Commonly Asked Questions about Virtual Currencies

by Priscilla

Virtual currency can be described as a type of electronic currency that may be issued, controlled, managed by private developers, issuers, and a founding organization. A virtual currency is represented with a token and is usually unregulated, coupled with the absence of a legal tender.

Have you always had questions about crypto Currencies that you will answer? Find them below:

What is a Virtual Currency Transaction?

A virtual currency can be described as a digital currency, often unregulated, and can only be accessed electronically. They are stored and used through software, computer, or mobile applications, or some digital wallets. Transactions done with virtual currencies happen over the internet through encrypted, recommended networks.

What are Types of Virtual Currencies?

The current virtual currencies that have gained recognition over time are:

  • Litecoin (LTC)
  • Ethereum (ETH)
  • Bitcoin Cash (BCH)
  • Cardano (ADA)
  • Binance Coin (BNB)
  • Stellar (XLM)
  • Polkadot (DOT)
  • Chainlink

What is Cryptocurrency?

Cryptocurrency is simply a kind of virtual currency that makes use of cryptography to protect all transactions that are recorded digitally on a public ledger. Blockchain is a type of public ledger in this case.

If a transaction involves cryptocurrency and is recorded on the public ledger, it’s often called an on-chain transaction. But if it isn’t recorded on a ledger, it can refer to it as an off-chain transaction.

Bitcoin is a type of cryptocurrency that can be exchanged or sold for real money. The price for which it will be for is often determined by its current value in the blockchain market.

How Do I Know If I Have Short or Long Term Capital Gain or loss?

If your virtual currency has been held for a long time like one year or less because you exchange or sell your virtual currency, it means that your gain or loss will be short-term. But if you’ve held your virtual currency for one year or more before your exchange or sell it, it means that you will incur long-term gain or loss on your capital.

The holding period (the period in which the virtual currency is held) starts on the day you purchased the virtual currency. The day you exchange or sell your virtual currency is the day it ends.

How can Crypto Currency be converted into Cash?

There are many ways to convert your virtual currency to cash, and finally, get it to stay in your bank account. You can either buy it on coinbase, Binance, or any other cryptocurrency exchange you know of.

To ensure that you do not break the laws of money laundering, you need to withdraw the cash to the exact bank account you made payments with. Even though this isn’t the fastest route to take, it remains an easy, secure means to do this.

Final Thoughts

Unlike the normal money you’re used to, virtual currencies tend to rely on trust. They are not issued by a bank or other authorized authorities. If you’re a beginner in the blockchain industry, this guide is for you.

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