Eight years after its creation, bitcoin sees its growth accelerate. Its value has been multiplied by fifteen in 2017 to reach record levels at the end of the year. This soaring prices, however, leaves a speculative “bubble” to be feared which should encourage investors to be cautious. What are the uses of Bitcoin? What is the Blockchain at the origin of the creation of bitcoin? How to buy or sell Bitcoins? What is the tax regime applicable to Bitcoins? Is this new payment method really secure? What do you need to know before investing in Bitcoins? Find all the answers to your questions!
What is bitcoin?
Definition of bitcoin
Bitcoin is a virtual currency (or cryptocurrency) created in 2009 by one or more computer programmers using the pseudonym “Satoshi Nakamoto”.
Bitcoin is traded on online platforms from person to person against other currencies (euro, dollar, yen …) , outside traditional banking networks, in a completely “decentralized” way. Unlike other currency currencies, bitcoin is totally devoid of any legal framework :
- he has no legal tender,
- its value is not regulated by a central bank (as, for example, the European Central Bank for the euro).
How are bitcoins created?
Like other crypto-currencies, bitcoin was created from the Blockchain . The Blockchain (or “data block chain”) is a computer technology for storage and transmission of information that is secure and operates without a central control body (it is a so-called “decentralized” currency ).
The Blockchain is like an immense public and anonymous virtual registry of all the transactions made by users, which grows with time. The specificity of Blockchain is to be an encrypted registry that requires a certain amount of computing power to register and validate transactions between users (see below: Bitcoin mining). Another peculiarity of the Blockchain is to be, as its name indicates, divided into linear blocks , where the last part of each (the cryptographic signature, also called “Hash”) makes it possible to constitute the next block, and therefore of Make the whole Blockchain secure and non-modifiable.
Creation and mining of bitcoins
The issue or creation of Bitcoins originated, at the origin, of the trust between users towards this virtual currency. It is therefore the simple law of supply and demand and, when it was created, bitcoin was only worth a few cents because it was used very little.
Conversely, to validate a Bitcoin transaction between users and register it definitively in the Blockchain (Bitcoin transaction register), a cryptographic algorithm has been programmed for a certain level of difficulty and to request a certain amount of power. computer. Users who make their computer available to create an encrypted, tamper-proof signature on a “block of transactions” are called Bitcoin miners . In exchange for this service, and therefore the time spent encrypting transactions, minors are rewarded with a certain amount of Bitcoins.
Thus, to create or “mine” ( bitcoin mining ) Bitcoins regularly, and thus validate Bitcoin exchanges between users, it is imperative that a large number of minors calculate the cryptographic signature of the Blockchain at any time.
Due to the increasing difficulty of the Blockchain’s cryptographic algorithm , and its size, Bitcoins are created at a decreasing rate:
- between 2009 and 2013: 50 bitcoins issued every ten minutes,
- between 2013 and 2016: 25 bitcoins every ten minutes,
- between 2017 and 2020: 12.5 bitcoins every ten minutes, etc.
Fork of Bitcoin: speed up the mining
Due to the requested computing power, as well as the increasing number of users making transactions , the Bitcoin network could not confirm the exchanges quickly enough.
On November 13, 2017, it was decided to reduce the difficulty of the Blockchain cryptographic algorithm by creating a new currency: Bitcoin Cash . This type of modification is called a “Fork”, a new “branch” of the currency.
There are two Bitcoins today: the original ( initials: BTC ) and its twin Bitcoin Cash ( initials: BCH ). Another Bitcoin, the Bitcoin Gold , is a totally new currency, about to be abandoned.
Other tests have been made to speed up exchanges and reduce the time needed to validate a transaction: the Segwit2X or “Bitcoin 2.0” . Unfortunately, the miners have decided to vote against, which increases the price of transactions between users day after day because they can not be validated quickly enough.
BITCOIN PRICE AT THE END OF 2017
The total stock of bitcoins is ultimately set at 21 million units. At the beginning of December 2017, 16.7 million bitcoins were already in circulation, ie 80% of the bitcoins to be issued (source: www.blockchain.info)
Bitcoin: Why do we talk about a speculative bubble?
At its creation, bitcoin interested only a small circle of enthusiasts. But over the years and especially since early 2017, individuals and institutional investors (investment funds, in particular) have bought heavily. As the number of bitcoins that can be put into circulation is limited, any sharp increase in demand automatically results in a strong appreciation of their value. This further encourages purely speculative investments .
Consequence: the value of bitcoin has been multiplied by 15 between January and December 2017 with a very high volatility (the prices can vary, in a day, of +/- 20%). As this phenomenon is exceptional for a financial asset, some economists and financial players warn against the risk of a speculative bubble that can “implode”.
Tax regime of bitcoins
Gains from the buy-sell activity of bitcoins are subject to income tax . When the activity is carried out on an occasional basis, the income must be declared in the category of non-commercial profits . If the activity is carried out as usual, the income must be reported in the category of industrial and commercial profits .
Note: gains are taxable regardless of the nature of the assets or securities against which bitcoins are exchanged (for example, against euros).
On the other hand, according to the Court of Justice of the European Union (CJEU), exchange transactions between traditional currencies (euros, dollars) and bitcoins are exempt from VAT .
The risks associated with bitcoins
The Banque de France , the European Banking Authority and the Autorité des marchés financiers regularly point out that bitcoins are a risky investment and warn individuals against the main risks associated with the use of bitcoins:
- the absence of a protective legal framework when buying goods or services with bitcoins;
- the absence of regulatory protection to cover losses in the event of default, cessation of activity or hacking of the platform that manages the exchange or storage of bitcoins;
- the absence of repayment guarantee and recourse in case of theft of bitcoins;
- the absence of a legal tender for bitcoin and the absence of a regulated market;
- the high risks of losses linked to the very high volatility of bitcoin prices;
- the lack of supervision by the banks and the supervisory authorities on the nature of the funds used for the purchase of bitcoins (possible links with criminal activities: money laundering, financing of terrorism, etc.).
As the Autorité des marchés financiers (AMF) and the Prudential Supervisory and Resolution Authority (ACPR) have done, LCL recommends that savers be very vigilant before considering investing some of their savings.