In the world of blockchain, the activity of mining cryptocurrencies is essential, because it makes it possible to operate the protocol of a blockchain against remuneration in crypto assets from the same protocol.
What is cryptocurrency mining?
To determine the taxation of mining of cryptocurrencies, it is still necessary to understand what is meant by mining. The blockchain is based on a transparent and secure information storage and transmission system, without the intervention of a central control body (bank). Basically blockchain is a decentralized embodiment of financial transactions. Thus engaging ourselves in all crypto activities contributes to the reduction of financial monopolies by banks and other financial institutions.
The blockchain is also based on a protocol that will define the peer-to-peer exchange rules (from buyer to seller). Everything is done using powerful computers. The best known Blockchain protocol is of course Bitcoin. The blockchain protocol will issue digital assets whose price is determined by the law of supply and demand. The digital asset is a means of exchanging values between individuals without the intervention of a third party (central control body). However, the minor retains an important place in the control of the operations carried out.
Mining activity occurs with each transmission of digital assets from one computer to another. Mining will allow each data entry on the blockchain to be proven and certified. This is what allows the blockchain to be so secure. The miner will issue a computer Proof of Work corresponding to the resolution of a complex computer calculation that results in the validation of the transaction.
The miner will receive in return for this operation a reward in the form of digital assets from the mined blockchain protocol. It is this prospect of reward that makes cryptocurrency mining a lucrative business. Today, most cryptocurrency mining activity is carried out by mining farms (farms of computer machines dedicated to mining). However not everyone can afford to own and operate the resources needed for crypto mining. The most logical option for them is to get involved in crypto trading. There are many platforms and applications that have been created for it, for example is Bitcoin Up.
Advantage of crypto mining
Mining activity is an activity that allows you to receive crypto assets in return for your participation in the transaction validation process. These can be exchanged for other crypto assets, goods or services or sold for fiat currency. Cryptocurrency mining is an activity that can be very profitable if your hardware is efficient. In addition, it should be noted that the taxation of cryptocurrencies (in general) is relatively advantageous.
Creation of a mining company
In our country, cryptocurrency mining is possible, but legally regulated. From a technical point of view, to mine cryptocurrencies, you must have high-performance computer equipment, specialized software and an electrical connection. However, the cost of this material can be significant.
This is why it can be a good idea to start a cryptocurrency mining business. A corporate structure will allow you to deduct the financial charges related to this activity. In this context, the choice of the corporate form of your company will influence the taxation applicable to the mining activity. It is also possible to create your own cryptocurrency mining company to benefit from a different and more optimized tax regime. The mining activity allows the company to receive crypto assets in exchange for the IT service provided. These crypto assets can then be sold by the company. They are then assimilated to a stock which subjects the company to corporation tax. After all, crypto commodities don’t look much different from other commodities.