto insurance. Additionally, many exchanges finance their own insurance plans in the event of a hack. The insurance coverage is generally capped and not guaranteed, so there is still a risk of loss.

The years-long effort has changed how transactions are verified on the Ethereum blockchain. In December 2020, Ethereum began running on two parallel blockchains, one using the legacy system to validate transactions and another blockchain using proof-of-stake for developers to test and improve. This merge combines the two blockchains into a single one using a proof-of-stake system for validations.

In a proof-of-stake system, individuals or companies act as validators (instead of miners), staking their own Ethereum tokens (known as ether or ETH) as collateral to validate transactions and secure the network. Validators are incentivized to do so by the chance to earn rewards, namely additional ETH tokens.

Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code, called smart contracts. Smart contracts allow participants to transact with each other without a trusted central authority. Transaction records are immutable, verifiable, and securely distributed across the network, giving participants full ownership and visibility into transaction data. Transactions are sent from and received by user-created Ethereum accounts. A sender must sign transactions and spend Ether, Ethereum's native cryptocurrency, as a cost of processing transactions on the network.

A smart contract is application code that resides at a specific address on the blockchain known as a contract address. Applications can call the smart contract functions, change their state, and initiate transactions. Smart contracts are written in programming languages such as Solidity and Vyper, and are compiled by the Ethereum Virtual Machine into bytecode and executed on the blockchain.

There are two types of accounts in Ethereum: Externally Owned Accounts (EOA) and Contract Accounts. An EOA is controlled by a private key, has no associated code, and can send transactions. A contract account has an associated code that executes when it receives a transaction from an EOA. A contract account cannot initiate transactions on its own. Transactions must always originate from an EOA.

You can pay for transactions using Ether. Ether serves two purposes. First, it prevents bad actors from congesting the network with unnecessary transactions. Second, it acts as an incentive for users to contribute resources and validate transactions (mining). Each transaction in Ethereum constitutes a series of operations to occur on the network (i.e. a transfer of Ether from one account to another or a complex state-changing operation in a smart contract). Each of these operations have a cost, which is measured in gas, the fee-measure in Ethereum. Gas fees are are paid in Ether, and are often measured in a smaller denomination called gwei. [1 ether = 1,000,000,000 gwei (10^9)]

You can buy Ether with fiat currency from a cryptocurrency exchange like Coinbase or Kraken. Ether is associated with your Ethereum account. To access your account and Ether, you must have your account address and the passphrase or the private key.

When a transaction triggers a smart contract, all nodes of the network execute every instruction. To do this, Ethereum implements an execution environment on the blockchain called the Ethereum Virtual Machine (EVM). All nodes on the network run the EVM as part of the block verification protocol. In block verification, each node goes through the transactions listed in the block they are verifying and runs the code as triggered by the transactions in the EVM. All nodes on the network do the same calculations to keep their ledgers in sync. Every transaction must include a gas limit and a fee that the sender is willing to pay for the transaction. Miners have the choice of including the transaction and collecting the fee or not. If the total amount of gas needed to process the transaction is less than or equal to the gas limit, the transaction is processed. If the gas expended reaches the gas limit before the transaction is completed, the transaction does not go through and the fee is still lost. All gas not used by transaction execution is reimbursed to the sender as Ether. This means that it's safe to send transactions with a gas limit above the estimates.

You can buy or sell crypto on a trading platform using money. Or buy or sell it directly.Crypto is kept in a unique digital or software wallet (hot) or hardware (cold) wallet. Each wallet has private keys (unique codes) that authorise transactions on the blockchain network.

The majority of Bitcoin users are law-abiding people motivated by privacy concerns or just curiosity. But Bitcoin's anonymity is also a powerful tool for financing crime: The virtual money can keep shady transactions secret. The paradox of cryptocurrency is that its associated data create a forensic trail that can suddenly make your entire financial history public information.

When Bitcoin first emerged, law enforcement officers were "panicking," Meiklejohn says. "They thought these technologies were dangerous and made it harder for them to do their job." But as the arrests and convictions have rolled in, "there's a steady shift toward seeing cryptocurrency as a tool for prosecuting crimes." Even in the strange new world of Bitcoin, FBI Assistant General Counsel Brett Nigh said in September 2015, "investigators can follow the money."

Matthee is part of a team launching a new anonymous online market called Shadow this year, which will use its own cryptocurrency, ShadowCash. The goal is not to facilitate illegal transactions, Matthee says. It will be up to the users, who administer the system, to police it, he says, but to help prevent abuse, "we are going to try our best to filter out known keywords for drugs or worse."

The Engiven platform is a third party vendor provided donation software technology that enables nonprofits to safely and securely receive cryptocurrency donations and then convert those donations into usable fiat currency such as US dollars. Learn more about Engiven here.

For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of donation. If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied. Donors who give cryptocurrency donations to The Salvation Army USA Western Territory will receive an electronic donation receipt (through the Engiven donation platform) in US dollars with comprehensive details about each transaction. 350c69d7ab

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