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What is Bitcoin and how does it work? Is it legal? Who's behind it?

What is Bitcoin?

Bitcoin is a decentralized digital payment system and currency created by an individual or group using the username Satoshi Nakamoto. It was introduced through a whitepaper posted on a discussion board in 2008. Bitcoin operates independently of traditional financial systems and government authorities, allowing for peer-to-peer transactions over a digital network without the need for financial institutions1 4 5.

How Does it Work?

Bitcoin uses blockchain technology, an open-source program that records and secures all transactions by chaining them together in a public ledger. This blockchain prevents manipulation of transaction histories and ensures the integrity of the network. Transactions are verified through a process called mining, which involves solving complex mathematical problems to validate transactions and add them to the blockchain. Bitcoin can be used as an alternative to fiat currencies or as an investment, and its value can appreciate over time, making it a potential investment opportunity1 3 4.

Legality of Bitcoin

The legality of Bitcoin varies by country but is generally legal in most developed nations. Here are some key points:

United States: Bitcoin is legal and classified as a convertible decentralized virtual currency by the U.S. Treasury. It is taxed as property by the IRS2 5.
European Union: Bitcoin is legal, and transactions involving it are exempt from VAT. It is treated as a means of payment rather than a commodity2.
Other Countries: In countries like Japan, the U.K., Canada, and many others, Bitcoin is legal. However, some countries have specific regulations or restrictions. For example, El Salvador has recognized Bitcoin as legal tender, while countries like Ecuador and Bolivia have restrictions on its use as a payment tool2 5.

Who's Behind It?

Bitcoin was created by an individual or group using the pseudonym Satoshi Nakamoto. The true identity of Satoshi Nakamoto remains unknown, as they have chosen to remain anonymous. The whitepaper outlining the concept and technology of Bitcoin was published in 2008, and since then, the development and maintenance of Bitcoin have been community-driven1 4 5.