Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.
The IRS classifies bitcoin as property for tax purposes. This means that any gains or losses from bitcoins held as capital will be taxed at the capital gains rate, while income from bitcoins will be taxed at the ordinary income rate.
You can donate bitcoin to charity. In 2013, the first major nonprofit to accept bitcoin was the Wikimedia Foundation, which began accepting donations in January of that year.
Since then, numerous other nonprofits have begun to accept bitcoin donations, including Greenpeace, Human Rights Watch, and the United Way.
When you donate bitcoin to charity, you’re generally doing so anonymously. This means that you won’t get a tax deduction for your donation since there’s no way for the nonprofit to know who you are.
However, some charities do offer ways to make your donation tax-deductible. For example, BitGive allows donors to track their donations on a public ledger so they can prove they made them and claim a deduction on their taxes.
Generally speaking, donating bitcoin to charity is a good way to support causes you care about while also getting around some of the drawbacks of using bitcoin (such as volatile prices and lack of merchant acceptance). Just be sure to check with the charity beforehand to make sure they accept bitcoin donations and take steps to ensure your donation is tax-deductible if that’s important to you.