No.

Ukyo.loan was a risk-free investment, just like deposited money in bitfunder or weexchange . They should all paid back proportionally at the same rate. The only way ukyo can get out of paying them would be to declare bankruptcy. Otherwise it is fraud.

You also have to remember that at the time HashFast was promising delivery in October and said they had multiple contingency plans in the event there was a delay in one part of the project. There was no "december 31st" date and there was no "mining protection plan". Just a 400+ GH/s miner promised in October at well under 1 W/GH/s

That's a good idea. There has been far too little information and far too much waiting and I'm beginning to get impatient, especially regarding ukyo.loan which has had no information of substance whatsoever in quite a while. It's seems like there are many people that are owed more than $10k and a few that are owed more than $100k. That is definitely a sum of money that it would be worth hiring a lawyer for.

Yeah it was 61 for those of us who ordered early on.

A couple of questions:

1) What is the total amount of outstanding WeExchange balances? In other words, what percentage of the coins owed is that 386 btc?

2) Is there any news as to the coins owed ukyo.loan owners? Are those coins missing too? Is the repayment plan for that separate from the WeExchange plan?

I guess Krusty invested in Labcoin.

This is definitely NOT true in the US. I can't speak for other countries.

Buying an commodity like bitcoin is NOT a loss as the bitcoin has value. Namely the value is what you bought it at! You can only realize a loss when you sell it for an amount less than what you paid. Or you realize a gain when you sell it for more you paid for it. The price you buy the bitcoin at is used as the basis for calculating your future gains (or losses).

Yes, exactly. Plus there are enough people out there who can't do math and want to jump on the bitcoin bandwagon who will continue to pay too much for miners keeping the price high.

No, it's the opposite. Once we hit equilibrium, pretty much NO ONE will make money and those who do are the ones who have free electricity and cheap time.

Not even batch 2 Avalons! My batch 2 Avalon has only made 70 coins and it isn't likely to make more than 1 or 2 more through the rest of its life.

Bitcoin is a way bigger paradigm shift that a new product like facebook or the Apple iPhone.

Bitcoin is more like the PC, cellphones, or the internet, and both existed for decades before they really became relevant. The internet was around since the 70's but only became relevant in the mid 90's. Cellphones existed as carphones since the 80's but only became relevant in the late 90's.

Its more likely for bitcoin to go back to $100 than it is to go to $10,000.

The only way bitcoin can go to $10,000 in the near term is if wall street gets involved. That means the Winklevoss twins ETF gets approved. It might take a while for that to happen if it ever does.

If you mine bitcoins it is counted as income based on the value of the bitcoins at the time you mine them. Yes, it's a huge pain to keep those kinds of records, but it is the legal way to do it.

It doesn't matter, but it would be safest to use mtgox. Alternatively, if you primarily use another exchange to sell your coins, you can probably use their exchange rate. Just because the exchange rate isn't set in stone, doesn't mean there isn't a fair market value for the bitcoins and you still owe taxes on them. If you drastically underestimate the price on your tax return the IRS will come after you.

This isn't the only situation where there is this kind of ambiguity. If you were to barter with someone, or if you were to do some work and you were paid in goods instead of cash, you need to estimate the fair market value of the goods exchanged or received on your tax return.

You could also argue that it is the mining pool that is creating the currency and they are simply paying you for the work you have done to help them find a block. This is the case for most people out there these days since few solo mine now. And for those that mine in a pool it is likely that they have never actually been the one to find a block, so did they actually ever create any units of a virtual currency?

I wish that were true, and to be honest the IRS hasn't said anything official about it. But any accountant will tell you that that based on how taxes work that isn't the case. BItcoins mined are revenue and will almost definitely be taxed as income based on their value at the time they were mined. This is really annoying actually, since it means that you need to keeps records of every fraction of a bitcoin you mine and the exchange rate at that time. It's unclear how granular this must be. I have records by day, but theorecticaly you probably need to record every time you get a payout from your mining pool.

I don't see how this leads to centralization.

There is no such thing as a free lunch. As long as there is a cheap and easy way to mine bitcoins the difficulty will ALWAYS rise high enough so that it is just barely profitable. You can't stop people from buying a free money printing machine. The only reason why it's been profitable to mine up to now is they can't make ASICs fast enough to keep up with the rising price of bitcoins.

Expect within in a year to reach a state where you can buy a mine machine for a few hundred dollars. Larger machines will cost a few thousand. Power consumption will be under 1000w which is low enough to run at home. The machines will expect to ROI in 6 months to a year after taking into account electricity cost. People with expensive electricity might not ROI at all. People will mine for fun, in general, not because they believe they are going to get rich. Some companies will mine, but likely only the ones that also sell ASICs as they will have access to hardware at wholesale prices. Other small companies might start mining where electricity is cheap. No one will be getting rich and there will be no centralization of mining because it is not cheaper to consolidate mining in one location or one company. As difficulty and price waiver up and down mining will come in and out of fashion with people who time it right possibly making a profit. Many people will lose money, though, and continue to mine anyway, either because they can't do math, or prefer it as a method for earning btc.

fyi, the difficulty at that point will be around 75 - 100 BILLION.

Yes, that is true, but you could be totally screwed for that year if you don't have enough savings to cover that tax liability.

I plan on paying income tax on my mined coins since that way I can deduct the costs of everything I paid to mine the coins (mining hardware, computer and networking equipment, etc).

The other issue is if you don't declare the mined coins and later sell the coins on the exchange that IRS says "where did you get that money? where did you get those coins?" you will not be able to point to any transaction where you bought those coins and established a basis for their value for the purpose of calculating your capital gains.

For small time miners maybe the IRS won't care. But for those of us who have hundreds of thousands of $ in bitcoin the IRS WILL notice when those bitcoins are liquidated and so the rules will need to be followed.

I am not an accountant, so please correct me if this is incorrect.

I'm assuming that you are someone who is trying to follow ALL the rules as best as they can (and many of them are unclear right now).

Here is a hypothetical scenario:

- You mine a coin a day for the month of November. Bitcoin is at $1000, so you mine 30 coins worth $30,000.

You would owe income tax on those coins, on that $30,000.

- Now let's say bitcoin crashes to $10 in December. You sell off the 30 coins for $300 and take a $29,700 loss.

You can declare that as a capital loss on your taxes.

Now the problem is the 30 coins you mined aren't a capital gain, they are declared as income. So you can't deduct the $29,700 capital loss from them. You can only deduct up to $3,500 per year off of your income.

So you'll be stuck owing taxes on $26,500 and have no money to pay it as your coins only earned you $300 in fiat!

This seems pretty scary. Am I wrong in this scenario or is this really what would happen?

You only get to declare a loss or gain when you sell. The price you buy at is used to determine the basis from which you calculate your loss or gain when you sell. The time you buy and sell is important as if you hold your coins for at least a year and a day you may be eligible to pay long term capital gains instead of short term capital gains tax on them. Also note that you can't pick and chose which coins you are selling. You have to pick either a FIFO (first in, first out) or LIFO (last in, first out) plan and stick with it. Most people will pick FIFO except in some unusual situations.

To answer your question, if you sell on Dec 31, yes, you have to pay capital gains for 2013. If you have a loss next year, it will appear on your 2014 tax return and can be used to offset gains in 2014 and future years. You can not use it to retroactively get your capitals gains tax from previous years back. It's important to realize that only up to $3500 of capital loss can be deducted off your income. The rest must be deducted off of other capital gains. Fortunately, you can carry it forward to future years. So if you sell in 2014 and declare a loss but don't have any capital gains of that year, you can put it on your 2015 or future tax returns if you have a capital gain that year. Or you can deduct $3500 a year off your income.