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At the end of September 2017, one Bitcoin was valued at over CAD$5,000, having increased from less than $800 a year earlier, with the market capitalization of Bitcoin rising to over $80 billion. Although the price continues to be highly volatile, its meteoric rise from a few cents to a few thousand dollars over the course of less than a decade continues to draw a lot of attention.
Bitcoin is a digital currency that uses cryptography (computerized encoding/ decoding) for security and is the most well-known of a number of cryptocurrencies. Bitcoin and other cryptocurrencies are unlike traditional currencies in that they are dissociated from governments and central banks. Instead, cryptocurrencies are administered and controlled through a blockchain network; a secure online ledger that keeps a record of the transactions. The blockchain is a distributed ledger, which effectively means that everyone is working off the same set of books, as opposed to keeping their own ledger to record transactions.
While Bitcoin and other cryptocurrencies are not replacing traditional forms of currency, their use is now increasingly widespread. Some major retailers are even starting to accept Bitcoin, including Microsoft, Expedia and Overstock.com, to name few. As the world of digital currencies continues to grow, it is becoming more important to understand how they work and their potential benefits and pitfalls.
In this edition of the Canadian Financial Planner we will examine how cryptocurrencies work, how they can be used in practice and the benefits and drawbacks of using them. Finally, we will highlight possible strategies to help avoid some of the security risks of using a digital currency.
Specifically, we will discuss:
- PART 1: What Is a Cryptocurrency and How Does It Work?
- PART 2: How Cryptocurrencies Can Be Used in Practice
- PART 3: Benefits and Drawbacks of Cryptocurrencies
- PART 4: Scams and Fraud – How to Mitigate the Security Risks
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WARNING: This information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortuous, or any other form of liability for its contents or for any consequences arising from its use. Photocopying, replication or any other reproduction of the information contained within the newsletter, for any reason, other than a single page for reference only is strictly prohibited. Copyrighted © Video Tax News Inc. 2017. Date of Issue – November 2017. This periodical is published six times per year in January, March, May, July, September and November.