I am hoping DeathAndTaxes and BCB provide comments, but my understanding now is that LIFO and FIFO are legal techniques used to simplify tax accounting. You always have the option to pay taxes on the actual gain for each piece of property that you sell or trade.
VERY good point! True, there is always the option to be as anal with accounting as you like for tax purposes, and that's generally preferable. What I am less certain of is this: what are your legal obligations if you exchange property in a single transaction without realizing a capital gain?
Good question, but I'd imagine as long as you could meticulously show there was no gain, then that's just what it is. |
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I don't think this would work. This tax attorney advises using the FIFO method and nothing else for bitcoins. The biggest issue for most bitcoin users is determining their basis. Because bitcoins are fungible, you run into the problem of tracing the cost of each bitcoin you hold. You cannot just arbitrarily choose your basis. The IRS will permit you to use the FIFO method (First in, First out). Any other method such as LIFO or Average Cost Basis is not advisable, particularly now that we know foreign currency rules do not apply |
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I can see how this statement would be applied to bitcoin and other virtual currencies, but wouldn't you think they would use some of the other examples to clarify what else they consider "convertible virtual currency" by saying "Points, Frequent Flyer and/or Rewards programs?" I'm probably expecting too much.
In my head I want to think that this broad of a definition could also mean that buying of stamps, trading cards, comic books or other items that could be sold later would also fall under that umbrella, but then again they don't fit the "acts as a substitute for real currency" piece? Is it also because you buy the things I mention above, but the other you receive additional to some other transaction?
Honestly looking for clarification on this. I don't deal in the Points/Rewards game at all but know others who do.
...wondering how long before in-game currencies for games like Eve and World of Warcraft get the same treatment.
Very good question  Right now we're involved in a sort of "money" game. In that game it's now the state vs. the people. Since money can theoretically be anything how it's defined is of importance, given the influence on people's lives and respective positions. This is where legal tender laws come in. In order to protect the interests of ordinary people the U.S. Constitution, supposedly the highest law in the land, specifically states only gold and silver coin can be legal tender. Given that, anything else is not legally "money". There was a time when there were thousands of privately issued currencies in the U.S., similar to today's gift certificates, points etc. These currencies could be traded, but this was viewed as barter since they were generally only redeemable for goods from the issuer, not gold and silver. Now to your question. The U.S. government is in the peculiar predicament of trying to appear legitimate while propping up a system clearly deemed illegitimate in the words of its own law -- dollars, or Federal Reserve Notes, are now as redeemable for gold as toilet tissue. Bitcoin enters the picture and adds an interesting dynamic to the game. Due to its decentralized nature the government can't simply use force to shut it down. Instead, governments must take a legal position on it. This is where we are today. The Fincen guidance states: In contrast to real currency, "virtual" currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. One of the attributes of "real" currency is being legal tender in some jurisdiction. Since Bitcoin, points, even video game currency, operate like a currency in some in environments, but are not legal tender anywhere, they are all in the same category: virtual currency. So the guidance the IRS and FinCEN issues can't apply to Bitcoin only and nothing else. It must apply equally to other instruments behaving the same way, meaning the money transmission regulations and now tax guidance apply. |
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According to FinCEN Bitcoin and other virtual currency such as loyalty program rewards or timeshare points become convertible virtual currency as follows: Currency vs. Virtual Currency ...
In particular, virtual currency does not have legal tender status in any jurisdiction. This guidance addresses "convertible" virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.
http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html In other words, any time a person or organization issues a token of value, such as scrip, loyalty program rewards, points, gift certificates, etc. the federal government views this as "virtual" currency to be treated as property both subject to currency regulation, but contradicting capital gains taxes as a capital asset in the hands of the taxpayer. Loyalty programs have become popular worldwide, with programs such as frequent flyer miles and other points of value being exchanged on websites like Points.com. Since airfare price can vary depending on factors such as energy costs or travel season taxpayers redeeming airfare points should now document capital gains and losses per the new IRS guidance. Timeshare points work in similar fashion. Briefly, a timeshare is a kind of property which works on a points system. Owners in the system acquire points automatically over time which can be exchanged for hotel/lodging at various properties worldwide. Again, due to factors such as travel season or special events, like New Year's day parades or sporting events held nearby, the fair market value for these rooms can vary greatly, again subjecting taxpayers to capital gains and loss reporting, although they already pay property taxes. |
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So it is important to separate out "the tax code" with "can I cheat on my taxes and get away with it".
I think that's a bit charitable. The tax code is so convoluted it's probably possible to get even the most anal of honest tax reporters on something if they wanted to. |
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Keep in mind Bitcoin is not fully evolved, not even close.
That's a really cool thing about it. Not everything is known about normalized Bitcoin usage yet because it's still so early in its life. Many possibilities remain.
Saying it's free to send bitcoin isn't entirely false. It can be misleading, though. Technically, it's possible to send a bitcoin transaction without any fee. It's just not smooth, or very reliable, yet. It may never be practical to send "quick" transactions without any fee on the core Bitcoin network, but that's not the only way to transfer bitcoins. It may become possible to send bitcoin transactions completely free or for negligible fees at some point in the future via off-chain transactions, for example. I still believe that will be a big part of Bitcoin's future. It makes sense, eases block size limit pressure, and can foster innovative market based solutions for transfer, such as ad based monetization models in lieu of fees.
Remember, bitcoins are not physical. Their inherently digital nature coupled with a global Internet means possibilities for cheap, efficient transfer are many.
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It's all very well having a really secure piece of software but if exchanges etc have sloppy code then it is all undermined.
No, it's not. Exchanges do not equal Bitcoin. Localbitcoins.com, for example, does just fine and the transactions take place manually, in person (or manually online). MtGox had horrible business practices and imploded. Bitcoin is still here. So the above statement is clearly false. Trowing technology at some of the problems we face is not going to make them go away.
Who suggested it would? Is Bitcoin just a redistribution of wealth from one group of people to another?
No. Code is the new law.
No, law is the law, and no law means anything anyway unless followed and enforced. Are coders the right people to be deciding what's right and what should be legislated?
What? Barclays have PingIt and there are many other emerging p2p payment networks so is Bitcoin even necessary as a standalone currency? Yes. Why can't the banking system simply integrate Bitcoins open source code in to their existing infrastructure?
Ask them. I do not hold these views myself
Thank goodness we cleared that up. What are we talking about then? I just want to address them as I hear them being raised by critics and think they need exploration.
What a waste of time and venue to explore questions I just addressed IMO quite satisfactorily in less than 2 minutes with a forum reply. EDIT: sorry for not actually contributing alternative ideas. I'll try and think on it. |
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Fairly certain people were saying same wishful thinking back during late 70s and 80s about the 'imminent collapse' of US.
I am old enough to remember that things were much MUCH more dire back then
Really? The 70's were more dire than this? Detroit home January 27, 2013  Trust me, some people doing the work are already taking steps to remedy the situation.
I don't doubt it. You mean like the following? http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything. |
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To keep this on topic about Bitcoin, I'd point out thamericandreamfilm.com seems to have come about in 2010, when Bitcoin was still in its infancy...
There was a thread titled "what does Bitcoin mean to you" where someone replied "peaceful resistance".
It would be interesting to see how Bitcoin and cryptocurrency might have been added to this video as a way of resisting the bankers.
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The internet is a series of tubes, bitcoin is a check
Of course. The way it works is somebody at an undisclosed location sits at the end takes a deep breath and...  |
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Yes, exactly, and another word for hoarding is of course saving. That's too simplistic. Hoarding gold (or Bitcoin) is really about speculation. I disagree. I'd argue when you speculate you don't care whether you're buying or selling. |
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Inasmuch as Bitcoin has a vague resemblance to gold (people hoarding it as a store of value) ...
Yes, exactly, and another word for hoarding is of course saving. WB's philosophy is about putting capital to work ...
Great, but the problem with that is when the capital represents trillions of currency units at some point there simply isn't enough work to continue keeping pace. You'll begin having people working on things nobody really needs or cares about. I wouldn't expect WB to see its utility. Not yet, anyway.
It's ironic to me, because his great investment insight IMO is boiled down to ability to recognize enduring quality in one form or another. He's able to strip away transitory aspects of a business and focus on core offering, that which can yield long term competitive advantage, and see that before the market does. Couple that with a stock market in a highly inflationary environment and you stand to make billions over time. So in a way his wealth IMO springs from betting on quality set against a devaluing currency, although not overtly, something gold bugs might relate to. |
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OMG Either Warren Buffet is being intentionally ignorant or he's clueless yet speaking authoritatively about Bitcoin. I'm not sure which is worse. For those that missed the glaring omission (I know not many in this crowd) Bitcoin is two things. It is both a currency and a payment network for that currency. If Bitcoin had been invented solely as a way to transfer dollars easily, yes, it would have made a few headlines, but it wouldn't be close to achieving the level of infrastructure, innovative ideas, passionate users and communities springing up around it in such short time. The truth is Bitcoin has intrinsic value not only because it's a better value transfer mechanism but also because it has a known, transparent fixed supply to the currency unit. Hey, Warren: checks and money orders can't do that. http://www.cnbc.com/id/101494538 |
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This just occurred to me: please have redeemable codes for exchange credit. BTC-e has these and Gox used to have them. If enough exchanges do this it will allow a marketplace to spring up around these codes allowing users to convert various forms of currency easily. This is the problem Ripple purports to solve, but does it without being shady about it. For example, at some point users will be able to convert physical gold to cryptocurrency easily, if only one physical location accepts it and has a redeemable code. |
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I've been working with a team of engineers for the last 6 months on a new exchange. We have acquired banking support for 10 different fiat currency.
Wanted to see what the community is looking for in a new exchange, currently we have the following:
- Mandatory 2FA
- Verifiable user funds
- User KYC documents encrypted and stored in Canada, backed-up offline
- On EC2 so that we can sustain DDOS attacks.
- Incorporated outside of the US, so that user privacy is protected.
I wouldn't have mandatory 2FA. It's not like that's a bulletproof answer. I've seen posts from people claiming to have lost coins with 2FA enabled. Security is always a balance between convenience and robustness. You could say mandatory colonoscopy too, but that may not fit well with some users. What I would do is have 2FA in the flow by default, but give the option to opt-out, while making it very clear it's considered a big loss of a security protection layer. However, some users know what they're doing, or have other reasons they might opt out of 2FA. The only thing which should be mandatory is a strong password. There are a few other security measures which can be very effective, yet remain convenient too. The first is simply requiring email link confirmation for every withdrawal request. BTC-e has been doing this for a while. It doesn't seem all that inconvenient, yet a hacker would need access to two different accounts. The second is giving the user the option to set a permanent wallet withdrawal address, an address where no matter what it's the only one the site sends funds to. The only way to change that address requires a colonscopy phone call, or perhaps photo ID submission, etc. That way a hacker can only send funds to an address the user controls, unless they can prove they are authorized to change the withdrawal address. The last simple yet highly effective security measure is delayed action. Again, give users the option to set a minimum 24/48/whatever hour delay before some action completes. This can be a withdrawal, or changing the permanent withdrawal address etc. This way a hacker in control of much of a user's info must hope the user does not become aware something is wrong before the changes go through, which is unlikely. Last, in terms of website security, simply be sure the majority of funds are kept in cold storage and refill hot wallets as needed. It's better to possibly delay some customer withdrawals and deal with customer service than be forced to announce a severe loss of funds which can't be recovered. |
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Based on the same reasoning (or lack thereof), the amount of Bitcoins in existence is conspicuously not mathematically verifiable either.
I think we're done. I would add in a Gene Wilder voice (Depp was not as intense): "According to all the published source code as well as the performance data from the last five years, it is clear that the Bitcoin protocol is based upon the claimed mathematically provable limit. You would know this if you had done any research first. Also, you did not return the Everlasting Gobstopper. Good Day, Sir!"  |
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Based on the same reasoning (or lack thereof), the amount of Bitcoins in existence is conspicuously not mathematically verifiable either.
I think we're done. |
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Let me ask all the Ripple supporters something. If there was a new coin created called ReallySmartCoin, and the people behind it said everyone should buy it, but when asked how many ReallySmartCoins existed they said well there is X amount, um No.. you can't check for yourself, just take our word for it.
What do you think the community's reaction would be? Would you say people should support and invest in ReallySmartCoin?
That's what Ethereum is doing for their fundraiser ... Ethereum appears to be a block chain based currency which is mined and mathematically verifiable, just like cryptocurrencies we're already familiar with: https://github.com/ethereum/wiki/wiki/%5BEnglish%5D-White-Paper#wiki-currency-and-issuancehttps://github.com/ethereum/wiki/wiki/%5BEnglish%5D-Dagger and it doesn't seem to deter potential investors because not everyone is a sociopath incapable of trusting anyone to deliver on their promise.
Don't you know the first person to engage ad hominem attacks loses by default? But anyway, that rethorical question is irrelevant...
The question was not rhetorical. ... in the case of Ripple since the number of XRP is fixed and <100B as can be asserted from any ledger close, and the source code of validators in charge of guaranteeing that this remains so is opensource.
Again, the amount of Ripples in existence is conspicuously not mathematically verifiable. Statements posted on the Internet are not adequate proof. |
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With all the scribbles it's difficult to tell what you meant. But it's also not incorrect to say that a public key has a corresponding private key. I mean, a Bitcoin address is a just a base58 representation of the ripemd160 hash of the sha256 hash(double) of the public key + checksum whereas the private key is just base58 encoded.
Right. Most casual users won't go this deep, so hopefully nobody gets confused. It's fine to think of Bitcoin as simply having two parts: a public component, and private component. The world can know your public component and not be able to access your coins. As long as you protect your private component (private key) your coins are safe. However, technically it goes: private key -> public key -> final public Bitcoin address More info: https://en.bitcoin.it/wiki/Technical_background_of_version_1_Bitcoin_addresses |
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You've asked a bunch of questions. First it's helpful to understand terminology. Yes, in Bitcoin value is assigned to key pairs which consist of a public key and private key. A public key can be derived from a private key, but not the reverse; you can't find a private key by knowing the public key. The private key is what gives authorization to send coins. Technically, a single public/private key pair can be thought of as an account. The word "wallet" generally means some sort of management of a number of these key pairs or accounts. Typically this is done with software such as Bitcoin-Qt. To store coins offline, or what's known as cold storage, you simply need to copy the private keys down in some way which can be retrieved, but which doesn't expose them to online computers in any way. Yes, Bitcoin-Qt has a number of commands for navigating around and dealing with key pairs. However, it's generally believed to be safest and easiest to use bitcoinarmory to make paper wallet backups and manage coin transactions, because the way it works private keys are never exposed to online machines which might have viruses. Armory is still being improved but for now it's about the best we've got for simple rock solid coin security. As for why your balances in Bitcoin-Qt looked weird, that's by design. When you create a Send transaction the "change" is sent back to a different address to enhance anonymity. This doesn't happen in all wallet clients. For example, Multibit doesn't currently do this. You can send payments to the address even if its offline, someone please confirm, but offline wallets can only have 100 transactions sent to it without being updated.
If your bitcoin are spread between a bunch of wallets on the QT, and you send a payment, it will deduct from all the balances if it will leave a 0 balance.
That little bit there isn't exactly correct. If you have just a single address in cold storage you can send to it as many times as you like, the only time you need to update anything is the wallet.dat file once you've done 100 transactions with it, since when you send it usually sends the change back to a newly generated random address. Correct. There is no limit to the number of transactions a private key/public key pair can receive, and neither needs to be "online" to receive payments. Refreshing backups of wallet.dat per number of transactions is due to the way Bitcoin-Qt works. I explained it in detail on Reddit. |
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