Back to all topics

What is Bitcoin?

At its simplest, Bitcoin is virtual currency. Think of it as cash for the internet age. Before Bitcoin, you would make transactions by check, wire, or cash - these methods work well in general, but are far from perfect. Making transactions in dollars requires a third party (bank, government) to process your transaction and it’s generally a slow process - sometimes taking days or even weeks to settle transactions.

Bitcoin is an exchange of digital information that allows you to buy or sell goods and services without a third party. The transaction gains its security and trust by running on a peer-to-peer (p2p) computer network that is similar to Skype, or BitTorrent, a file-sharing system. With bitcoin, you are in full control of your money.

Who created bitcoin?

In October 2008, an unknown man/woman/group called Satoshi Nakomoto released a paper which would lay the foundation for bitcoin. This shook the online community to its very foundations, for it was the first time we had a working model for digital currency.

In January 2009, the bitcoin network officially launched and a digital currency revolution was born. Bitcoin differed from earlier p2p systems because it was designed for everyone on the bitcoin network to have an economic incentive to "follow the rules”. It also solved the “double-spend” problem that had baffled computer scientists for years. More on the double-spend problem in the next section.

How does Bitcoin work?

Without getting into the technical details, Bitcoin works on a massive public ledger called a blockchain, where every single bitcoin transaction is packaged into a 'block' and stored on the network.  As each block enters the system, it is broadcast to the peer-to-peer computer network of users for validation.

In this way, all users are aware of each transaction, which prevents stealing and double-spending. Double-spending occurs when one user tries to spend the same money in two different places. On the internet, we’re used to making limitless copies of information like photos and emails, but Bitcoin wouldn’t be a very useful currency if we could just make more out of thin air on demand. Thanks to the blockchain, cryptography, and mathematics, the Bitcoin network can be secured against these kinds of problems and allows all users to trust the system.

Why should I use bitcoin?

The best thing about Bitcoin is that it is decentralized, which means that you can settle international deals without exchange rates and extra bank charges. Bitcoin is free from government interference and manipulation, so there’s no Federal Reserve System‍ to hike interest rates or print more money. It is also transparent, so you always know what is happening with your money.

You can start accepting bitcoins instantly, without investing money and energy into details, such as setting up a merchant account or buying credit card processing hardware. Bitcoins cannot be forged, nor can your client demand a refund.

Users and enthusiasts have begun to call Bitcoin “Money 2.0” and Bill Gates called it “a techno tour de force.”

How do I buy and sell bitcoin in Canada?

In Canada there are a few options for buying and selling Bitcoin.

Online Exchange: If you want to buy or trade Bitcoins at the best avialable rate, you‘ll want to use an online exchange like Coinsquare. Exchanges act as an escrow by storing both Bitcoin and fiat currency on behalf of their customers. Here you can make your own orders to buy or sell Bitcoin at the best rates with the click of a button. On exchanges, fees and the spread are low, however you are required to submit personal information like your address to comply with Canadian regulations.

ATM: Maybe the most private method to acquire Bitcoins is a Bitcoin ATM. These machines where you can get money with your card. Some companies also produce ATMs where you can buy Bitcoin with cash. ATMs have very high fees of 5-8% percent or even more.

Gift Cards/Voucher: This is another easy method to buy Bitcoins. In Canada you can use cash or debit to buy a Flexepin voucher at thousands of retail purchase locations. These vouchers can be redeemed on exchanges like Coinsquare for Bitcoin. Like ATMs, these voucher cards tend to charge relatively high fees.

How do I store bitcoin?

To store your Bitcoin, you will use some form of a bitcoin wallet. Bitcoin wallets function similar to traditional wallets except it's not a physical wallet and it doesn't actually store currency - digital currency wallets simply interact with the blockchain to keep track of your funds.

You’ll find Bitcoin wallets come in many types including desktop, mobile, web, paper and hardware wallets. Each of these has its advantages and disadvantages.

When you buy Bitcoin on Coinsquare, you are automatically given a web wallet to track your Bitcoin so you don't have to worry about setting one up.

Back to all topics

What is Ethereum?

To understand Ethereum, let’s compare it to a currency we already understand – Bitcoin. Ethereum is a decentralized platform for applications. Both Bitcoin and Ethereum are decentralized platforms, but they differ in a few key ways.

While Bitcoin is designed to process transactions and help people exchange money, Ethereum aims to function as a kind of decentralized computer, supporting a new type of application (a "dApp") in the process.  A good analogy is to think of Ethereum as the blockchain version of the “App Store”.

What is Ether?

Ether is the currency that allows the Ethereum network to run.  In the same way that your computer uses electricity to run, Ethereum requires small amounts of Ether to process transactions. Ether powers the Ethereum network and is a unit of currency that you can buy and sell.

Technically, you aren't buying Ethereum when you try and buy their token online, Ethereum is the name of the network - you're actually buying Ether, Ethereum's unit of currency.

Who created Ethereum?

Ethereum was first proposed by Canadian programmer Vitalik Buterin in 2013, when he was only 19 years old. When first publicly announced in January 2014, the core Ethereum team was Vitalik Buterin, fellow Canadian Anthony Di Iorio, Mihai Alisie, and Charles Hoskinson. The system officially went live on July 30th, 2015.

Is Ethereum like Bitcoin?

Well, sort of, but not really. Like Bitcoin, Ethereum is a distributed public blockchain network. Although there are some significant technical differences between the two, the most important distinction to note is that Bitcoin and Ethereum differ substantially in purpose and capability.

Bitcoin offers one particular application of blockchain technology, a peer to peer electronic cash system that enables online Bitcoin payments. While the Bitcoin blockchain is used to track ownership of digital currency (bitcoins), the Ethereum blockchain focuses on running the programming code of any decentralized application. These decentralized applications have a wide array of use cases, including but not limited to financial transactions. 

How does Ethereum work?

Ethereum’s core innovation, the Ethereum Virtual Machine (EVM) is a Turing-complete software that runs on the Ethereum network. It enables anyone to run any program, regardless of the programming language given enough time and memory.

The Ethereum Virtual Machine makes the process of creating blockchain applications much easier and efficient than ever before. Instead of having to build an entirely original blockchain for each new application, Ethereum enables the development of potentially thousands of different applications all on one platform.

What is a decentralized application?

Any services that are centralized can be decentralized using Ethereum. Think about all the intermediary services that exist across hundreds of different industries. From obvious services like loans provided by banks to intermediary services rarely thought about by most people like title registries, voting systems, regulatory compliance and much more. 

Some notable decentralized applications today are hoping to decentralize industries like cloud storage, home rentals, and even social media.

How do I buy and sell Ether in Canada?

In Canada there are a few options for buying and selling Ether.

Online Exchange: If you want to buy or trade Ether at the best avialable rate, you‘ll want to use an online exchange like Coinsquare. Exchanges act as an escrow by storing both Ether and fiat currency on behalf of their customers. Here you can make your own orders to buy or sell Ether at the best rates with the click of a button. On exchanges, fees and the spread are low, however you are required to submit personal information like your address to comply with Canadian regulations.

ATM: Maybe the most private method to acquire Ether is a Bitcoin ATM. They are referred to as Bitcoin ATMs only because that is the most popular digital currency. Most of these ATMs work with Ether as well. These machines where you can get money with your card. Some companies also produce ATMs where you can buy Ether with cash. ATMs have very high fees of 5-8% percent or even more.

Gift Cards/Voucher: This is another easy method to buy Ether. In Canada you can use cash or debit to buy a Flexepin voucher at thousands of retail purchase locations. These vouchers can be redeemed on exchanges like Coinsquare for Ether. Like ATMs, these voucher cards tend to charge relatively high fees.

How do I store Ether?

To store your Ether, you will use some form of an Ether wallet. Ether wallets function similar to traditional wallets except it's not a physical wallet and it doesn't actually store currency - digital currency wallets simply interact with the blockchain to keep track of your funds. Ether wallets work almost exactly the same as Bitcoin wallets.

You’ll find wallets come in many types including desktop, mobile, web, paper and hardware wallets. Each of these has its advantages and disadvantages.

When you buy Ether on Coinsquare, you are automatically given a web wallet to track your Ether so you don't have to worry about setting one up.

Back to all topics

What are altcoins?

'Altcoins' is the term given to the hundreds of digital currencies that have launched in the last couple years. Today, new digital currencies are launched every day. Some of these altcoins emulate Bitcoin as peer-to-peer digital currencies, while others represent application tokens for dApps built on the Ethereum blockchain.

What are altcoins used for?

Altcoins serve a wide variety of functions. They are typically used as tokens for very specific applications. The owner of these tokens may hold on to them as an investment or use these tokens to perform a function within the application.

An example of this is Filecoin, one of the world's largest token sales to date. Filecoin is a decentralized application built on the Ethereum network. Users will be able to exchange their unused computer storage for Filecoin's token.

How do I buy and sell altcoins in Canada?

In Canada there are a few options for buying and selling altcoins.

Online Exchange: If you want to buy or trade altcoins at the best avialable rate, you‘ll want to use an online exchange like Coinsquare. Exchanges act as an escrow by storing altcoins and fiat currency on behalf of their customers. Here you can make your own orders to buy or sell altcoins at the best rates with the click of a button. On exchanges, fees and the spread are low, however you are required to submit personal information like your address to comply with Canadian regulations. Some altcoins are only available on specific exchanges. While you can find the most popular altcoins on almost all exchanges, some of the newer or more obscure altcoins can only be found on certain exchanges.

Gift Cards/Voucher: This is another easy method to buy altcoins. In Canada you can use cash or debit to buy a Flexepin voucher at thousands of retail purchase locations. These vouchers can be redeemed on exchanges like Coinsquare for altcoins. These voucher cards tend to charge relatively high fees.

Back to all topics

What is a blockchain?

A blockchain is essentially a distributed database. Imagine a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.

Information held on a blockchain exists as a shared — and continually reconciled — database. This way of using the network has a few obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. There is no centralized version of information or data for a hacker to corrupt. Because a blockchain is hosted by thousands or even millions of computers simultaneously, its data is accessible to anyone on the internet.

Blockchain technology is similar to the internet in the sense that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain cannot be controlled by any single entity and it has no single point of failure.

How do blockchains work?

A network of so-called computing “nodes” make up a blockchain. Let's use Bitcoin's blockchain as an example.

Each node (a computer connected to the bitcoin network that verifies and relays transactions) gets a copy of the Bitcoin blockchain, which gets downloaded automatically upon joining Bitcoin's blockchain network. 

Every node on the network is an “administrator” of the blockchain, and joins the network voluntarily. However, everyone on the network has an incentive for participating and following the rules of the network. In Bitcoin's case, the reward for participation is the chance of winning Bitcoins.

What are some use cases of blockchain technology?

The blockchain gives internet users the ability to create value and authenticates digital information. There are countless possible use cases for blockchain technology - most of which are just starting to be explored. Some of the most notable use cases include:

Smart contracts

Distributed ledgers enable the coding of simple contracts that will execute when specified conditions are met. Ethereum is an open source blockchain project that was built specifically to realize this possibility. Ethereum has the potential to leverage the usefulness of blockchains on a truly world-changing scale.

At the technology’s current level of development, smart contracts can be programmed to perform simple functions. For instance, a derivative could be paid out when a financial instrument meets certain benchmark, with the use of blockchain technology and Bitcoin enabling the payout to be automated.

The sharing economy

With companies like Uber and AirBnB flourishing, the sharing economy is already a proven success. Currently, however, users who want to hail a ride-sharing service have to rely on an intermediary like Uber. By enabling peer-to-peer payments, the blockchain opens the door to direct interaction between parties — a truly decentralized sharing economy results.

An early example, OpenBazaar uses the blockchain to create a peer-to-peer eBay. Download the app onto your computing device, and you can transact with OpenBazzar vendors without paying transaction fees. The “no rules” ethos of the protocol means that personal reputation will be even more important to business interactions than it currently is on eBay.

Crowdfunding

Crowdfunding initiatives like Kickstarter and Gofundme are doing the advance work for the emerging peer-to-peer economy. The popularity of these sites suggests people want to have a direct say in product development. Blockchains take this interest to the next level, potentially creating crowd-sourced venture capital funds.

In 2016, one such experiment, the Ethereum-based DAO (Decentralized Autonomous Organization), raised an astonishing $200 million USD in just over two months. Participants purchased “DAO tokens” allowing them to vote on smart contract venture capital investments (voting power was proportionate to the number of DAO they were holding). A subsequent hack of project funds proved that the project was launched without proper due diligence, with disastrous consequences.  Regardless, the DAO experiment suggests the blockchain has the potential to usher in “a new paradigm of economic cooperation".

Prediction markets

The crowdsourcing of predictions on event probability is proven to have a high degree of accuracy. Averaging opinions cancels out the unexamined biases that distort judgment. Prediction markets that payout according to event outcomes are already active. Blockchains are a “wisdom of the crowd” technology that will no doubt find other applications in the years to come.

Still in Beta, the prediction market application Augur makes share offerings on the outcome of real-world events. Participants can earn money by buying into the correct prediction. The more shares purchased in the correct outcome, the higher the payout will be. With a small commitment of funds (less than a dollar), anyone can ask a question, create a market based on a predicted outcome, and collect half of all transaction fees the market generates.

Back to all topics

What are wallets?

A digital currency wallet is a software program that interacts with blockchains allowing people to send and receive digital currency and monitor their balance. If you want to use Bitcoin or any other digital currency, you will need to have a digital wallet.

When a person sends you bitcoins or any other digital currency, they are essentially signing off ownership of the coins to your wallet’s address. To be able to spend those coins and unlock the funds, the private key stored in your wallet must match the public address the currency is assigned to.

If public and private keys match, the balance in your digital wallet will increase, and the senders will decrease accordingly. There is no actual exchange of real coins. The transaction is signified by a transaction record on the blockchain and a change in balance in your digital currency wallet.

What kind of wallet should I use?

There are two main categories of digital currency wallets, hot wallets and cold wallets. Hot wallets are wallets that are connected to the internet. These hot wallets run on the cloud and are accessible from any computing device in any location. While they are more convenient to access, these online wallets store your private keys online and are controlled by a third party which makes them more vulnerable to hacking attacks and theft.

Cold wallets on the other hand store a user’s private keys on a hardware device like a USB device or even on a piece of paper. These wallets tend to be more secure since private keys are stored offline and aren’t vulnerable to hacks. Coinsquare automatically gives you a wallet to keep track of your digital currency and stores over 95% of all user funds in cold wallets to make sure your money is safe from hacks.

Are digital currencies safe to use?

Digital currencies are incredibly safe when used and stored correctly, and networks like Bitcoin and Ethereum have inherent security features that make the networks incredibly resistant to hacks - far more safe than any bank or third party.

Back to all topics

How are digital currencies taxed in Canada?

In Canada, the CRA has stated that Bitcoin and other digital currencies are taxable.

Barter transaction rules apply where bitcoins are used to purchase goods or services. In other words, if a computer retailer trades a laptop for, say, three bitcoins, those bitcoins are considered a taxable gain that must be reported.

Conversely, if you’re a bitcoin investor and you trade your bitcoin for dollars, the resulting gains or losses could be considered income or capital depending on the facts, according to the CRA.

We are not tax professionals and regulations can change without notice. You should always consult with a tax professional for accurate tax information regarding Bitcoin and other digital currencies.

What regulations do investors need to be aware of?

The legal status of digital currencies vary from country to country and sometimes within specific states. 

In Canada it is legal to hold, mine, and trade Bitcoin. Canada’s federal and provincial governments and their regulators have been relatively quiet when it comes to the issue of digital currency and exactly how it should be defined and governed.

To date, no branch of the Canadian government has issued an official notice or any form of written guidance on the state of the law of bitcoin. Canada is in line with the regulations of most countries around the world.

These regulations will continue to evolve over time and could change in the future.

Quis autem vel eum iure reprehenderit qui in ea voluptate velit esse quam nihil molestiae consequatur, vel illum qui dolorem?

Temporibus autem quibusdam et aut officiis debitis aut rerum necessitatibus saepe eveniet.

Don’t miss out on our weekly newsletter

Copyright © 2015 Flex Mag Theme. Theme by MVP Themes, powered by Wordpress.

To Top