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Bitcoin is not a currency, it will never be a currency. Why? Capital gains tax, that's why. Bitcoin is a commodity, period. While the anarco-libertarians may s

by scoofy 12y ago

Bitcoin is not a currency, it will never be a currency. Why? Capital gains tax, that's why. Bitcoin is a commodity, period. While the anarco-libertarians may see paying taxes as optional, people who actually have something to lose pay their taxes... These capital gains complications of using bitcoin as barter essentially eliminate the usefulness of this commodity, as opposed to cash, for anyone of serious importance in the developed world, and since that won't happen, there will be little push for any adoption beyond a fringe group. Without serious investors holding bitcoin, there benefits of transactions via bitcoin with currencies trades at both ends are problematic, because nobody wants to be left holding the coins. It will be useful as a substitute for wire transfers, it will be useful as a store of value in the developing and under-developing economies, but other than that i see no long term use for bitcoin that makes it significantly different from gold. The benefit of gold being that there is significantly less chance of theft. Solve the capital gains problem and maybe we'd have something, but i cannot imagine a scenario in which that happens beyond a bank removing FIFO capital gains after every transaction... which would frustrate most users.

icebraining 12y ago
The benefit of gold being that there is significantly less chance of theft. That's not possible. Simple counter-example: create a Bitcoin address, then engrave the private key in a gold bar and destroy the digital copy.
- AnthonBerg 12y ago
  Does this make sense as a counterexample?: Take a picture of the gold bar, you have now stolen the Bitcoins without taking the bar.
  - logicallee 12y ago
    Yes, the counterexample is very good. (If we accept its premises that without the information the bitcoin cannot be stolen - this is not true due to 50% attack and other reasons. Gold cannot physically disappear but bitcoin can logically disappear by network consensus or a new version of the bitcoin network that no longer accepts it and which people adopt for some reason. This was done early in bitcoin's history.) But if we accept the premise, then anyone physically close enough to take a picture (let's wrap the gold bar in a dust cover, so that this entails unwrapping it) can physically steal it. i.e. if you prevent someone from physically stealing it, such as keeping it in a vault, then to a good approximation you've also prevented them from unwrapping its dust cover and reading the engraving. I guess exceptions would be if you have workers who work in your vault but go through metal detectors to make sure they haven't stolen the gold, or the gold is somehow physically too heavy to move in one piece quickly, or somehow you can react to it being stolen and prevent the gold from actually leaving, but not if it remains in the vault. This is getting silly though- it's just as easy to engrave something and then hide it in cast iron that is very hard to get into without tools. I think physical protection from theft is very close to physical protection of a piece of engraving.
XorNot 12y ago
Also the idea that Bitcoin can't be easily stolen is foolish. It is theoretically hard to steal...that hasn't been born out in practice. Whereas gold is actually, physically heavy. Not only do you have to be local to steal it, you actually need a good deal more then just being there. Moreover, physical security has the benefit of having straightforward to follow principles - i.e. no one's breaking into a sealed vault by walking through the walls because of the time it takes the vault door to open and close. As opposed to the digital realm, where you can steal cryptokeys by listening to coil whine.
- sireat 12y ago
  Another problem with storing Bitcoin is that you do not know when it has been stolen. You might be sleeping soundly having your keys in cold storage but someone might already have a copy. Not so with gold. Either you have it or you do not. Mind you I have some bitcoins(hopefully still intact) and no gold.
  - Torgo 12y ago
    That is analogous to someone having the key to your house, but you don't know it until they've stolen your gold. I don't think it's substantially different. On the other hand, if you have a brain wallet and have never even put your device online, you could have bitcoin sent to an address that has a level of security impossible to achieve for any physical asset.
    - vectorpush 12y ago
      > That is analogous to someone having the key to your house, but you don't know it until they've stolen your gold. I don't think that's an apt analogy because, at the very least, a thief still has to physically enter your home, putting them at a much greater risk of detection as well as risk of arrest, personal injury or death while attempting to burglarize a home. There is also additional risk in the effort required to locate and break/steal a physical safe. Further, the population of potential attackers is much wider with bitcoin compared to gold since it is impractical for bots or thieves abroad to steal physical gold from your house.
DennisP 12y ago
I'm pretty averse to complicating my tax situation and capital gains are the reason I don't transact much with bitcoin. It's worth mentioning that if the IRS considered it a currency, while taxes wouldn't apply for small amounts of transactions, they would for large gains, and at a higher tax rate. On the other hand, tax authorities globally have taken a variety of approaches. To take one liberal example, Denmark doesn't tax personal bitcoin gains at all. http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country
jordigh 12y ago
I don't know what you're talking about with gaining tax, but I've paid sales tax on every bitcoin transaction I've made. I don't see why bitcoins in particular are inherently any more tax evasive than cash is.

by scoofy 12y ago

icebraining 12y ago

The benefit of gold being that there is significantly less chance of theft. That's not possible. Simple counter-example: create a Bitcoin address, then engrave the private key in a gold bar and destroy the digital copy.

AnthonBerg 12y ago
Does this make sense as a counterexample?: Take a picture of the gold bar, you have now stolen the Bitcoins without taking the bar.
- logicallee 12y ago
  Yes, the counterexample is very good. (If we accept its premises that without the information the bitcoin cannot be stolen - this is not true due to 50% attack and other reasons. Gold cannot physically disappear but bitcoin can logically disappear by network consensus or a new version of the bitcoin network that no longer accepts it and which people adopt for some reason. This was done early in bitcoin's history.) But if we accept the premise, then anyone physically close enough to take a picture (let's wrap the gold bar in a dust cover, so that this entails unwrapping it) can physically steal it. i.e. if you prevent someone from physically stealing it, such as keeping it in a vault, then to a good approximation you've also prevented them from unwrapping its dust cover and reading the engraving. I guess exceptions would be if you have workers who work in your vault but go through metal detectors to make sure they haven't stolen the gold, or the gold is somehow physically too heavy to move in one piece quickly, or somehow you can react to it being stolen and prevent the gold from actually leaving, but not if it remains in the vault. This is getting silly though- it's just as easy to engrave something and then hide it in cast iron that is very hard to get into without tools. I think physical protection from theft is very close to physical protection of a piece of engraving.

XorNot 12y ago

Also the idea that Bitcoin can't be easily stolen is foolish. It is theoretically hard to steal...that hasn't been born out in practice. Whereas gold is actually, physically heavy. Not only do you have to be local to steal it, you actually need a good deal more then just being there. Moreover, physical security has the benefit of having straightforward to follow principles - i.e. no one's breaking into a sealed vault by walking through the walls because of the time it takes the vault door to open and close. As opposed to the digital realm, where you can steal cryptokeys by listening to coil whine.

sireat 12y ago
Another problem with storing Bitcoin is that you do not know when it has been stolen. You might be sleeping soundly having your keys in cold storage but someone might already have a copy. Not so with gold. Either you have it or you do not. Mind you I have some bitcoins(hopefully still intact) and no gold.
- Torgo 12y ago
  That is analogous to someone having the key to your house, but you don't know it until they've stolen your gold. I don't think it's substantially different. On the other hand, if you have a brain wallet and have never even put your device online, you could have bitcoin sent to an address that has a level of security impossible to achieve for any physical asset.
  - vectorpush 12y ago
    > That is analogous to someone having the key to your house, but you don't know it until they've stolen your gold. I don't think that's an apt analogy because, at the very least, a thief still has to physically enter your home, putting them at a much greater risk of detection as well as risk of arrest, personal injury or death while attempting to burglarize a home. There is also additional risk in the effort required to locate and break/steal a physical safe. Further, the population of potential attackers is much wider with bitcoin compared to gold since it is impractical for bots or thieves abroad to steal physical gold from your house.

DennisP 12y ago

I'm pretty averse to complicating my tax situation and capital gains are the reason I don't transact much with bitcoin. It's worth mentioning that if the IRS considered it a currency, while taxes wouldn't apply for small amounts of transactions, they would for large gains, and at a higher tax rate. On the other hand, tax authorities globally have taken a variety of approaches. To take one liberal example, Denmark doesn't tax personal bitcoin gains at all. http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country http://en.wikipedia.org/wiki/Legality_of_Bitcoin_by_country

jordigh 12y ago

I don't know what you're talking about with gaining tax, but I've paid sales tax on every bitcoin transaction I've made. I don't see why bitcoins in particular are inherently any more tax evasive than cash is.