Legal Regime to be Applied to Bitcoin and Other Virtual Currencies 23 November 2017
Virtual currency whose popularity has increased lately called Bitcoin, which was invented in 2008 by Satoshi Nakamoto, has no physical reciprocity and is not under control of any countries or central banks. Bitcoin which is fundamentally a software provides “person A” to transfer digital money to “person B” and uses Peer to Peer (“P2P”) network protocol which is used for sharing data between two or more computers without needing any central coordination. Therefore; due to the usage of P2P network protocol, no intermediary is needed while using Bitcoin.
Since Bitcoin is not operated by a central institution, everyone can earn Bitcoin via Bitcoin mining. Bitcoin mining is done through free software developed specially for this purpose which makes the processing unit of the computer to operate in order to achieve certain results within the Bitcoin algorithm. Chance of finding correct outcome is directly proportional to processor speed. Thus, Bitcoin mining requires high processing power. Every right result constitutes a “block” and this block is added to Blockchain. For every block added to the chain, the software gives a certain amount of Bitcoin. While this award was 50 Bitcoin in the beginning, it was reduced to 25 Bitcoin in 2014 and currently is down to 12,5 Bitcoin. It is due to the limitation of the Bitcoin amount that can be produced to 21 million. The “difficulty level” which determines the Bitcoin mining speed to control the producing rate, is consistently being adjusted in accordance with certain protocols. In other words, the more Bitcoin is earned, the more difficult it is to find new Bitcoins.
Even though it is foreseen that Bitcoin which can be produced until 21 million units can be earned through mining software until the year of 2140; because approximately 17 million units have already been produced by now, Bitcoin production is getting increasingly difficult. While it was possible to do mining even with desktop computers in the beginning, special hardware produced for Bitcoin mining is required today.
Some of the biggest advantages Bitcoin provides can be listed as; not being control by a central administration or a central bank, being able to fit into quite small capacities and portable, being transferred without intermediary and every transaction done being recorded via Blockchain technology and consequently it gets more and more popular as the public awareness raises. However, Bitcoin also involves certain risks. Worth of Bitcoin is completely manipulative and it shows deflationary character as it has limited supply. Since it is kept in a virtual wallet, restoration is not possible if the password which is created in order to control this wallet is lost. Additionally; since it is not under the control of any country or center, there is no institution or authority to apply for compensation in case of the virtual wallet is hacked.
Along with, absence of national or international regulatory legislation regarding Bitcoin induces uncertainty about the legal status of Bitcoin and despite the fact that it gets more popular every day, this uncertainty in sense of legal protection stands as the biggest obstacle before public trust in Bitcoin. In this regard, to be able to legally protect both the users and the miners in addition to the people who supports miners via investment, relationships between these people should be regulated contractually within the framework of already existing civil law principles.
Since Bitcoin is a highly technical issue and has not been regulated in our legislation system, it might be assimilated to an equation with multiple variables. Hence, Bitcoin investment without acquiring consultancy service from experts on the matter might end up with suffering from crimes like fraud. In this context, our office, which has an expert team on the matter, provides necessary legal support to both real and legal persons operating in production and usage of Bitcoin in order to avoid any civil or criminal liability.
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http://www.kasaroglu.av.tr/tr/bitcoin-ve-diger-sanal-para-birimleri
