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>The anonymity is still not perfect, especially against state-level actors. With PirateChain it is, but true anonymity brings with it other technical challenge

>The anonymity is still not perfect, especially against state-level actors. With PirateChain it is, but true anonymity brings with it other technical challenges.

vkou 7y ago
It also brings legislative challenges, such as 'prove that your money did not come from running an international assassination ring'.
ColanR 7y ago
I haven't heard of PirateChain. However, the state-level threat model includes things like taxes, where (e.g.) people in the US have to report every transaction they make. If most people report their PirateChain transactions, amount in, amount out, then the problem is that unreported transactions would stick out and would probably be associable with wallets. Am I getting this wrong?
- AlexCoventry 7y ago
  What are the laws requiring reporting of every transaction? I know it's necessary to report transactions which establish the cost basis for capital gains, but doesn't mandate report of all transactions.
  - ineedasername 7y ago
    In the US, all transactions to/from a financial institution of $10,000 or higher (including cash) must be reported. Same applies if multiple transactions on the same day reach that limit. So all attempts to cash out will be hard to avoid tracking. Also, attempts to structure transactions to avoid this, like $9999 per day, is illegal with jail and fines applied.
  - sobani 7y ago
    The IRS considers Bitcoin an asset. Every time you buy/sell goods with Bitcoin or just plain buy/sell Bitcoin, you have to report that as if you were buying/selling any other asset, like stocks. So most Bitcoin transactions will be subject to capital gains tax. https://www.investopedia.com/articles/investing/040515/are-there-taxes-bitcoins.asp https://www.investopedia.com/articles/investing/040515/are-t...
    - ibeckermayer 7y ago
      Please correct me if I’m wrong — does this fact not imply that any attempt to actually use cryptocurrency as a currency to buy and sell goods (I.e. how we currently commonly use USD) is completely impossible, since the capital gains taxes will cause everything to cost substantially more?
      - sobani 7y ago
        The tax is only on the gains of the worth of the spend Bitcoin. If you buy a Bitcoin and immediately spend it on something, there will be no gain, so $0,00 taxes. If you bought a Bitcoin when it was $5000 and you spend 0.2 Bitcoin today (now they're ~$10000 a piece) you would need to report $1000 of capital gains. You could argue that would make your 0.2 Bitcoin / $2000 purchase cost more, because you have to add the tax. On the other hand, if you sell those Bitcoin later, you would have to pay those capital gains tax anyway. The story does become a bit more complex when you factor in long-term vs short-term capital gains tax.
- Lordarminius 7y ago
  A requirement to report taxes is not normally thought of as a threat to privacy coins per se. And the whole privacy coin thing is modelled on the belief that the state has no business knowing all your financial details.
  - ColanR 7y ago
    I think it should be, when the tax reporting requirements are so granular; and in such cases, the effect is analogous to a timing attack.
- toast0 7y ago
  As long as transactions are in the right categories, you can group multiple similar transactions and report the dates as 'various'.

>The anonymity is still not perfect, especially against state-level actors. With PirateChain it is, but true anonymity brings with it other technical challenges.

vkou 7y ago

It also brings legislative challenges, such as 'prove that your money did not come from running an international assassination ring'.

ColanR 7y ago

I haven't heard of PirateChain. However, the state-level threat model includes things like taxes, where (e.g.) people in the US have to report every transaction they make. If most people report their PirateChain transactions, amount in, amount out, then the problem is that unreported transactions would stick out and would probably be associable with wallets. Am I getting this wrong?

AlexCoventry 7y ago
What are the laws requiring reporting of every transaction? I know it's necessary to report transactions which establish the cost basis for capital gains, but doesn't mandate report of all transactions.
- ineedasername 7y ago
  In the US, all transactions to/from a financial institution of $10,000 or higher (including cash) must be reported. Same applies if multiple transactions on the same day reach that limit. So all attempts to cash out will be hard to avoid tracking. Also, attempts to structure transactions to avoid this, like $9999 per day, is illegal with jail and fines applied.
- sobani 7y ago
  The IRS considers Bitcoin an asset. Every time you buy/sell goods with Bitcoin or just plain buy/sell Bitcoin, you have to report that as if you were buying/selling any other asset, like stocks. So most Bitcoin transactions will be subject to capital gains tax. https://www.investopedia.com/articles/investing/040515/are-there-taxes-bitcoins.asp https://www.investopedia.com/articles/investing/040515/are-t...
  - ibeckermayer 7y ago
    Please correct me if I’m wrong — does this fact not imply that any attempt to actually use cryptocurrency as a currency to buy and sell goods (I.e. how we currently commonly use USD) is completely impossible, since the capital gains taxes will cause everything to cost substantially more?
    - sobani 7y ago
      The tax is only on the gains of the worth of the spend Bitcoin. If you buy a Bitcoin and immediately spend it on something, there will be no gain, so $0,00 taxes. If you bought a Bitcoin when it was $5000 and you spend 0.2 Bitcoin today (now they're ~$10000 a piece) you would need to report $1000 of capital gains. You could argue that would make your 0.2 Bitcoin / $2000 purchase cost more, because you have to add the tax. On the other hand, if you sell those Bitcoin later, you would have to pay those capital gains tax anyway. The story does become a bit more complex when you factor in long-term vs short-term capital gains tax.
Lordarminius 7y ago
A requirement to report taxes is not normally thought of as a threat to privacy coins per se. And the whole privacy coin thing is modelled on the belief that the state has no business knowing all your financial details.
- ColanR 7y ago
  I think it should be, when the tax reporting requirements are so granular; and in such cases, the effect is analogous to a timing attack.
toast0 7y ago
As long as transactions are in the right categories, you can group multiple similar transactions and report the dates as 'various'.