Everyone nowadays seems to be into cryptocurrency. Even if you do not have any prior knowledge or experience with it, you hear about all these people getting rich from their cryptocurrency investment. Along with it, so many different terms such as Blockchain and R&D tax credit software blockchain have sprung up. So, what is Cryptocurrency and blockchain and how does it correlate with R&D tax credit as well as the future of tax? This article will attempt to provide an answer to that.
Cryptocurrency: What is it?
Cryptocurrency is a digital or virtual currency that is created using cryptographic methods that allow people to buy, sell, and/or trade them securely. Bitcoin is a type of cryptocurrency, and currently the most popular one. It uses a purely peer-to-peer version of electronic cash. This means that payments are sent between parties without the need for a third party, such as a bank. In order to work properly, Bitcoin requires parts such as digital signatures. It also makes use of the blockchain, which is a public ledger for all Bitcoin and cryptocurrency transactions. Currently, more and more focus is being directed to the future development of blockchain development. Companies developing innovative software for online cryptocurrency may qualify for R&D tax credits.
R&D Tax Credit
The federal Research and Development (R&D) Tax Credit, which was ratified in 1981, allows a up to 13% credit of eligible spending for new and improved products and methodologies. In order to qualify, research must meet the four-part test:
- Elimination of Uncertainty
- Process of Elimination
- Technological in Nature
- New or improved products, software, or processes
Eligible costs consist of supply costs, employee wages, testing cost, contract research costs, and expenses associated with patent development. On December 18, 2015, the R&D Tax Credit was signed making it permanent. As early as 2016, the R&D credit can be used to counteract Alternative Minimum tax, and the credit can be used by startup businesses against payroll taxes.
What is Bitcoin?
Bitcoin is a type of cryptocurrency that is highly reliant on the blockchain ledger. It is the most popular cryptocurrency and has the most number of users as well. Users can safely exchange cryptocurrency with each other through a Bitcoin address. To do this, users must first download the Bitcoin wallet on a computer or mobile device. With the aid of QR codes and/or public key access, the Bitcoins are then transferred safely to another wallet. Transactions must be confirmed before they are added to the blockchain.
For a transaction to be confirmed, it must be in a block that abides by the cryptographic rules the network supports. These rules will keep any older blocks from changing, because the minute one block is changed, all the blocks before it will become invalid. Although Bitcoin is currently experiencing setbacks in privacy issues, blockchain technology is starting to thrive within the financial industry.
How the Bitcoin Process Works with Blockchain:
- Download the Digital Wallet software
- Transfer Bitcoin through public key address or QR code
- Confirm transaction
- Post to Blockchain
Bitcoin is a growing digital currency that is unable to confirm authenticity of a transaction. For instance, double-spending becomes an issue because users might transfer funds to another and then instantly transfer those funds to a second person during the processing period (around 10 minutes). The problem with this is that it can be difficult to copy digital assets. Digital cash, for instance, can be copied countless times. Because Bitcoin is a decentralized currency, it must find solutions to the privacy issues haunting it.
Blockchain: The Big Picture
Blockchain is a network that almost anyone can access. With the help of 64-character hash functions, a winning block will be added to the blockchain. In general, a block that makes it to the chain corresponds with a specific number of zeroes in the beginning that match the older blocks on the chain, followed by different ending numbers.
There have been several significant developments within Blockchain over the years since Bitcoin was created in 2009. The main goal is to produce a reliable network where unrelated people can conduct transactions with each other. One major drawback to this development is that some unscrupulous individuals may try to corrupt the network. Fortunately, a solution was provided by using majority rule to nullify disagreements in the blockchain.
Blockchain is quickly evolving beyond being just the technology that provides bitcoin and other cryptocurrencies to one that can potentially transform the operative models for many industries.
Blockchain is growing into a transformative technology that can significantly improve the way companies do business going forward. The Protecting Americans from Tax Hikes (PATH) Act rules for startup companies can support companies involved in this technology to save money by reducing a large part of their payroll taxes with R&D tax credits.
R&D Tax Credit Software Blockchain
Blockchain is in constant need of innovative updates to keep improving its technology. Improvements are necessary especially in security, user-friendliness, and more. Some companies are building custom blockchains in order to perform internal tasks more efficiently, together with pre-built blockchains that are ready-to-use. However, these blockchains require personnel with knowledge in math, cryptocurrency, statistics, and computer sciences. Since blockchain technology involves research and the sciences, there is potential for R&D tax credit software blockchain. This is worth looking into especially if your company is involved in cryptocurrency and blockchain.
Conclusion
Bitcoin is a new and unique form of virtual currency that is continuously improving. New developments are always coming up especially those involving Bitcoin and blockchain technology. Players in the financial and banking industries are predicting growth for blockchain technology in the near future. They are already making moves to adapt to such changes as well. But there is a need for uniformity among banking institutions when it comes to blockchain. This is so they can gain the upper hand against their competitors. While there is a lot of potential to innovate and increase Bitcoins presence, blockchain technology has more capability to succeed in the years to come. Innovation related to R&D tax credit software blockchain technology development provides an opportunity to receive R&D tax credits from federal and state governments.
