BASIC BITCOIN LINGO
Our new blog will speak mostly to legal issues surrounding the phenomenon of bitcoin, blockchain and cryptocurrency. But to get the less informed of us started, here are a few basics:
1. What is crypotocurrency?
Cryptocurrency is a currency which only exists in the digital world and has to be read with computer codes, known as cryptography.
2. What is bitcoin?
Bitcoin is nothing more than a popular form of cryptocurrency, of which it is believed thousands exist.
3. What is blockchain and how does it relate to bitcoin?
Blockchain is a technology based database of all bitcoin transactions worldwide, which anyone can search, but the database cannot be changed. Basically, transactions are grouped into blocks which are chained together with links using cryptography (see above). Basically, since everyone can see it, once a transaction is recorded, if someone does try to record an incorrect transaction, then blockchain immediately resubstitutes in the correct “block.
4. Can bitcoins be stolen?
Yes. While the recording system described above is secured, the actual bitcoins do not reside in the database, so they are vulnerable to hacking, as are other financial transactions over the internet. So, it is crucial that when building a new bitcoin venture, that every security protocol imaginable is undertaken.
5. How are bitcoins regulated?
This is a subject which is open to much debate among lawyers, regulators and other interest parties, such as auditors. As of right now, there are potential regulatory issues with both the SEC and CFTC, and other agencies, such as the IRS, will see implications as well.
6. So, given the fact that there are no “hard and fast” rules at this point, yet this is definitely a “hot topic” for regulators, how to I protect my enterprise and still take advantage of this exploding opportunity?
As with any other business venture, having the right legal counsel is the key. The transactional lawyers at Wexler, Burkhart are involved in this area and will work with you to make sure you have a legally sound structure and to help you through the intricacies of this new frontier in the financial world.