Posted on 01/23/2014 7:59:41 AM PST by Errant
In a recent New York Times Dealbook post, venture capitalist Marc Andreessen argued that Bitcoin is here to stay because it provides a payment system better than the one we have now, particularly for online merchants and international transfers. He likened Bitcoin to other disruptive technologies such as the personal computer and the Internet.
These are great analogies. The personal computer has revolutionized the world, but Altair was not one of the winners. (Remember Altair? It was one of the many pioneers.) The Internet was not the first or even the only network for connecting computers. There were several other early networks including Bitnet (the "Because Its Time" network), which was started in 1981. It thrived for a while connecting university computers, but was eventually supplanted by the Internet as we know it today. I believe that Bitcoin will suffer the same fate as Bitnet: a technical advance that will soon be surpassed by even better advances.
Our payment system is undergoing an amazing technical revolution. In a few short years, we have evolved from a world in which most payments were made via paper to one in which most are made with electrons. This evolution has not finished and will continue. There is broad dissatisfaction with the fees involved in the Visa MasterCard duopoly, and definitely room for improvement. We will continue to see innovations that provide even better and more cost-effective payment solutions. Recent innovations include PayPal, Popmoney, and Square. Plenty more are still under development, as many innovators compete to come up with a "digital wallet" that people will actually use.
(Excerpt) Read more at news.cnet.com ...
EBay considering accepting bitcoin as payment
Not that Btc needs Ebay...
Has any freeper involved with bitcoins, found an accountant that can do your federal tax return addressing their bitcoins?
I ask because we can’t find one. Care to share by private freep-mail?
It’s not a trivial matter to create and maintain a currency. A successful attempt requires wide acceptance and a high stability of value. People will not willingly accept as a currency something that varies widely in value from one day to the next.
Sure, speculators will, but businesses and individuals generally will not. If one earns, via his labors, the equivalent of one mortgage payment per week, he’s not going to accept being paid in a currency that might suddenly only pay 2/3rds of a mortgage payment that week due to a drop in the value of the currency.
Gold and silver have served as currencies, but only in societies where no central bank has been established. Once a central bank establishes a currency successfully, that currency drives out gold and silver as transaction mediums simply because they are too volatile.
That said, very few governments are capable of running monetary operations so as to maintain a stable value of the currency over decades. And when some fail to do so, they fail spectacularly. The dollar is an accepted worldwide currency because it has generally maintained stability albeit with a persistent tendency toward inflation year after year. That inflation is consistent enough that people generally accept it, and just expect relatively small inflation adjustments to their salaries, and to their purchases, year after year.
Bitcoin has no hope of supplanting a government-issued currency, for it will always trade up and down with significant volatility, more even than gold and silver now do.
That said, I fear the current Federal Reserve Chairman has created a situation that could easily result in a spectacular failure of the dollar sometime in the next few years. However, he has operated well outside the normal boundaries of typical Fed operating procedures.
From the article you cited: “PayPal’s CEO David Marcus recently tweeted: ‘We treat BTC and any FX the same way. We’re believers in BTC though.’”
That’s one similarity to a Ponzi scheme. Both take believers. Another similarity will be the end result when the believers realize they were wrong.
Again, for something to serve as a suitable currency, it must provide stability of value. Otherwise it will never gain general acceptance for that purpose. And bitcoin will never attain stability of value, ever.
I would think treating any bitcoin transaction the same as you’d treat a foreign exchange transaction would be appropriate. In most cases, you ignore FX transactions because you’re just spending after tax dollars, converting them first to FX before spending them in, say, France.
However, whatever the rules for speculating in a foreign currency are, i.e., buying 1,000 Euros with dollars, sitting on them for a time, then selling them at a profit or loss in dollars, would seem to apply. That is, I’d look to the tax rules for investing in foreign currencies.
One thing’s sure. If you own a bunch of bitcoins and sell them at a huge profit, Uncle Sam is going to want his cut. Whether he views it as a long-term gain or a short-term gain is another issue, as is whether he can ever discover the fact that you made the transactions at all.
He’s trying to put a benign face on a monstrous open secret - the world currency system is a shambles.
Bitcoin is a giant, market-volunteered vote of no confidence in the global monetary system.
Well said.
What is the problem/issue you are having calculating what you owe? Have you even had any Bitcoin transactions? If you invest/trade and realized a profit once converted to dollars, it’s a capital gain. If you’ve mined them and sold/traded them for something for your personal use, it’s income. What’s so hard about calculating taxes on that. Keep good accurate records so you can determine your basis/expenses and then profit/income which is what is taxed. At least you have another two months to figure it out, if you even had a transaction in ‘13.
Later, have to walk the dog. ;)
There is bitcoin income from mining activity.
It can be posted multiple times a day
There is no ‘real’ exchange or market so the conversion to dollars isn’t rocket science.
It is an accounting nightmare. No place to find charts that show day to day market values.
If anything it will be the accounting nightmare that the i.r.s. imposes that is the death of bitcoin.
It is really much more than a currency.
The process is the paradigm shift.
The peer to peer nature, with minimal fees, is the key. Large and small merchants can save millions in fees by adopting the payment system.
I am not saying that Bitcoin is the ultimate winner. But it clearly is the Gorilla. Of course AOL and Yahoo were the Gorillas back in the day. They are pretty much spider monkeys to Google today.
First:
Once a central bank establishes a currency successfully, that currency drives out gold and silver as transaction mediums simply because they are too volatile.
Not exactly, bad money drives out good. Read more about Gresham's law here: https://en.wikipedia.org/wiki/Gresham%27s_law
Second:
Sure, speculators will, but businesses and individuals generally will not.
On the contrary, many people (including yours truly) respect the virtue of diversification. It's why I believe everyone should hold at least some wealth alternatives to the dollar or other fiat, Btc being a possible part of such a portfolio.
Third:
The dollar is an accepted worldwide currency because it has generally maintained stability albeit with a persistent tendency toward inflation year after year.
That good name is being eroded daily. Other countries are already looking for an alternative. And unfortunately, we may see a collapse of many fiat currencies worldwide in the near future, then massive inflation as a result.
Fourth:
Bitcoin has no hope of supplanting a government-issued currency...
You're missing the point. Bitcoin (crytocurrency) as a medium of exchange, MAY eliminate the need for government-issued currency - as breathtaking or impossible as that may sound for now.
Tulip Bulbs...
No more so than say a tree farmer (forester) would have. She plants her plot, keeps up with and claims yearly expenses, and may only realize income from the operation after a good number of years; perhaps a dozen or more at the first thinning. She doesn't have to keep track of the daily price of timber. She is only taxed on the price less costs at the time of sale, same for a miner of BTC or any other producer of a certain "commodity".
At least until ruled differently...
It is getting exhausting but every one of the professor’s assertion can be shot down. There just isn’t enough time. I think he’s from the Krugman school of economics. Weather Bitcoin the currency survives is of little consequence if a more useful crypto emerges. The underlying breakthrough encrypted, decentralized blockchian is not going anywhere!
We are big enough to handle our own security and transactions and in no need of a nanny.
The problem with the professor is just that,he’s a professor. Living in a protective bubble world of theory and young minds that he can bulldoze.
Marc Andreessen is a visionary innovator who has shaped the future and the likes of Professor Angel could not carry his pocket protector.
First, you don’t appear to understand Gresham’s Law. For starters, it has nothing to do with the reason silver and gold are rarely used for transactions today (although it is the reason you won’t find a silver dime in your change anymore, and it will eventually lead to the demise of the penny.)
Second, wealth is rarely invested in currency. It is invested in assets. And while a dollar bill could be considered an asset, it is a poor investment because, like a bitcoin, it earns no interest. Unlike a bitcoin, it is relatively stable in value so it will continue to be favored by most businesses and individuals over bitcoins when used as a medium of exchange.
Third, compared to the bitcoin, the dollar is a paragon of stability. People have been disparaging the dollar for decades (with justification in the 1970’s), but it remains one of the world’s most popular currency for transactions.
Fourth, in my opinion, the bitcoin will fall into disfavor for any number of possible reasons long before the dollar does, unless Bernanke’s mismanagement of the Fed’s excess reserve position leads to a hyperinflation, as it could.
>>”Payment system, currency, or ponzi scheme?”
Tulip Bulbs...<<
Yes, that is accurate. The result of wild speculation, pure and simple, with the miners taking the place of the growers. At the end, they will be left with an inventory consisting of used computers instead of piles of unsold bulbs, wondering how $10 million of bitcoin inventory could become worthless nearly overnight.
It’s failure to maintain a stable value from one transaction to the next makes it impossible to budget. That’s what will keep it form ever becoming our next form of worldwide cash. Only those with extra speculative cash can afford to use it and since too many people live week to week it fails to meet their needs.
TIGER DIRECT is now accepting tulip bulbs!
Payment system, currency, or ponzi scheme?
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