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What Is Bitcoin? A Step-By-Step Guide for Beginners

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Re: What Is Bitcoin? A Step-By-Step Guide for Beginners

#3

Post by CmdrSprinkles »

zerooneinfinity wrote: post #2

I am always wondering about Bitcoin and taxes. How does that work? And is it even taxable?

It is.

Not a lawyer, but my understanding is that it is handled as a capital gains tax. So you buy some bitcoin, it fluctuates wildly over the course of a week, and you convert back to fiat. You then pay taxes on any earnings from that.

So if you bought 1 flubbercoin for 900 USD and sold it a week later for 1200 USD, you are liable for that 300 USD in gained capital.

Here is a marginally more technical description https://en.wikipedia.org/wiki/Capital_gains_tax

Re: What Is Bitcoin? A Step-By-Step Guide for Beginners

#4

Post by KlaudijLikon »

CmdrSprinkles wrote: post #3
zerooneinfinity wrote: post #2

I am always wondering about Bitcoin and taxes. How does that work? And is it even taxable?

It is. Not a lawyer, but my understanding is that it is handled as a capital gains tax. So you buy some bitcoin, it fluctuates wildly over the course of a week, and you convert back to fiat. You then pay taxes on any earnings from that. So if you bought 1 flubbercoin for 900 USD and sold it a week later for 1200 USD, you are liable for that 300 USD in gained capital. Here is a marginally more technical description ht…

Not really related, but how about mining? What will happen once all the mining costs go down? What system will be put in place?

Re: What Is Bitcoin? A Step-By-Step Guide for Beginners

#6

Post by CmdrSprinkles »

KlaudijLikon wrote: post #4
CmdrSprinkles wrote: post #3

Earlier quoted context omitted.

It is. Not a lawyer, but my understanding is that it is handled as a capital gains tax. So you buy some bitcoin, it fluctuates wildly over the course of a week, and you convert back to fiat. You then pay taxes on any earnings from that. So if you bought 1 flubbercoin for 900 USD and sold it a week later for 1200 USD, you are liable for that 300 USD in gained capital. Here is a marginally more technical description ht…

Not really related, but how about mining? What will happen once all the mining costs go down? What system will be put in place?

At that point: Theoretically nothing. At that point the currency is stable and its value adjusts to very small degrees (if any) and it is no different than dave and busters money. You're taxed on your income and all you are doing is adding an extra layer of indirection before spending. And if you were paid in bitcoin, you have the same capital gains to report when you effectively translate it to fiat while buying your new Gameboy. There may be added complications similar to how foreign currencies work, but they should theoretically be negligible.

In terms of making sure you report those gains: What we see right now. Getting involved in the infrastructure to cut down on black money/money laundering.

But don't worry. I am sure The Followers of Satoshi will find a way to keep that currency volatile.

Re: What Is Bitcoin? A Step-By-Step Guide for Beginners

#8

Post by shuntress »

I still don't understand what happens after all the bitcoins have been mined.

It seems to be designed to just fail eventually and be replaced, which I cannot reconcile against the elegance of the rest of the design.

To clarify: bitcoins can go away forever. About 6 years ago and had a wallet with a couple bitcoins in it. I have lost the key to that bitcoin wallet and if I can't find it, and noone else can find it, those bitcoins should be gone forever and irreversibly, right? If it were possible to recover the key to a wallet you dont own and spend coins that are not yours none of it would work.

So, once there are no more new coins, eventually all the coins will be lost. Am I missing something?

Re: What Is Bitcoin? A Step-By-Step Guide for Beginners

#10

Post by CmdrSprinkles »

shuntress wrote: post #8

I still don't understand what happens after all the bitcoins have been mined. It seems to be designed to just fail eventually and be replaced, which I cannot reconcile against the elegance of the rest of the design. To clarify: bitcoins can go away forever. About 6 years ago and had a wallet with a couple bitcoins in it. I have lost the key to that bitcoin wallet and if I can't find it, and noone else can find it, th…

While not an expert (and actually something of a critic):

I think the idea is that new bitcoins will be mined at a rate that will outstrip those lost. A LOT of the early coins were lost because they basically had no value. That was when mining was easy. Now, bitcoins have value and people are less likely to lose it. And mining is now harder.

Similarly, we migrated from people keeping their wallets in a text file (money in a mattress) toward lots of sites like coinbase that basically give this Totally Free And Unregulated currency a system of banks. That further decreases the likelihood of money disappearing, especially if said banks start offering interest in exchange for being allowed to do loans. That resolves issues of people like me having some in a wallet that they are unlikely to ever collect/convert to fiat (not worth the hassle).

So while bitcoin is likely to fail for MANY reasons, I don't think lost currency will be it (unless it is more stuff like that Japanese bitcoin bank that just went dark).

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