The Rise of Cryptocurrency
Joe David, Director of Myna
Background of Crypto
In 2008, Bitcoin was introduced as a new way of handle money around the world through a white paper titled “Bitcoin: A Peer to Peer Electronic Cash System”.
Cryptocurrency has been on the rise ever since and now, with over 4,000 cryptocurrencies available, the possibilities are endless.
So what is Bitcoin and cryptocurrency? Cryptocurrencies are a digital asset which is held in a virtual wallet that automatically synchronizes all transactions with the blockchain it is held on.
Due to this synchronization, all transactions that take place through a wallet/exchange portal are automatically logged on the particular blockchain log and protected through cryptography. Money can instantly be sent between wallets and, more importantly, each transaction comes with a private key — a secret code allowing users to prove ownership of their coins.
One of the main benefits of cryptocurrency is the fact that the amount of each currency cannot be increased beyond what is declared on the blockchain. Many blockchains are now operating on a decentralised network meaning they are not controlled by any person or organisation and ensuring that there is no outside influence on the market.
Bitcoin is created via a process called Proof of Work or ‘mining.’ Mining is a process that occurs where a miner is required to solve a complex computational problem in order to add a new block to the blockchain and claim his reward. This process requires a significant amount of computer power and led to environmental campaigners to criticise the process of mining.
Due to the high energy usage of the mining process, a new process called proof of stake was introduced as an alternative. The Proof Of Stake algorithm uses a random selection process to select a node to be the validator of the next block, based on a combination of factors that could include the staking age, randomization, and the node’s wealth.
Where in Proof of Work-based systems more and more cryptocurrency is created as rewards for miners, the Proof-of-Stake system usually uses transaction fees as a reward.
In the last 12 months Defi, or decentralised finance, has stormed in popularity and added additional complexities to the sector.
Ethereum was born to be able to do the things that Bitcoin was unable to do. The bitcoin ledger was not built to host the multitude of decentralised applications that Ethereum can host and the creation of Ethereum in 2015 was the catalyst for the rise of Defi.
The rise of Ethereum allowed for smart contracts to launch. A smart contract is a self-executing contract with the terms of the agreement between the buyer and the seller written into lines of code. This allows the contract to be executed on the blockchain directly without a third party execution.
Some of the largest Defi projects are ones such as AAVE, a lending and borrowing platform, REN, a liquidity protocol and Uniswap, a liquidity protocol.
Why specialism is important
Specialism or niching in any business sector is always important and will aid the growth of the business. The challenge a lot of the time is finding that specialism.
A specialist in any sector is someone who dedicates a significant amount of time to a particular subject in order to be a thought leader or expert in the space. It also means that they can ensure they study the market and any changes to keep clients informed of the latest information.
In some industries, such as accounting, it is very easy to become ‘just another accountant’ and therefore can be very difficult to stand out from the crowd. The days have now gone where being a ‘cloud accountant’ is enough to be different.
We are highly invested in the space both personally and financially. We are in a privileged position to be able to invest in the area we specialise in and can therefore say to clients that we honestly and truly understand this space!
Background to Myna
Myna was developed by Nephos, one of the UK’s leading digital accountancy firms that was built on the principle that technology can, and should, work harder for your business. Cryptocurrency is just one more part of this – we don’t just keep you compliant but actively work with you to help your business and investments grow.
Our business has grown from strength to strength and our cryptocurrency expertise has grown significantly as we have worked with some of the largest and most innovative business in this ever-growing sector.
We have also supported many individuals to maximise investments by offering high-level tax advice to support their investments.
Let us do it for you
At Myna, we understand that the accounting and taxation rules around cryptocurrencies and blockchain is complex and we are here to support you and your clients through this process. We are here to ensure you and your clients are kept abreast with all the latest HMRC rule changes and changes in accounting standards.
Our aim at Myna is to ensure you maintain that healthy client relationship without the headache of learning a whole set of new rules!
Many firms outsource taxation or audit requirements to others and this area is no different to that. We are members of Crypto UK and sit on regular taxation roundtables with HMRC along with regulatory discussions and general market updates.
We can operate on either a white-label or referral basis and our main focus is ensuring the relationship with your client is maintained at the highest level.