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Can somebody explain something to me... I haven't been participating in the Bitcoin/cryptocurrency movement for better or worse, just following it from afar: I

Can somebody explain something to me... I haven't been participating in the Bitcoin/cryptocurrency movement for better or worse, just following it from afar: I thought the premise of these currencies was to avoid government and banking oversight/control... but with both the SEC and IRS putting controls around virtual currency (which I think we all expected to happen), how does that change the original inspiration? Do these virtual currencies become relegated to the same fate as all other currencies? Was seeing this happen part of the experiment of crypto-currency as well? I keep trying to figure out the real motivation behind the basically unknown origins of the inventors (e.g. Satoshi Nakamoto).

nemild 9y ago
There's lot here, but I'll make it short: - The fed does not exercise control over Bitcoin directly, so Bitcoin is still fundamentally different than fiat currencies - All fiat onramps into crypto are controlled by governments, which is one way to regulate it (KYC, AML) - You still have to follow the rules for your country, and if the government finds out you haven't, it can censure you; with crypto, it can be harder to see if someone followed the rules, but it's not impossible with the pseudonymous approaches used by most cryptocurrencies today
- sixdimensional 9y ago
  Fair enough, maybe this falls apart when we started talking about fiat currencies being exchanged directly for Bitcoin (i.e. when "real" money got involved). Prior to that really happening, it seemed like one could create new Bitcoin through mining, which was a conversion of computing power/electricity/time directly into crypto-currency value - not a direct conversion of fiat currency into crypto-currency value. With mining now being cost prohibitive, it's not as reasonable of an avenue of gaining Bitcoin.. and "real" money has entered the game - and with that, comes regulation.
- zxcmx 9y ago
  Nearly all fiat onramps have AML/KYC. There's also localbitcoins.com, one way to meet parties who are interested in transacting person to person. Naturally you are still supposed to pay your taxes if you do this.
CoryG89 9y ago
I don't think it was this change that put that to rest. I doubt Satoshi ever foresaw that BTC transaction times and fees would grow so large that you essentially cannot use it for everyday purchases. It is still not feasible to regulate BTC itself. They only really only regulating the exchanges.
- throwaway30yo 9y ago
  Only the centralized exchanges at that.
- notheguyouthink 9y ago
  I don't know how he didn't expect that. Isn't it designed in the system such that you can calculate the maximum transactions being handled? I've seen some people blame the miners for the fees.. but when you have such a massive backlog, the variable fees are the only way it's even working at all right now. If not for that, it would be a lottery whose transactions actually got through.
- sixdimensional 9y ago
  I also have been a bit confused by the usability of BTC for ordinary people, due to the units of measurement. The fractional nature of BTC and cryptocurrency seems like it would not fit the necessary ease of use for most non-digital, day-to-day transactions. I think ordinary people would find it hard to buy bread if it cost 0.000127 BTC ($1.99 USD), for example.
  - pgm8705 9y ago
    I think things would start being priced using different units. With your example of bread costing 0.000127 BTC, that could also be written as 127 "bits" or μBTC. It would take a lot of getting used to, but it really isn't any more complicated than $1.99.
notheguyouthink 9y ago
I also wonder how this will deal with crypto coins that are specifically designed to avoid monitoring. Seeing as it's insanely easy to set up an alternate address in any coin, and that whatever the US government knows of my coins could just be a tiny percentage.. how would they know how much to tax me on? It seems so difficult as to be almost useless. Makes me think they'd be better off just considering it a foreign coin, and only tax what goes into and out of USD. I dunno, clearly I'm out of my element haha.
- tw04 9y ago
  What good is the coin if you can't ever spend it? Sure, you can hid it away somewhere the government can't find, and just sit on it... but then what? When you eventually want to spend it on SOMETHING, unless you're going completely black market, there's going to be a record. When the guy making $50k/year suddenly buys a $2.5 million house, the government is going to ask you where that money came from.
  - notheguyouthink 9y ago
    I never said anything about not spending it. Clearly though if you bring money over to USD, it's quite visible and taxable. To be honest, I don't know what your point is. If I make 50k/y and buy a 2.5m house with cash, the gov is going to ask me where it came from too. What's this have to do with my comment questioning the governments ability to track anonymous coins? Anonymous coins _(if working properly)_ are effectively the same as cash. So the same concepts and limitations apply regarding the governments taxation on it. No?
    - SAI_Peregrinus 9y ago
      They track cash via audits. The same thing will happen with anonymous coins. So if your apparent income (tracked purchases) is larger than your declared income you can expect an audit, no matter where the extra money came from.
      - 9y ago
alergico 9y ago
The vision behind crypto is more decentralized than the actual currency is. Some may applaud the SEC stepping in to combat shady ICO's, others see it as overreaching death throes by an increasingly anxious dinosaur. Bitcoin was set up to disproportionally reward the early adopters. The early adopters were cyberpunks, cryptography enthusiasts, and darknet merchants. Since we can only speculate about the inventor(s), the motivation can range from a US-hostile government wanting to loosen the grip the US has on fiat and digital currency, to Libertarian Anarchists wanting to switch trust from bank-bailing-out governments to technology. It seems one goal "to protect Bitcoin from the select few" is already close to impossible, as Bitcoin shows a highly skewed power distribution (a select few has thousands of Bitcoin).
- drvdevd 9y ago
  Arguably one of the ways “Bitcoin” protects from the select few with it’s adoption is by only being one such currency. Since the many can create a new currency to place their faith in with relative ease - at least in comparison to fiat - they can combat “rich bitcoin jerks” through devaluation and other such mechanisms, in theory.

nemild 9y ago

There's lot here, but I'll make it short: - The fed does not exercise control over Bitcoin directly, so Bitcoin is still fundamentally different than fiat currencies - All fiat onramps into crypto are controlled by governments, which is one way to regulate it (KYC, AML) - You still have to follow the rules for your country, and if the government finds out you haven't, it can censure you; with crypto, it can be harder to see if someone followed the rules, but it's not impossible with the pseudonymous approaches used by most cryptocurrencies today

sixdimensional 9y ago
Fair enough, maybe this falls apart when we started talking about fiat currencies being exchanged directly for Bitcoin (i.e. when "real" money got involved). Prior to that really happening, it seemed like one could create new Bitcoin through mining, which was a conversion of computing power/electricity/time directly into crypto-currency value - not a direct conversion of fiat currency into crypto-currency value. With mining now being cost prohibitive, it's not as reasonable of an avenue of gaining Bitcoin.. and "real" money has entered the game - and with that, comes regulation.
zxcmx 9y ago
Nearly all fiat onramps have AML/KYC. There's also localbitcoins.com, one way to meet parties who are interested in transacting person to person. Naturally you are still supposed to pay your taxes if you do this.

CoryG89 9y ago

I don't think it was this change that put that to rest. I doubt Satoshi ever foresaw that BTC transaction times and fees would grow so large that you essentially cannot use it for everyday purchases. It is still not feasible to regulate BTC itself. They only really only regulating the exchanges.

throwaway30yo 9y ago
Only the centralized exchanges at that.
notheguyouthink 9y ago
I don't know how he didn't expect that. Isn't it designed in the system such that you can calculate the maximum transactions being handled? I've seen some people blame the miners for the fees.. but when you have such a massive backlog, the variable fees are the only way it's even working at all right now. If not for that, it would be a lottery whose transactions actually got through.
sixdimensional 9y ago
I also have been a bit confused by the usability of BTC for ordinary people, due to the units of measurement. The fractional nature of BTC and cryptocurrency seems like it would not fit the necessary ease of use for most non-digital, day-to-day transactions. I think ordinary people would find it hard to buy bread if it cost 0.000127 BTC ($1.99 USD), for example.
- pgm8705 9y ago
  I think things would start being priced using different units. With your example of bread costing 0.000127 BTC, that could also be written as 127 "bits" or μBTC. It would take a lot of getting used to, but it really isn't any more complicated than $1.99.

notheguyouthink 9y ago

I also wonder how this will deal with crypto coins that are specifically designed to avoid monitoring. Seeing as it's insanely easy to set up an alternate address in any coin, and that whatever the US government knows of my coins could just be a tiny percentage.. how would they know how much to tax me on? It seems so difficult as to be almost useless. Makes me think they'd be better off just considering it a foreign coin, and only tax what goes into and out of USD. I dunno, clearly I'm out of my element haha.

tw04 9y ago
What good is the coin if you can't ever spend it? Sure, you can hid it away somewhere the government can't find, and just sit on it... but then what? When you eventually want to spend it on SOMETHING, unless you're going completely black market, there's going to be a record. When the guy making $50k/year suddenly buys a $2.5 million house, the government is going to ask you where that money came from.
- notheguyouthink 9y ago
  I never said anything about not spending it. Clearly though if you bring money over to USD, it's quite visible and taxable. To be honest, I don't know what your point is. If I make 50k/y and buy a 2.5m house with cash, the gov is going to ask me where it came from too. What's this have to do with my comment questioning the governments ability to track anonymous coins? Anonymous coins _(if working properly)_ are effectively the same as cash. So the same concepts and limitations apply regarding the governments taxation on it. No?
  - SAI_Peregrinus 9y ago
    They track cash via audits. The same thing will happen with anonymous coins. So if your apparent income (tracked purchases) is larger than your declared income you can expect an audit, no matter where the extra money came from.
    - 9y ago

alergico 9y ago

The vision behind crypto is more decentralized than the actual currency is. Some may applaud the SEC stepping in to combat shady ICO's, others see it as overreaching death throes by an increasingly anxious dinosaur. Bitcoin was set up to disproportionally reward the early adopters. The early adopters were cyberpunks, cryptography enthusiasts, and darknet merchants. Since we can only speculate about the inventor(s), the motivation can range from a US-hostile government wanting to loosen the grip the US has on fiat and digital currency, to Libertarian Anarchists wanting to switch trust from bank-bailing-out governments to technology. It seems one goal "to protect Bitcoin from the select few" is already close to impossible, as Bitcoin shows a highly skewed power distribution (a select few has thousands of Bitcoin).

drvdevd 9y ago
Arguably one of the ways “Bitcoin” protects from the select few with it’s adoption is by only being one such currency. Since the many can create a new currency to place their faith in with relative ease - at least in comparison to fiat - they can combat “rich bitcoin jerks” through devaluation and other such mechanisms, in theory.