GoldRush
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August 22, 2010, 10:15:38 PM |
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How, exactly, do you ensure compliance with tax laws when people are spending US paper dollars (cash)?
(rhetorical question...)
Call it rhetorical if you like, but that does not make your point. The IRS has the ability to audit your bank accounts. That makes it really hard to cheat on your taxes in any significant way. Your bitcoin wallet is easily hidden, however. And no, the IRS is not ok with Linden dollars and the rest. Congress is already nervous about transactions that use anything other than the US fiat currency. http://themonetaryfuture.blogspot.com/2010/01/irs-may-push-for-tax-compliance-in.htmlYour link does not substantiate your argument that "IRS is not ok with Linden dollars and the rest". It should surprise no one that the IRS wants to tax income generated by US citizens. It should surprise no one that it is likely illegal to not report bitcoin income to the IRS. And none of this changes bitcoin's viability in any way. The IRS just wants you to report income, regardless of currency, or even if there is no currency involved at all. [edited to add barter link] You guys are fooling yourselves if you think bitcoin can be successful as a currency instead of a commodity. If you treat it as a commodity I think it'll survive. If you try and talk retailers into accepting bitcoins then you are just digging your own grave. Have you forgotten the raid on the Ron Paul silver dollars? Their mistake wasn't the silver dollars. It was the move of retailers in the north-east to accept them instead of the US fiat currency. http://www.thestreet.com/story/10390631/raid-on-ron-paul-dollar-maker.htmlAgain, your link does not substantiate your arguments. That guy was a nutter trying to sue the US mint. OpenCoin has a nice legal report on the currency that's worth reading. Between 1933 and 1971 it was illegal to own gold bullion in this country. And merchants weren't even accepting gold as a currency. It is important that you understand why the US, for decades, required that you turn over your gold bullion to the US government. http://en.wikipedia.org/wiki/Executive_Order_6102In Australia it is currently a crime to trade gold bullion without reporting all transactions to the Australian government. You are living in blissful ignorance if you think the US government is going to allow widespread use of bitcoins as a currency. However, it is perfectly legal to create something that people will buy. Your odds are much better if you treat bitcoins as a commodity. Then again, maybe the whole point in the bitcoin project is to ultimately be shutdown by government. It would bring a lot of attention to government's control of our personal wealth. If that is the case, then use bitcoins as a currency instead of something you hold for price appreciation.
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chaord
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August 23, 2010, 09:09:07 AM |
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I feel like the commodity vs currency argument is somewhat cyclical. Many finance professional would consider the USD as a commodity for analysis purposes. On the other hand, I tend to think that an ideal situation is where local physical transactions utilize whatever commonly accepted local currency (whether it be USD, bitcoins, or some other community currency) and if I can have my debit card and bank exchange in and out on the fly. When people ask me why my purchasing power always seems to be going up, I can tell them about the commodity aspect (scarcity) of bitcoin. When they ask me how I'm able to purchase whatever, wherever I want, I can give them the currency exchange aspect. That would be my utopia ![Wink](https://bitcointalk.org/Smileys/default/wink.gif)
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Anonymous
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August 23, 2010, 02:39:52 PM Last edit: August 23, 2010, 04:12:30 PM by noagendamarket |
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How, exactly, do you ensure compliance with tax laws when people are spending US paper dollars (cash)?
(rhetorical question...)
Call it rhetorical if you like, but that does not make your point. The IRS has the ability to audit your bank accounts. That makes it really hard to cheat on your taxes in any significant way. Your bitcoin wallet is easily hidden, however. And no, the IRS is not ok with Linden dollars and the rest. Congress is already nervous about transactions that use anything other than the US fiat currency. http://themonetaryfuture.blogspot.com/2010/01/irs-may-push-for-tax-compliance-in.htmlYour link does not substantiate your argument that "IRS is not ok with Linden dollars and the rest". It should surprise no one that the IRS wants to tax income generated by US citizens. It should surprise no one that it is likely illegal to not report bitcoin income to the IRS. And none of this changes bitcoin's viability in any way. The IRS just wants you to report income, regardless of currency, or even if there is no currency involved at all. [edited to add barter link] You guys are fooling yourselves if you think bitcoin can be successful as a currency instead of a commodity. If you treat it as a commodity I think it'll survive. If you try and talk retailers into accepting bitcoins then you are just digging your own grave. Have you forgotten the raid on the Ron Paul silver dollars? Their mistake wasn't the silver dollars. It was the move of retailers in the north-east to accept them instead of the US fiat currency. http://www.thestreet.com/story/10390631/raid-on-ron-paul-dollar-maker.htmlAgain, your link does not substantiate your arguments. That guy was a nutter trying to sue the US mint. OpenCoin has a nice legal report on the currency that's worth reading. You are right.It is all about reporting your income.If there are bitcoin millionaires I would expect them to reduce their tax bill due for bitcoins as for frn's.Only a fool pays more taxes than he has too. ![Smiley](https://bitcointalk.org/Smileys/default/smiley.gif) Hire an accountant if you are concerned .How the hell do you work out your tax liability for using bitcoin though?
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GoldRush
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August 23, 2010, 05:30:25 PM |
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I feel like the commodity vs currency argument is somewhat cyclical. Many finance professional would consider the USD as a commodity for analysis purposes. On the other hand, I tend to think that an ideal situation is where local physical transactions utilize whatever commonly accepted local currency (whether it be USD, bitcoins, or some other community currency) and if I can have my debit card and bank exchange in and out on the fly. When people ask me why my purchasing power always seems to be going up, I can tell them about the commodity aspect (scarcity) of bitcoin. When they ask me how I'm able to purchase whatever, wherever I want, I can give them the currency exchange aspect. That would be my utopia ![Wink](https://bitcointalk.org/Smileys/default/wink.gif) I'm not making a philosophical argument. It's a practical one. If tens of thousands of retailers are accepting bitcoins at their website, then the government is going to step in. There is plenty of history to support this. On the other hand, if tens of thousands of people are buying and holding bitcoins like they are beanie babies or gold coins, then you aren't likely to attract the attention of congress, yet you've met the goal of creating an alternate method for holding some of your wealth. If the point of bitcoin is to make a stand against government invasion of our personal wealth, then bitcoin is on the right track. When/if retailers accept bitcoins you can bet the government will be there to regulate and tax them.
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MoonShadow
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August 23, 2010, 07:11:27 PM Last edit: August 24, 2010, 01:04:56 AM by creighto |
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I'm not making a philosophical argument. It's a practical one. If tens of thousands of retailers are accepting bitcoins at their website, then the government is going to step in. There is plenty of history to support this. On the other hand, if tens of thousands of people are buying and holding bitcoins like they are beanie babies or gold coins, then you aren't likely to attract the attention of congress, yet you've met the goal of creating an alternate method for holding some of your wealth.
If the point of bitcoin is to make a stand against government invasion of our personal wealth, then bitcoin is on the right track. When/if retailers accept bitcoins you can bet the government will be there to regulate and tax them.
If Bitcoin ever takes off, it matters not what they are called or by whom. Eventually, any method of exchange that is difficult to track will get the attention of those who, for whatever reason, feel that it is thier duty to track. If retailers never accept Bitcoin, then there will never be a problem; but the acceptance of Bitcoin for trade is the root purpose. If retailers never accept Bitcoin, then it is a failure and whatever those other people do is irrelevent. Other attempts to develop an online currency such as this have failed because they all, ultimately, depended upon a single institution to support them. That institution became the single point of failure for that currency, and logically became the target of TPTB. Those same powers also understand legal attacks well; it is their field, after all. However, such tactics will not prove very succesful against Bitcoin, as there is no single institution to assault that can bring down the beast. Those attacks will bring down the unlucky retailers, but not the system; and attacking all such people becomes prohibitively expensive. The real attacks, when they do come, will be more direct upon the network in an attempt to undermine the faith in the network.
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"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."
- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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GoldRush
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August 24, 2010, 12:32:33 AM |
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If retailers never accept Bitcoin, then it is a failure and whatever those other people do is irrelevent.
Most retailers are not accepting gold when you purchase something. Does this mean gold is a failure and that the gold coins and bars you have are worthless?
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MoonShadow
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August 24, 2010, 01:04:24 AM |
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If retailers never accept Bitcoin, then it is a failure and whatever those other people do is irrelevent.
Most retailers are not accepting gold when you purchase something. Does this mean gold is a failure and that the gold coins and bars you have are worthless? As a medium of exchange, yes. As a storage of value, well, that's debatable.
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"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."
- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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Red
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August 24, 2010, 02:53:19 AM |
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As a medium of exchange, yes. As a storage of value, well, that's debatable.
Hear hear! There appear to be some people who think that bitcoins represent a store of value ABSENT the acceptance of bitcoin as a commonly accepted medium of exchange. Nothing could be more preposterous. What value would it be storing?
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GoldRush
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August 24, 2010, 03:31:45 AM |
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As a medium of exchange, yes. As a storage of value, well, that's debatable.
Hear hear! There appear to be some people who think that bitcoins represent a store of value ABSENT the acceptance of bitcoin as a commonly accepted medium of exchange. Nothing could be more preposterous. What value would it be storing? The demand by others for bitcoins. That is exactly why gold is over $1200/ounce. Bitcoins are very similar to gold. If you understand why people pay so much for a yellow metal that sits in a safe and does nothing, then you will have your answer.
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Red
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August 24, 2010, 03:57:03 AM |
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The demand by others for bitcoins. That is exactly why gold is over $1200/ounce. Bitcoins are very similar to gold. If you understand why people pay so much for a yellow metal that sits in a safe and does nothing, then you will have your answer.
Excellent! Charles Ponzi himself decided to come to the forum. Welcome! How exactly is gold like bitcoins? What makes bitcoins more like gold than say like 2008 Oklahoma collectable quarters?
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GoldRush
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August 24, 2010, 04:05:19 AM |
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The demand by others for bitcoins. That is exactly why gold is over $1200/ounce. Bitcoins are very similar to gold. If you understand why people pay so much for a yellow metal that sits in a safe and does nothing, then you will have your answer.
Excellent! Charles Ponzi himself decided to come to the forum. Welcome! How exactly is gold like bitcoins? What makes bitcoins more like gold than say like 2008 Oklahoma collectable quarters? Are you calling gold a Ponzi scheme? This is getting rediculous.
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MoonShadow
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August 24, 2010, 05:00:07 AM |
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Are you calling gold a Ponzi scheme? This is getting rediculous.
I think that he was comparing your "bitcoins are like gold" analogy to a ponzi scheme. Of course that's inaccurate, but any comparison of bitcoins to hard money is also misleading.
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"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."
- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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MoonShadow
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August 24, 2010, 05:12:01 AM |
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As a medium of exchange, yes. As a storage of value, well, that's debatable.
Hear hear! There appear to be some people who think that bitcoins represent a store of value ABSENT the acceptance of bitcoin as a commonly accepted medium of exchange. Nothing could be more preposterous. What value would it be storing? The demand by others for bitcoins. That is exactly why gold is over $1200/ounce. Bitcoins are very similar to gold. If you understand why people pay so much for a yellow metal that sits in a safe and does nothing, then you will have your answer. People demand gold for it's 'store of wealth' quality. Gold has this quality (moreso than silver) because of it's long history as money. Gold became this defacto money because of it's wide demand as a commodity. It became a widely demanded commodity due to it's usefulness and beauty in jewelry, and it's relative scarcity. Gold is no longer scarce relative to other elements nearby on the periodic table such as uranium, thorsium, etc.; nor as compared to silver, the other historic money. Yet gold continues to maintain it's position as a store of value, perhaps by shear historic inertia. Anyone can say that this is not a sustainable position, and that the value of silver should overtake that of gold, but no one can say *when*. If bitcoin is the first cryptocurrency to be accepted by the market, then bitcoin will continue to dominate that market even if some technically superior solution comes along. How many people here have seen a betamax vcr?
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"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."
- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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Red
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August 24, 2010, 05:13:25 AM |
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There appear to be some people who think that bitcoins represent a store of value ABSENT the acceptance of bitcoin as a commonly accepted medium of exchange. Nothing could be more preposterous. What value would it be storing?
The demand by others for bitcoins. I was referring to the demand for bitcoins absent their currency-like utility. Selling bitcoins ONLY because others will want them even more in the future, is by definition a Ponzi scheme.
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jgarzik
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August 24, 2010, 05:15:41 AM |
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If bitcoin is the first cryptocurrency to be accepted by the market, then bitcoin will continue to dominate that market even if some technically superior solution comes along. How many people here have seen a betamax vcr?
That's a huge leap and a poor analogy. Being first mover in a market often means nothing more than providing seed ideas for a more powerful player.
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Jeff Garzik, Bloq CEO, former bitcoin core dev team; opinions are my own. Visit bloq.com / metronome.io Donations / tip jar: 1BrufViLKnSWtuWGkryPsKsxonV2NQ7Tcj
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Red
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August 24, 2010, 05:37:40 AM |
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That's a huge leap and a poor analogy. Being first mover in a market often means nothing more than providing seed ideas for a more powerful player.
Hense Betamax begetting VHS, but VHS dominated the market and crowded out everything else incl disks up till DVD.
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Anonymous
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August 24, 2010, 11:28:19 AM |
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Bitcoins would be an excellent virtual game currency.The problem is they are also a cash substitute and violate a lot of the terms and conditions of such things as super rewards.If someone could come up with a separate version that could be used as a virtual currency and that doesn't break the terms and conditions of virtual currency platforms it would be nice.
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Red
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August 24, 2010, 04:30:20 PM |
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Bitcoins would be an excellent virtual game currency.
I've always thought that but your TOS points are well taken! I think bitcoin has huge potential as an anonymous speech currency. It could replace the CAPTCHA for those times you want to speak but don't see a need to give sites your personal information. Or for when you wanted to make donations to speakers you support that prefer to remain anonymous. Think political or religious speech gadflies. Also, suppose you modified the TOR to support bitcoin, then you could offset the expenses of those running exit nodes, without compromising either party's anonymity. You could simply include a donation transaction when you set up the connection. The receiver can send it to any address they want. I'm trying to come up with ecosystems where the coins can circulate extensively without being converted back to national currencies after each exchange.
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cryptofo (OP)
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August 24, 2010, 06:16:50 PM |
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These statements should be obvious to everyone, but sometimes stating the obvious illuminates the not so obvious. All currencies/exchange mediums exist by design. Their design is based on a set of rules either established by or given to the exchanging parties. Sometimes the rules change, evolve or completely mutate over time, but it’s the rules of exchange and the qualities of that medium that define it as a currency. There are many different currencies with many different rules. These many currencies are designed with characteristics that facilitate exchange within a specific application. National Currencies - are designed to be accepted nationally
Local Currencies (which have many variations and designs) – are typically designed to be traded locally and remain local, specifically when there is a shortage of national currency.
Coupons – are designed to promote exchange with a specific business Airline Miles – are designed to promote exchange with a specific airline
Stock certificates – are designed to represent a percentage of interest in a company which can be traded between parties.
Futures Contracts – are designed to represent a quantity of a commodity which can be traded between parties for the purpose of speculation, hedging or acquiring
This, of course, is by no means an exhaustive list.
Commodities, on the other hand, exist not by design, but are produced for their function. No one designed apples. They exist and we have found uses for them and ways to increase there production. Commodities require resources (energy, labor, time, etc.) to grow and/or harvest or mine. The cost required to produce them adds to their value, but it is not limited to. The value of products derived from one barrel of crude far exceeds its extraction costs as well as its market value. The value of a commodity is based on its application of use. Scarcity alone does not create value.
This brings me to my point. It is my opinion that bitcoin could be seen as a considerably valuable commodity. I am also certain that the value of bitcoin as a commodity is based on its unique characteristics as a currency/medium of exchange. I will repeat that.
Bitcoin’s value as a commodity is directly dependant on it’s characteristics as a currency.
The attributes that make it particularly unique as an exchange medium - anonymous - decentralized - p2p - fast - secure - easily integrated - almost free of transaction fee - easy of use -private are what make it valuable as a commodity. Much like the characteristics that make gold an ideal medium of exchange. The big difference being that, outside of the rules designed to use gold as a currency, it has many other uses as a commodity as do platinum, silver etc.
The aforementioned attributes are some of the features of bitcoin I was particularly drawn to as an exchange system, specifically the decentralization. Not only because it thwarts manipulation, but because the lack of need for a central regulation is one less entity to be responsible for. If the rules can be established and the algorithm is left to regulate it, then we can subtract the human element which in my opinion tends to be the greatest contributor of error and corruption.
Finite supply is actually less of an attribute for my desired application of use which I previously mentioned, is local exchange.
It appears that there are many opinions out there on what the goals of bitcoin should be, ranging from video game money to crushing the Fed. Regardless, we are all entitled to them and no one is an authority considering we have never seen anything like bitcoin before. It reminds me when I first understood what Napster was and how it worked. Being tied to the music industry myself, I immidiately knew "some changes was a comin". One simple idea and some inovative technology sent the corporate conglomerates to absolescence purgatory.
I reiterate my initial concern that stabilization is the biggest challenge at least for the sake of using bitcoins on the microeconomic local level. The exchange rate volatility is just too vulnerable. I do, however, feel that it stands strong as a currency designed specifically for exchange of digital goods and services globally as well as for speculative trading. All of which have there place in society.
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MoonShadow
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August 24, 2010, 07:00:25 PM |
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If bitcoin is the first cryptocurrency to be accepted by the market, then bitcoin will continue to dominate that market even if some technically superior solution comes along. How many people here have seen a betamax vcr?
That's a huge leap and a poor analogy. Being first mover in a market often means nothing more than providing seed ideas for a more powerful player. Betamax did not 'beget' VHS. Betamax was a competing standard that came to market about a year after VHS was introduced. The Betamax standard and level of video quality was superior in many ways, but it lost the race for one simple reason. It wasn't better *enough* to overcome the 'first to market' advantage, and now they are lost to history. In order for any new cryptocoin system to overtake Bitcoin once the market is established would require either a dramatic improvement in usefullness (unlikely) or a near monopoly level form of institutional support. A cryptocurrency established and supported by the Federal Reserve, as an example, could probably crush Bitcoin at this point and for a long time into the future within the confines of the US legal system. However, it would still have to compete with Bitcoin internationally on it's own merits. The success or failure of one system or the other would depend greatly upon the future faith of foreigners. I'm not saying it's impossible for another system to overtake Bitcoins, but assuming that Bitcoin can make it for the next couple years unchallenged, it's going to take quite an advantage for another system to win.
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"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."
- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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