What is Bitcoin? Is it legal? Is it a scam?

Bitcoin, also known as Bitcoin, is a virtual crypto digital currency proposed by Satoshi Nakamoto in 2008. It is based on blockchain technology and adopts a decentralized distributed ledger system to ensure transaction security and network stability. The total amount is limited to 21 million, and it is generated through "mining". It has the characteristics of global transactions, fast speed and low handling fees, but its legality varies from country to country and region. In China, Bitcoin does not have monetary status, but it is recognized to a certain extent as a virtual property. This article will in-depth discussion on the technical principles, issuance mechanism, transaction characteristics, legitimacy, and whether it is a scam, so as to help readers fully understand Bitcoin.

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What is Bitcoin

• Technical Principle : Bitcoin is based on blockchain technology and adopts a decentralized distributed ledger system. All transactions are recorded in an open, transparent and tamper-free ledger. The transaction security and network stability are ensured through cryptography technology and consensus mechanisms.
• Issuance mechanism : The total amount is fixed at 21 million, generated through "mining". "Mining" is a process of using computer computing power to solve complex mathematical problems. After completing the task, miners will receive a certain amount of Bitcoin as reward. As time goes by, the reward gradually decreases by half.
• Transaction features : Bitcoin can be traded anywhere around the world. Transactions do not need to be conducted directly between users through traditional financial institutions such as banks. It has the characteristics of fast transaction speed and low handling fees. Moreover, Bitcoin has a certain degree of anonymity, and users can use an anonymous digital storage address to conduct transactions.

Is Bitcoin legal?

• In China : Bitcoin does not have the same legal status as currency and cannot be circulated and used in the market as currency. The People's Bank of China and other regulatory agencies have issued notices and announcements on many occasions, requiring financial institutions and payment institutions not to conduct business related to Bitcoin. However, some Chinese courts acknowledge that Bitcoin is virtual property and owning Bitcoin itself is not illegal, but related transactions are not protected by law.
• In other countries : The German Parliament decided to exempt investors who hold Bitcoin for more than one year in 2013, and the German Ministry of Finance identified Bitcoin as a "unit of account". In 2021, El Salvador approved Bitcoin as a fiat currency, becoming the first country in the world to adopt Bitcoin as a fiat currency. But there are also countries such as India, which are cautious about cryptocurrencies such as Bitcoin and have not yet clarified their legal status.

Is Bitcoin a scam

• It is not a scam from a technical and design perspective : Bitcoin has its unique technical foundation and design concept, such as blockchain technology is real and innovative, and has certain technical value. Moreover, Bitcoin’s transaction records are open and transparent, and the network is maintained by many nodes around the world, and is not controlled by a single institution or individual.
• There are risks and problems from the perspective of market and application : There are many fraudulent projects related to Bitcoin in the market, such as some people conduct illegal fundraising, pyramid schemes and other activities under the names of "Bitcoin Investment" and "virtual currency financial management", promising high returns to attract investors, and eventually run away with the money. In addition, Bitcoin's price fluctuates greatly and is used by some people to speculate, which can easily cause huge losses to investors. Some people use Bitcoin’s anonymity to carry out illegal and criminal activities such as money laundering, smuggling, and drug trafficking, which has negative impacts on society.

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