What is Cryptocurrency?

Cryptocurrency is a completely digital, encrypted, virtual currency that can be used in exchange transactions. Some consider it the currency of the future.

Today, cryptocurrencies are a phenomenon with many unknowns that has been heard by many people and has attracted a lot of attention from heads of state to major companies. Cryptography is used to verify and securely execute exchange transactions. It has no physical equivalent.

Actually, money spent and transferred with debit cards and credit cards are also virtual currencies, because these transactions only result in changes in system data. Cryptocurrencies work on the same principle. However, there is a decentralized system that is not controlled by any authority or government, which makes the system more secure.

What is Cryptology?

Cryptology is a science of encryption. It is the encryption of data according to a system. Cryptocurrencies are transferred through the creation and solving of encryptions in the environment. Algorithms like hash functions are used.

History of Cryptocurrencies

Since the 90s, the leaping age of technology, there have been many attempts to create a digital currency. Systems like Flooz, Beenz, and DigiCash were developed, but these ventures failed due to reasons such as fraud, financial difficulties, and internal company disputes. All these efforts developed the idea of a reliable, third-party approach.

Bitcoin, the first cryptocurrency, was developed in early 2009 by a person or persons using the codename Satoshi Nakamoto. Although it is said to have been developed by Satoshi Nakamoto, it was shared as open-source software by person(s) whose identity remains unknown. This network operates on a platform similar to peer-to-peer encrypted file sharing platforms.

Security of Cryptocurrencies

One of the most important problems with payment systems is the possibility of double-spending the same money. The traditional method used to prevent this is to put a central intermediary (banks) that keeps track of transactions. However, this method means inserting an authority that can control all capital, which reduces reliability.

However, in a decentralized or distributed network - like Bitcoin - every part of the system must approve for a transaction to occur. These operations are done through blockchain, so every transaction is visible to everyone.

All transfer operations are carried out with the wallet addresses of the sender and receiver and the amount to be sent. The exchange or sending transaction must be verified by the sender and then approved by the system. The approval process can only be performed by miners by solving a cryptographic puzzle. Once a transaction is confirmed, it cannot be reversed. The biggest risks for cryptocurrencies are the possibility of hacking and attacks.

How is Cryptocurrency Produced? What is Cryptocurrency Mining?

The production of cryptocurrencies is carried out through a distributed system like themselves. It is user-based. Cryptocurrency units have a production limit, so as the amount of cryptocurrency produced increases, the operations required to produce cryptocurrency become more difficult.

The production process happens through mining, even though it's not physical mining, operations based on solving mathematical problems are performed. In other words, if you have processing power and internet connection, you can take on the mining task without being assigned by someone.

Is Cryptocurrency Legal?

The legality of cryptocurrencies varies from country to country. While in some countries the legal status is still uncertain or variable, some countries explicitly allow their use and trade. Some countries have banned cryptocurrency use or imposed restrictions.

Questions like "Is Bitcoin legal?" are asked by many people. Currently, the Republic of Turkey has not imposed any laws or restrictions on Bitcoin use, so it is not possible for you to be penalized for holding, buying, or selling Bitcoin or other cryptocurrencies in your wallet.

Is Mining Legal?

Bitcoin or cryptocurrency production, that is, mining, is not a crime. There is no illegal situation.

Can Your Cryptocurrency Earnings be Taxed?

If regular money inflow is detected to your account, tax may be requested on your earnings. If this income is questioned by the Ministry of Finance, you can state that you obtained this income from cryptocurrency exchange transactions or mining, and when necessary, you can verify these transactions using your account statements.

What are the Advantages of Cryptocurrencies?

• Since it is not tied to any central bank, it is not affected by countries' economic situations.
• The account cannot be frozen or seized.