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In related news, a New York Fed official said Nov. 4 that one of the most significant benefits of a United States CBDC could be faster cross-border transactions. The cost to produce one bitcoin depends on the cost of electricity, the mining difficulty, the block reward, and the energy efficiency of miners. With a block reward of 6.25 BTC, difficulty at 27.5 trillion, $0.15 per kWh, and energy efficiency of 45 joules per terahash, the cost to produce 1 BTC = $35,500. Moreover, it has become clear that Bitcoin does not offer true anonymity. The government’s success in tracking and retrieving part of the Bitcoin ransom paid to the hacking collective DarkSide in the Colonial Pipeline ransomware attack has heightened doubts about the security and nontraceability of Bitcoin transactions.
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Third-party internet services called online wallets or webwallets offer similar functionality but may be easier to use. In this case, credentials to access funds are stored with the online wallet provider rather than on the user’s hardware. As a result, the user must have complete trust in the online wallet provider. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such a security breach occurred with Mt. Gox in 2011. If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party. A8. Your basis (also known as your “cost basis”) is the amount you spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars. Your adjusted basis is your basis increased by certain expenditures and decreased by certain deductions or credits in U.S. dollars. For more information on basis, see Publication 551, Basis of Assets.

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