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Crypotocurrency

Discussion in 'Real Life Discussion' started by Ched, Dec 29, 2017.

  1. awinarock

    awinarock Heir

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    Back when I got first got into Bitcoin in 2011 (so I can buy some weed over the web), a lot of the people in the community were mining because they were worried the dollar would collapse and trigger the collapse of other major currencies so they wanted to have another currency, one uncontrolled by major powers, on hand in case shit went sideways. Now though, I honestly don't know for sure. I still think it's a decent back up currency that could be used in case everything went sideways, but at that point, I guess we'd have bigger issues to worry about than which currency still has any value.

    I always saw it as something to be used to flee the country in case shit went sideways rather than ordering shit online on Amazon.
     
  2. Immet

    Immet Seventh Year

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    Since only awinarock is defending bitcoin I worry I'm focusing solely on them and unfairly attacking their viewpoint or generalising their views to all bitcoin users. But hey, I'm going to talk about why what they said makes no sense to me anyway.

    So there are two reasons given for saving bitcoins (the second linked to the first)- for if shit goes sideways and to help in running away to another country if shit goes sideways.

    Shit going sideways is pretty vague and useless, but when taking into account "bigger issues to worry about than which currency still has any value" it sounds like they are talking complete societal collapse. In the event of societal collapse you can't rely on the internet continuing in it's current state [1], and as such can't rely on bitcoin continuing. It doesn't matter if you have what is currently $3m of bitcoins if you have no internet access and there are no miners to make transactions happen.

    And even ignoring economic or societal collapse and just looking at wanting to leave your current identity behind quickly and run away to another country (again, bitcoin being useful solely for shady shit), if you want a currency not connected to bank accounts and your old ID then it still needs to be able to be used as a currency which bitcoin is terrible at.

    Ignoring bitcoin's use as a currency and viewing bitcoin solely as a store of value, if you suddenly need to exit the country bitcoin is shitty. If you need to be out of the country right the fuck now no time to ask questions, then you can't be waiting up to 16 hours [2] to pay someone to smuggle you out of the country or to bribe someone to let you in.


    It would be useful for someone else who seemed to know more about cryptocurrencies and kept up with it like T3t to come into this discussion and talk about how cryptocurrencies can be used as a currency when there is a hard minimum of 30 minutes to complete transactions and even at this stage of very little actual transactions going on it can be up to 16 hours to complete a transaction.
    What is the actual use-value of the technology if it can't be used as a currency for the majority of transactions?


    [1] Actually, stray thought, how does removing net neutrality affect bitcoin? Can ISPs decide to arbitrarily slow down bitcoin data and if so what effect would that have both in direct effect and trust in the bitcoin network? Could it mean that mining in the US becomes unsustainable and as such miners in the US disappear causing more than 50% of the mining to be done by one organisation in China (and thus killing those cryptocurrencies)?

    [2] I've been repeating the 16 hours thing over and over without any source, so I thought I'd link where I got this from- the time is correct as of Dec 2017 https://coincentral.com/how-long-do-bitcoin-transfers-take. Remember though that the stated intention of bitcoin is to be an alternative currency with orders of magnitude more transactions which means it will take orders of magnitude longer to transfer bitcoins.
     
    Last edited: Jan 2, 2018
  3. T3t

    T3t Purple Beast of DLP Prestige DLP Supporter

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    Ok, for a quick rundown:

    Yes, Bitcoin transactions can take a while, but 16 hours is at the extreme upper-end of what's likely. Average transaction clearance is more like 30 mins - an hour or two. However, as I mentioned in my first comment, the Lightning Network is being worked on as a solution to reduce transaction speed to ~a few seconds, with built-in potential for scaling.

    This is of course completely ignoring the many other cryptocurrencies which, by design, are better able to handle large transaction loads.

    As for the use of Bitcoin (or other altcoin) as a "hedge" currency/store-of-value: yes, if things go bad enough that the internet goes down, you'd much rather have gold (or, really, common medicines/armaments/water/etc). In most other situations Bitcoin has the natural advantage of ultimate portability. If you're trying to move quickly you don't need to worry about lugging around a bag of cash or gold - you just need your private key (whether you keep that on some physical media like a USB stick, somewhere in the cloud, or even in a safe deposit box) - they all have their upsides and downsides). You also don't need to worry about any central institution going under and rendering you unable to withdraw your Bitcoin (unless you store it on an exchange). The closest thing to a bank run Bitcoin has is a transaction load that it's unable to deal with, which, as addressed above, is an issue that's being worked out.

    As for Net Neutrality: all posturing aside, while Bitcoin uses a lot of electricity, it doesn't use a lot of bandwidth, compared to video streaming (or really most common internet applications). In theory ISPs could try to detect the traffic, but there are fairly easy ways to make that very complicated and expensive for them on the side of the people who mine/use Bitcoin, and it probably wouldn't even be worth it in the first place.
     
  4. Immet

    Immet Seventh Year

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    Thanks T3t for the quick reply.

    While 16 hours may be the upper end, even assuming a 30-120 minute delay still makes cryptocurrencies useless as a currency for all in person purchases and many online ones such as fast food delivery, and having to have your sale process include up to a dozen hours of waiting makes it infeasible for many more such as next day delivery.

    You did mention Lightning network and said it would improve matters, but you didn't say by how much in your post. Based on other things I had seen I assumed it was a way to have more transactions done in the same time and would keep a similar order of magnitude of delay, but that is completely different to how it works at the moment which is great and would actually make it feasible as a currency.

    Now it's just relying on the lightning network working, and then cryptocurrencies actually implementing a method that reduces the amount of money going to the miners.
     
  5. Giovanni

    Giovanni God of Scotch

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    I got out and stayed out (for the most part) after the first burst. Still made a reasonable amount in 2017, and a bit more doing some very basic consulting for a fund that was considering an investment in it.
     
  6. World

    World Oberstgruppenführer Moderator DLP Supporter

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    One issue about using Bitcoin as a currency is that, since its supply is capped at 21 million, it won't deflate like a normal currency which would motivate people to go out and use it rather than hoard it for gains. It's a neat concept but even if things like transaction fees and time are solved, this is one point that will make people want to keep it.

    I've switched to LTC for sending around values between accounts, and there are buttloads of other currencies that do that better. Bitcoin won't die as it is the godfather of crypto, but it's dominance has dwindled and will do so further.
     
  7. Zombie

    Zombie John Waynes Teeth Prestige DLP Supporter

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    I read something the other day that the IRS signed a deal in regards to BTC so that they can see who is making transactions, so if you trade BTC for ETH, or LTC or XRP or anything, then its considered a stock trade, and you have to report it on your 8949 at the end of the year. I'm note sure if that's true for the other currencies. Figured that'd be useful for other people before that start trading up or training down.

    IRS says you have to recognize the gain.
     
    Last edited: Jan 4, 2018
  8. World

    World Oberstgruppenführer Moderator DLP Supporter

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    A deal with whom?

    As far as I know, the IRS never said crypto gains were tax free, and every trade is a taxable event.
     
  9. Mordecai

    Mordecai Drunken Scotsman Prestige DLP Supporter

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    I did read the IRS was trying to force Coinbase to give up records of all their users in the US, but that Coinbase was fighting it in the courts. Is that some sort of settlement that they've reached?
     
  10. Zombie

    Zombie John Waynes Teeth Prestige DLP Supporter

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    Possibly, I can't find the source article, I was hoping someone could clarify.
     
  11. Perspicacity

    Perspicacity High Score: 3,994 Prestige DLP Supporter

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    In terms of taxation in the U.S., my accountant tells me that profits or losses from converting cryptocurrencies are no different from those realized by swapping currencies, commodities, equities, etc. in more traditional markets. Moreover, each use of BTC in place of cash is a potentially taxable transaction, which is another annoyance making BTC unattractive for anything but speculation.

    Coinbase is required to report to the IRS cumulative transactions in excess of $20k. For now, it's just a few years (2013-2015), but the precedent is set for the future. If you've raked in a nice kitty in 2017, it's probably worth filing on income taxes since you may open yourself up to charges of tax fraud otherwise.
     
  12. Zombie

    Zombie John Waynes Teeth Prestige DLP Supporter

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    More specifically, wasn't transactions seen as like-kind before. I'm still searching, but I swear I read something where they would no longer be treated as such, but instead be realized gain.

    I'm just going to have to ask my accountant. Tired of digging. I know its in relation to the new tax bill.

    Found it. Looks like I was on the right track. Just wrong in my earlier statements.
     
    Last edited: Jan 4, 2018
  13. World

    World Oberstgruppenführer Moderator DLP Supporter

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    Regarding taxes in Germany, I fear that I'll have to do something similar; treat each trade as a taxable event regarding gains and losses that can be set off against each other. I'll prepare a list of trades and withdrawals/deposits, but for now I'll calculate my gains as of the turn of the year and report the profit as taxable income.

    In Germany, it's tax free if it's below 600€, if it's more than that all of it is taxable. On Dec 31st I was slightly above that, and at New Years I was quite a bit over it, so... yay?

    Sad thing is, rather than paying capital gains tax (flat 25%) it's treated as income and thus taxed at your personal marginal tax rate which in my case is 42%.
     
  14. Mordecai

    Mordecai Drunken Scotsman Prestige DLP Supporter

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    Just saw South Korea is moving towards a complete ban on trading cryptocurrency. Not surprised, I'd expect they'll ease off that position in the future after they've sorted out a regulatory mechanism.
     
  15. Immet

    Immet Seventh Year

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    Reading up on the lightning network, I'm not convinced that it works.

    The intention is to create a separate record of instant transactions which are then added to the blockchain over time, and the transaction is recorded in the blockchain only once rather than six times.

    But, all transactions still need to be recorded to the blockchain no matter what, and the plan is to increase the number of transactions by several orders of magnitude including microtransactions. That means the separate record of transactions is increasing faster than the blockchain can record it by several orders of magnitude, creating an ever increasing backlog of records.

    That doesn't seem sustainable in any way.


    Ignoring that, bitcoin mining has a finite length of time- 21 million BTC worth, and after that the only reason to keep mining is transaction fees which this is trying to effectively remove. So, if the lightning network does work and goes ahead it effectively says that bitcoin will stop processing transactions in year 2140. Not in our lifetime I know, but it's a currency with planned obsolescence.
     
  16. Sesc

    Sesc Slytherin at Heart Moderator

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    I'm a bit vexed because I did actually seriously consider putting some money into BTC at the beginning of last year. Ultimately, I didn't -- but on the other hand, I then invested in a nice vacation, so I'm not too annoyed. My brother was luckier -- way back when he actually mined a couple of coins, and now he's started to cash out.

    Anyway, Bitcoin is neither a serious currency, nor a safe investment, it's what you do instead of betting or playing lottery. If you have money left over and want to have fun, that's where you go.

    That aside, @Ched, my opinion is pretty much this.

    Wasn't there something about holding them for longer than a year and no taxation or something?
     
  17. World

    World Oberstgruppenführer Moderator DLP Supporter

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    Correct for most coins. If you only got in recently and are playing around with everything, like I do, that doesn't help ;)

    Edit: Well it would help if I was going to hold any one coin for more than a year. Since accounting is based on FIFO, that's going to be difficult.
     
  18. Sataniel

    Sataniel Groundskeeper

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  19. Cas

    Cas DA Member

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    I'm still very much an amateur in the crypto game, only got into around October time. I first invested into Ethereum when it was at £250, so as it stands today, I'm up £450 per coin (was £750 last Wednesday before the crash)

    Other little things I've bought into are:
    Ripple XRP when it wasn't at £0.71
    Verge XVG at £0.07
    Digibyte DGB at £.004

    The last two are slightly down, whilst ripple is slightly up.

    My latest purchase was Swisscoin SWC, which came recommended to me. Bought around £50 worth at £0.002. Got over 25,000 coins.

    I keep looking out for coins at similar prices, to invest about £50 into. You only need the coin to go to a pound or two, and you have made some serious money.
     
  20. Halt

    Halt 1/3 of the Note Bros.

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    Interesting thought process. So basically treat them like penny stocks?