i love hal finney, but he didn't invent hashcash. it's adam beck's project.

consider: compare the likelihood that mt. gox is currently 'rigging' the price of a bitcoin compared to the likelihood that any other commodity is being rigged by a particular bank. compare the relative concentration and power. many users of this forum are living in a fantasy land.

the act of disposing of it (for fiat or anything else) is what creates the capital gain. it doesn't matter if you sell it for 'fiat' currency, goods, services, land, or anything else.

the mistake people keep making is to assume that a nation's fiat currency has any special place in computing the timing or amount of capital gains, except as the denomination of value in which the tax is paid. the way the tax laws work is much simpler: if you buy something for something worth $X and trade it away for something worth $Y, you owe $(Y-X) in (capital gains) taxes.  (modulo, of course, the exceptions you mentioned, like bands of tax-free income for small amounts.)

you're not thinking about it correctly. we pay tax all the time on things we don't 'have'. for example, if you earn USD $15,000, you pay tax on that income regardless whether you spend it or save it.

the principle is really very simple, but most people who haven't studied it get very easily confused and make bad assumption after bad assumption. the united states's principle is very straightforward: you owe tax on all income received, from whatever source derived.

that includes noncash compensation. when something isn't cash, the value for tax purposes is its fair market value at the time you received it. of course, fair market value can be disputed; it is up to the taxpayer to declare it and the IRS to challenge it. (if an intentional understatement, it can lead to civil or criminal penalties.)

so if you buy 150 BTC at $100 and immediately use it to buy a car, you owe no tax merely because you used bitcoins. (you might owe a sales tax in the US on the car, of course.) if you buy 150 BTC at $50, wait until it appreciates to $100, and use it to buy a car, you owe $7500 in income (specifically, probably capital gains) taxes on the appreciation of the bitcoins.

as to barter, people pay tax on it all the time. individuals who barter for $200 probably cheat the government out of income to that amount, but sophisticated individuals and businesses that engage in noncash transactions certainly do pay tax. i have done it myself, to the tune one year of a $4 million tax bill.

as to the title of the thread, it is because not everyone is an extremist anarchist; most people adopt ethical systems that recognise the value of law and government and then adopt the principle that it is appropriate for the costs of government to be split based roughly on income. nobody thinks the tax system in any large country is perfect, but almost everyone in those countries (except in this often ridiculous forum) thinks it is better than having no government at all.

except where it doesn't, like in the uk. i wish more people here would learn more about the actual world before coming up with grand political or economic theories (or at least before trying to correct me).

i believe this is an analytical error that i've tried to correct many times before. for one thing, it ignores dynamic market effects (for example, someone who profits from a put option, a short sale, or even a regular sale). it is usually a mistake to predict too confidently what 'rational' parties will do based on an incomplete understanding of their behaviour.

http://en.wikipedia.org/wiki/Dollar_auction

martin shubik has written about this extensively. it would be idiotic for anyone to play under most circumstances.

there was an early-ish bitcoin service that played this out in automated fashion with 1 btc as the auctioned item. i forget what it was called.

my favorite recent bizarre post that captures much of the ethos of this forum was:

heh. anything's possible, but i've never been a conspiracy theorist. in fact, i doubt this sort of disguise would occur to most younger people.

this is cute and imaginative, but it is better as fiction than as social science or prediction. if the professional economists can't predict anything two years ahead, why do you think you can?

1. even if bitcoin were untaxable, which it's not, why would the government be unable to find some other source of funds? it could tax land (owners or renters), for example. at the very worst, tax fraud through bitcoin could slightly undermine progressive income taxation, but it's unlikely to do even that because there would still be real-world employers with physical presences that are easy targets of tax enforcement. most salary-based tax is voluntarily reported by individuals, except for that portion declared by institutional employers. your view is a bit ahistorical, too: the income tax isn't even very old.

2. you seem to be assuming that the value of an individual bitcoin will reach $1 million. (that is probably what would be necessary for satoshi to be a 'trillionaire'.) why would anyone without bitcoins throw so much money into bitcoins, however? they might be useful, and they might be enough to attract both speculation and real use, but a century before your fanciful claims would materialise, those with present wealth would find it far easier to set up an alternative cryptocurrency.

2a. bitcoin would not actually be a robust way to store the amount of wealth that would be necessary for your story to materialise. it could still probably be disrupted by $5 million's worth of asic chips. it presently stores, also, nowhere near as much as the widely reported 'market capitalisation' figure.

3. why do you think bitcoin enables your nightmare scenarios, like kidnapping children in the suburban united states to sell them to paedophiles? if there were already drive to do this and people thought they could get away with it, i'm sure suitcases of cash or wire transfers to borderline-lawless jurisdictions would make for suitable, less trackable payments.

i just noticed something in reading satoshi's old posts on the cypherpunk mailing list: he uses two spaces after a full stop, not just one. i don't have hard data, but i believe this practice correlates strongly with age. that is, i suspect very few people younger than 35 have learnt to type that way.

funny, because someone else replied to the same passage and called it something else. the terms are not precise, or at least not used consistently enough to bother with a typology or taxonomy. and it doesn't matter. the relevant question is substantive, not taxonomic.

if the worst you can say to eric posner is 'you are perhaps using the term slightly incorrectly', you haven't debunked his analysis!

oh lord. i know. i've written academic articles on the subject.

you people really need some perspective. 'classical' refers to any paradigmatic or flourishing period. (for example, 'classical' music doesn't come from the ancient greeks.) 'platonic' refers to an ideal archetype, based on plato's philosophy of archetypes. have you never heard the phrase 'platonic ideal'?

in any case, we're arguing insignificant terminology now. it's odd that you'd write such a message and then suggest that i use the term 'pedantic'!

sorry, maybe i'm getting frustrated because, in 'real life', i'm used to people trusting what i say a little more -- and perhaps the lesson derived from pseudonymity is useful personally. but good lord is it tedious! as a general rule, you can trust that even if you disagree with my perspective or my analytical priors, i do know what i'm talking about and am neither uneducated nor ill-informed.

the two categories can overlap: if madoff's fund had traded in shares, it could have been illicitly pumped (and dumped) even whilst it was also a ponzi scheme.

the reason people see the resemblance between bitcoin's promotion and a classical ponzi scheme is that in both cases, the profit comes as a transfer of wealth from new participants to old participants, merely by convincing new participants to value the asset as an investment scheme on the hope of the cycle continuing. everyone here always says that's identical to shares in a new company, but shares in a new company become valuable (if legitimate) on the expectation of an eventual dividend. bonds become valuable because they will pay interest. etc.

but yes, if you want to say that bitcoin is necessarily different from a classical ponzi scheme because there is no promoter who profits from investment fees tied to assets under management, then i would mostly agree. except that mt. gox comes pretty close.

i don't recall this ever being mentioned, but i might have missed it: nothing prevents participants in pools from sending to the pool all proof of work that pays a reward except hashes that satisfy the block chain's current difficulty. in withholding such hashes, pool participants give up (1) an insignificant amount of revenue (the reward for the withheld hash) in exchange for (2) avoiding a statistical contribution to increased difficulty in the block chain and (3) the opportunity to harm a competing (or otherwise out-of-band targeted) pool.

(3) on its own may motivate such an exploit. it is an empirical question, i believe, whether (2) outweighs (1) in any particular case.

the problem is that you're responding to a substantive criticism by identifying a formal distinction. to most people making the claim, it doesn't matter whether bitcoin is literally a 'ponzi scheme' in some platonic, classical sense. some even recognize the distinction and point out that it operates as if it were a ponzi scheme, albeit through a new and interesting process. for example, eric posner's article at slate does this: http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html

i agree that mt. gox's speculations about the price are irresponsible, ill-informed, and essentially fraudulent.

there are many such similar claims in the community. even in this thread, there are ill-informed claims that assume, as background, that the natural progression of the price of a bitcoin is to climb indefinitely:


when nobody is buying and people are selling, the price will fall. that is true of any investment scheme, ponzi or not. a falling price is a falling price. you can only call it 'stagnation' if you assume the natural state of the price is to rise exponentially. there is literally nothing in the world that has that natural state forever.

the bitcoin technology is itself not a ponzi scheme or any kind of scam. the promotion of bitcoins with language like 'it always goes up' or 'get in before it's too late' is, as posner argues, essentially indistinguishable from a ponzi scheme even if there is no organized head and even if the beneficiaries are distributed. the speculatory value of a bitcoin depends on the hope of selling it to others at a profit even though the coin itself, unlike a stock or bond, never generates its own productive return or dividend. (for the record, yes, gold is the same way. it doesn't matter.)

i also think there is a decent chance that mt. gox are actively manipulating the market to bolster the price. the only way to know for sure would be for them to submit to a third-party audit or for enough people to stop using them. they have consistently marketed bitcoins to the public with very scammy language.

it's remarkable how quickly people forget: if it sounds too good to be true, it probably is.

back then, i was concerned that the influence of this forum had turned bitcoins, functionally speaking, into an investment fraud. more recently, it was at worst a media-backed frenzy. i don't mind profiting from the latter; i've made significant money in other, similar bubbles. i try to avoid profiting directly from fraud.


i have always been honestly motivated and have tried to improve people's understanding of bitcoin. if you misinterpreted that as trolling, the problem is with your reading comprehension. i can't help if some people here don't expect nuance and assume that any measured, rational criticism, rather than monotonic promotion of bitcoin under all circumstances, is 'trolling'.

i'm back on the forum because i sold a pile of coins and was curious what the old promoters were saying. the tone and content have not improved over the last two years, but surprisingly they've not declined either. neither has the quality of the 'businesspeople' associated with bitcoin improved, which is disappointing. it is still amateur hour among all the prominent services, including those i specifically warned about two years ago, many of which have turned out to be either dramatic failures or outright scams. at least mt. gox has again attracted people's ire, but i don't expect the community to learn and avoid them any more than they did in 2011.

who were you two years ago, and what motivated you to change identities on the forum?

yes, and i donated half of the proceeds to charity. you can follow this in my posting history if you're curious, rather than a needlessly insulting troll.

citation needed.

how would any of us know?