An ASIC Company's Guide to Maximizing Profit while Destroying Bitcoin

[theta]

Bitcoin in this sense is NOT a threat to US govt interests, it's more of a blessing. A reason for more economic activity (more hardware sold, exchange fees paid etc.) and therefore more taxes paid.

You could theoretically get away with paying no sales tax with using Bitcoin. You most definitely can get away with not filing mining earnings as federal and state tax.

In that case you would be breaking the law,  so it's another issue altogether and the government would go after the tax revenue,  nut bitcoin itself.  Same thing with any tax evasion case.

The government involvement was mainly icing on the cake - the most profitable route still exists with nearly the same negative effects: pump and dump the value, deliver the hardware as promised, and walk away with no civil/criminal liability.

That being said, I would say Bitcoin is one of the best tax evasion strategies ever created if/when the volatility is negated.

The dataset may not be useful precisely for the purpose of prosecuting right now (although I am positive that purchasing ANY sort of mining hardware is an indictable offense - the intent is what matters and that's an open-and-shut case given the specific purpose of an ASIC [unless you want to try arguing to a jury that you bought a SHA256 hasher for something else - be my guest]). However, that dataset is unarguably a master list of the points I mentioned in my first post: intelligent folks with financial resources and proven intent to participate in aforementioned activities.

But again, divorcing the government angle from this argument, you still have tons of incentive + opportunity for a ASIC hardware company to run a pretty big ruin on individuals and the network alike.

I agree on the last point, but why is purchasing mining hardware an indictable offence provided that you report all the revenues to the tax authorities and you comply with the law? It seems to me that you assume that miners are tax evaders.

[Gator-hex]

Bernard von NotHaus, created his own fully gold backed Liberty Dollar and this is how the FBI dealt with him...

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”

http://www.fbi.gov/charlotte/press-releases/2011/defendant-convicted-of-minting-his-own-currency

The biggest threat to Bitcoin right now is an ASIC monopoly that only sells in Bitcoins. This means only people who already own ASICs can mine enough Bitcoins to buy more ASICs, which will lead to a huge reduction in the number of network nodes.

[theta]

Bernard von NotHaus, created his own fully gold backed Liberty Dollar and this is how the FBI dealt with him...

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”

http://www.fbi.gov/charlotte/press-releases/2011/defendant-convicted-of-minting-his-own-currency

Liberty dollars were against the law because they used the word "dollar" and the same symbol ($) as the official currency of the country. This is VERY different from bitcoin, which is 100% legit.

The biggest threat to Bitcoin right now is an ASIC monopoly that only sells in Bitcoins. This means only people who already own ASICs can mine enough Bitcoins to buy more ASICs, which will lead to a huge reduction in the number of network nodes.

Yes, except that people who don't own ASICs will be able to exchange fiat for bitcoins so they can buy ASICs, not sure how a monopoly can be formed then. Plus, you can be a network node without mining.

[Gator-hex]

Liberty dollars were against the law because they used the word "dollar" and the same symbol ($) as the official currency of the country. This is VERY different from bitcoin, which is 100% legit.

Lots of currencies around the world say "dollar". The fact they got him on the "$" symbol, is a far cry from the message the FBI put out about him being a "domestic terrorist". If someone mistakenly uses your trade mark you deal with it with a cease and desist notice.

[cancis]

THANK YOU to Gator-hex for posting this - I was looking for this case. This is precisely what I am getting at with this post - it may sound ludicrous to us who are pro-Bitcoin that it would be a "unique form of domestic terrorism", but the facts are right there in case and statutory Federal law. Even if they weren't, this is a two-part Doom Scenario and the legal portion is only 50% of the risk equation.

I am not claiming that everyone who buys a BFL/Avalon/whichever ASIC is going to be indicted by any means. You are, however, exposing yourself to two very enticing scenarios for two powerful agencies: 1.) devaluation of the hardware you've purchased by a profiteering company pumping and dumping bitcoin, and 2.) collaboration with a government entity seeking to hand down a few (or hundreds) of indictments based on established Federal case law/statutory law. When you buy an ASIC and use your real information, you have irrevocablylinked your name and shipping address as a motivated, financially-capable, and key player in the Bitcoin movement. This is the language of the Department of Justice, not myself.

When you make this association between yourself and Bitcoin, you must realize that the change in legal angle from the von Nothaus case to someone purposefully and willing purchasing hardware with the explicit purpose of "minting" coins is but a few degrees of difference. In addition, you must realize the massive economic incentive for these companies to leverage your investment to fuck you over, and in doing so they would have zero criminal or civil repercussions for their actions. If you listen to, understand, and accept these risks then I have done my job and I am glad that I was able to better inform your decision.

An important piece of evidence was brought to my attention via PM: It takes but a brief search on this very forum to reveal the complete and utter disdain that one of these companies' chief spokesperson holds for the community at large. This is drawing much less suspicion than it rightfully should. This is huge. This is not the way a new company acts toward it's customers.

I started this thread in a lighthearted way, but the PMs I have received have brought a very sour realization of the evidence that actually exists for some variation of the scenario described being in action at this moment.

[dropt]

Man I'm such a sucker for conspiracy theories!!   Hey, hey, hey... anyone else notice there's been a disturbing lack of BFL adverts on bitcointalk and bitcoincharts?  Strange eh? 

[cancis]

Man I'm such a sucker for conspiracy theories!!   Hey, hey, hey... anyone else notice there's been a disturbing lack of BFL adverts on bitcointalk and bitcoincharts?  Strange eh? 

Turn off ad-block!

But really, as far as BFL is concerned I don't see anything updated since 3/15. What gives!? Surely my conspiracy theory cannot be true

[jubalix]

Here's a fun little scenario I came up with the other day. Below I describe the most profitable business model for an ASIC hardware company to follow if they are looking to solely maximize profit without regard to protecting the Bitcoin network.

I sincerely hope for the sake of Bitcoin that no company decides to go this route - but where there is massive profit potential with no legal repercussions, there's fire:

Step 1. Recruit the team needed to make a legitimate ASIC offering

Step 2. Get in bed with SEC/FBI/[whatever three-letter agency that wants to see Bitcoin fail while painlessly hiding their involvement in it's failure]

Step 3. Start taking pre-orders and begin furnishing all pre-order information (full names, addresses, payment info) to the given Three Letter Agency. Three Letter Agency now has a dataset containing a very large portion of the United States population that could be considered a legitimate threat to national economic activities. To make it into this list of pre-orders, it implies the following about you:

a.) you have a significant interest in anonymous, decentralized cryptocurrency (this could be argued as an interest in "anti-economic activities" depending on which Three Letter Agency and their interests)
b.) you have the resources to invest significant sums of cash into these "anti-economic activities"
c.) you possess a higher-than-average intelligence and capacity for critical thinking, and further
d.) you have taken definitive and documented action to utilize the above resources to further your interests in these activities (placing a pre-order for a mining device)

Step 4. Continue collecting large pre-order USD/BTC sums, assemble first batch of ASICs

Step 5. Slowly bring ASIC units online in different pools (maybe even your OWN mining pool for maximum control!) as well as solo-mining, and begin funneling your mined BTC to a central location

Step 6. Delay, delay, delay as long as possible to maximize mined BTC profits and lure in any stragglers for pre-orders

Step 7. At some point - the "tipping point" as I will refer to it - you announce that you are on the verge of delivering on all pre-orders. Several important things now happen:

a.) Take your substantial USD assets and artificially inflate the exchange rate (the "pump")
b.) Hold this exchange rate long enough to create a massive bid wall at a desirable USD rate
c.) Execute the "dump" at this favorable exchange rate, turning your pile of BTC into a monolithic pile of USD

Step 8. Congratulations! You've devalued BTC massively, walked away with pre-order profits + mining profits, all amplified by massive and controlled speculation, and to top it all off you got some extra cash from Three Letter Agency and a Get out of Jail Free card for playing ball with them. Now all you have to do is deliver on the (now essentially worthless) hardware, and you have mitigated all your civil suit liability as well!

BONUS ROUND: Do a 51% attack right before delivering to really upset folks' confidence in the market
BONUS ROUND 2: Cancel orders and return BTC to their owners (although they're hardly worth anything now). Continue 51% attacks to keep Bitcoin from recuperating!


I hope you all have enjoyed my theoretical scenario, and I'll look forward to your comments and speculations. Oh, I am so totally not writing this to implicate any specific company either, in case anyone was drawing correlations that I did not intend.

floor 1

Step 3.

I never gave my name, I just gave my BTC

[cancis]

floor 1

Step 3.

I never gave my name, I just gave my BTC

Yeah, this doesn't apply if you're using a dead drop or a very good mail forwarder.

P.S. What the heck does "floor 1" mean?