The USA is taxing every trade. In Canada (according to my accountant, at least), cryptocurrency gains are only taxable when "realized" by selling into fiat (capital gains), or spending on goods and services (income). Until that point, they are considered intangible assets and not subject to tax. A USA/non-USA (or taxable trades vs only fiat trades) switch feature would be nice, to account for the different approach to taxation.
I will trust my accountant; he is after all, on the hook for how it is reported.
Thanks for posting the links! Taxtips.ca is not an official source, and note they use a ton of "may" be this and "might" be that. I will ignore that page, since they clearly do not know and are not the CRA.
The Canada.ca link is consistent with what my accountant said -- when you use crypto to purchase goods or services, it is treated as income (just like bartering), taxable in equivalent CAD value at the time of the transaction. Trading crypto for other crypto is _not_ a goods or service, since crypto is treated as an intangible asset or commodity.
The third link is also consistent with this view:
"Buying and selling digital currency like a commodity
When you file your taxes you must report any gains or losses from selling or buying digital currencies.
Digital currencies are considered a commodity and are subject to the barter rules of the Income Tax Act. Not reporting income from such transactions is illegal."
In order to be considered a "gain" or a "loss", according to my accountant, the commodity must be realized into fiat money. "Selling or buying" means selling into fiat or buying with fiat. "Bartering" means trading for goods or services -- crypto is not considered to be goods or services.
>In order to be considered a "gain" or a "loss", according to my accountant, the commodity must be realized into fiat money. "Selling or buying" means selling into fiat or buying with fiat. "Bartering" means trading for goods or services -- crypto is not considered to be goods or services.
Thanks for the extended update!
That's very interesting! I have been hesitant to take advantage of some potential gains because of the burden of maintaining a record of every inter-coin transaction.
If your accountant is correct, then that's a load off—and a major advantage.
I just thought I'd pop that information out there because it's not clear to me whether or not the coin-to-coin trade falls under barter like making goods&services purchases does. Really, in case there are other Canadians like me who are doing their own taxes this year and have to include these kinds of items for the first time.
People keep saying that. I wonder if they have actually read the white paper. The lightning network will only work for exchanges who will keep channels open between them. Getting a graph of every wallet connected to every other wallet is a mathematical impossibility.
The lightning network is essentially instituting central banking all over again, this time with bitcoin. "Oh so you want to transfer coins quickly? Better keep them at well connected exchange so it can be instantaneous, and you'll only be transferring between exchanges by the way."
> The lightning network will only work for exchanges who will keep channels open between them. Getting a graph of every wallet connected to every other wallet is a mathematical impossibility.
Transactions can be routed through multiple channels, you don't need to open a channel to every single wallet you want to transact with. That would not be a Lightning network, it would just be payment channels.
> The lightning network is essentially instituting central banking all over again, this time with bitcoin. "Oh so you want to transfer coins quickly? Better keep them at well connected exchange so it can be instantaneous, and you'll only be transferring between exchanges by the way."
Not even close to central banking, LN transacts real Bitcoins, not IOU's, so they can't print more base money or more debt-based money. There's also no trust needed (no counter-party risk and you can route around censorship attempts)
1 point by fgonzag 0 minutes ago | edit | delete [-]
I know you can chain multiple channels. I've read the paper. Anyone with a relatively basic math background can see the problems the lightning network will not work as a "decentralized" network.
So you'll end up with many hubs, and you'll have to open a channel from your wallet to a hub (or multiple hubs) if you want to be able to pay or receive payments from (insert random wallet here). These hubs will take a cut to process payments. The more hops you have between two wallets, the more fees you'll have to pay (as you'll have to pay a fee for each hop). We just turned into VISA and Mastercard.
That's without mentioning the high capital reserve requirements that hubs will be forced to have, and how easy it would be to DDOS a specific hub by abusing the nLoc timer, especially since the transaction can only be forced to close if the only pending acknowledgement is from the originating wallet. Every other hop can essentially hold off for 1 day.
As I understand it, bitcoin is a ledger scheme. There no "coins" per se. Which means it's very much like how banking works in practice: everyone keeps their own books and leaves the credits and debits on them. Real funds don't change hands all that often, it's easier just to keep the running tally if you trust your counterparty.
Of course, trusting your counterparty requires you to know who they are, have stable addresses and so on.
You're basically right except with payment channels you mostly don't have to trust the counterparty.
The simplest case is a unidirectional channel. To pay you a series of micropayments, I send a series of transactions with each one slightly larger, so each is the sum of all my payments. You can only submit one such transaction to the blockchain. I lock my funds so you don't have to worry they won't be available.
Bidirectional channels and networking are elaborations on this idea. In bidirectional channels the main risk is that your counterparty will submit an obsolete state; there has to be a delay and you have to monitor the chain so you can submit a more recent state if that happens. You don't have to know who the counterparty is.
(Your analogy to a ledger with account balances is precisely correct for Ethereum, but Bitcoin actually has a somewhat different model.)
If I'm reading you, the idea is to essentially to negotiate out-of-band? I remember reading something like this in Bitcoin and Cryptocurrency Technologies with a note saying nobody had tried it in practice.
> (Your analogy to a ledger with account balances is precisely correct for Ethereum, but Bitcoin actually has a somewhat different model.)
My understanding is that in bitcoin it's a log of transactions -- a ledger. Ethereum is instead addresses holding totals -- more like an account statement.
I guess I've been misusing the term "ledger." You're exactly right for Ethereum. Bitcoin has transactions with "unspent outputs." Each transaction can have multiple inputs and outputs; to make a transaction you collect unspent outputs from previous transactions, use them as your inputs, and typically make two outputs, one to the payee address and one that holds the change.
Not only is the "network" part of LN referring to the ability to chain multiple channels together to make payments several hops away if needed, but why would exchanges be the only one you could transfer to?
Currently on mainnet a VPN vendor is really the only major player, and it's expected that most vendors will have a lighting node, as all it requires is an always online server...
Not to mention that transacting over LN has no counterparty risk, and "keeping a graph of every connected wallet" is not an impossibility... It uses the TOR protocol which runs over IP, which are both the kinds of networks of channels you imply are impossible here...
It sounds like you read the first 2 paragraphs of the paper and decided to stop. Read more, and these details will be explained in excruciating detail.
Because you might need to pay someone? How do you know beforehand all the wallets you are going to transact with? (Assuming we are talking about using it as a currency anyways)
There's no ETA, people can start using it right now if they want (some crazy people are already using it on main net) but the developers don't consider it safe and stable enough to use with real money (only recommended on test-net right now)
2. South Korea cut off access to banks by cryptocurrency exchanges in December, and access to exchanges by foreign traders. As a result the prices in the country spiked, and the largest price aggregator CoinMarketCap removed Korean exchanges from the index because they were skewing the averages. This caused ~$150B to appear to have suddenly vanished, gapping prices down. This is when the sell-off began in earnest. Then recently the South Korean Minister of Justice said he wants to shut down exchanges, but then the PM says that would require a vote in the National Assembly on new legislation. They are consulting with Japan (who are positive on crypto) and China (who are not) to create a new regulatory framework. http://www.koreaherald.com/view.php?ud=20180116000817
4. France's central bank has been whining about cryptocurrency for some time and finally convinced the Minister of Finance to make a public statement and authorize a draft of new regulations. https://www.express.co.uk/finance/city/905169/bitcoin-France...
5. A speculative theory: the Bitcoin futures contracts are about to expire, and some investors will have bet on lower BTC prices. There could be large market players deliberately pushing prices down to meet those futures bets. Or just market makers wanting to get in at a lower price point.
Or just price manipulation by big holders. External factors/news are often regarded as the cause of dips and gains, while other, often simpler reasons remain under appreciated.
How would you define "overvalued"? Is it the current average price compared to a very low price three months from now? What if it recovers a few weeks after that — would that change the fact that it was once "overvalued"? Valuation is not based on nothing, in vacuum. The challenge is to understand the underlying factors. The post you replied to actually tried to shed some light.
The difference between the price of bitcoin versus the price of bitcoin as it would be if it was only used as a medium of exchange rather than a speculative asset.
No, the energy required is a function of the price, not the other way around.
The bitcoin network adjusts the block difficulty (effectively the energy required to mine 1 BTC) every 2016 blocks such that the rate of creating blocks is fixed at one block (currently 12.5 BTC) every ten minutes.
If the dollar value of energy required to mine 1 BTC is significantly less than the current dollar value of a bitcoin then it is likely more hash power will be added to the network by the bitcoin farms, further increasing the network's hash rate, and as a consequence the block difficulty and therefore the price of the energy required to mine 1 BTC.
I thought most people, even the hard-core believers, were waiting for a correction. The previous times Bitcoin grew so exponentially it was always followed with a hard crash, though this time it's taking a bit longer.
Yes theres that, but BTC being overvalued doesn't explain the entire market dip that we are seeing now. However, it is consistent with Bitcoin's historical pattern:
> 3. Indonesia just banned cryptocurrency transactions, stating only their native currency is legal tender.
Nitpick:
Butcoin is not, to my knowledge, legal tender anywhere. What Indonesia has done is declare that all transactions in Indonesia must be denominated in rupiah. This is far more restrictive than most Weatern nations where private parties may accept anything they want as payment, but must accept legal tender in certain circumstances.
> but imagine I buy an apple from Whole Foods and pay with Bitcoin. Now I know what account they use
An application like this would use a new address for every transaction, and never use it again. There are desktop software wallets that do this, in the interests of privacy.
> So, if it can’t be used as a currency to buy anything, and when you “invest” in it you’re not having any ownership in a company, what is it truly worth? What is a fake coin in your electronic wallet truly worth?
What is SeekingAlpha.com truly worth? What is a fake newspaper on your electronic screen truly worth? What is the software you used to write the article worth?
The value of digital assets lies in their usefulness, and how many people use them. The usefulness of the software "Bitcoin" is that it allows people to store a record of value -- like the numbers in your bank account -- in a reliable, secure, trust-worthy, fungible way that is practically immune to corruption, control, and seizure, and can be transferred to anyone else anywhere in the world almost instantly, for practically free.
But that's just Bitcoin, the very first of its kind. The thriving technology ecosystem that Bitcoin birthed is boiling over with potential.
The Civil project looks more feasible, as it actually pays investigative journalists for their work, while at the same time providing feedback/scoring for accuracy.
"Comparing Bitcoin’s energy consumption to other payment systems
To put the energy consumed by the Bitcoin network into perspective we can compare it to another payment system like VISA for example. Even though the available information on VISA’s energy consumption is limited, we can establish that the data centers that process VISA’s transactions consume energy equal to that of 50,000 U.S. households. We also know VISA processed 82.3 billion transactions in 2016. With the help of these numbers, it is possible to compare both networks and show that Bitcoin is extremely more energy intensive per transaction than VISA."
1. I have read that with every VISA transaction, transactions move between no less than 5 separate institutions. What is the net energy used in all of that deliberate inefficiency? All buildings, vehicles, and energy use of people who work for VISA must also be taken into account. And for all other credit cards and payment systems.
2. Bitcoin isn't really a "payment system", so comparing it to VISA is apples to oranges. It is more of a store of value, like a bank. So it would more properly be compared to the net electricity consumption of all banks, including all buildings, armoured trucks and all vehicles used to ship people to and from banks around the world.
Banks offer many services in addition to secure and insured deposits. The same cannot be said for wallet software made by anonymous internet devs with a lower barrier to implant obfuscated back doors to steal user funds irreversibly.
Bitcoin is in a competitive market so energy usage will be more relevant to compare against the decentralized services offering identical functionality with alternative algorithms, like litecoin, monereo, ethereum, and so on.
- There are newer blockchain dApp platforms that are WAY faster than Ethereum (i.e. EOS, Quantum...)
- Proof of Work isn't the only consensus algorithm, there are ones with lower computational costs, such as Proof of Stake
- See IPFS, and there are other distributed storage solutions
- One can add new ledger entries that refer to previous ones, to correct them
Aside from transparency (and note that privacy is also an option on some blockchains), the main benefit is that smart contracts can eliminate the need for 3rd parties, but still provide trustworthy transaction settlements. Third parties such as the Uber organization, or a bank. The tasks they perform can be provided automatically via programmable transaction handling on the blockchain (smart contracts). Another benefit of distributed software is that it is more resilient (in theory - the global architectures are still being developed), no central point of failure or high-value target for attack.
> Proof of Work isn't the only consensus algorithm, there are ones with lower computational costs, such as Proof of Stake
PoS still doesn't exist in the real world, as far as I know.
> See IPFS, and there are other distributed storage solutions
IPFS has nothing to do with blockchains per se, though for better or worse (IMO for worse), the team working on it is also heavily involved with the cryptocurrency world. You might be thinking of Filecoin, which looks reasonable and had probably the only ICO so far that isn't total bullshit, but while I'm hopeful, we still need to see if and when it actually gets deployed.
> the main benefit is that smart contracts can eliminate the need for 3rd parties, but still provide trustworthy transaction settlements
Let's not forget about the most important drawback of "trustless" systems - machines know no mercy. You'd better be sure you've covered all potential problems in the present and the future, because if you make a single mistake in the code and lose all your money, there will be - by design - literally no one to help you.
(There's this idea of replacing laws with smart contracts that occasionally pops up on the Internet; it's a stupid and dangerous idea precisely because of that.)
* PoS was just an example - there are a range of consensus algorithms that are not proof of work, which was the very first one. Ripple is a "real world" blockchain that does not use proof of work: https://ripple.com/build/xrp-ledger-consensus-process/
> because if you make a single mistake in the code and lose all your money, there will be - by design - literally no one to help you.
Actually there are, by design, roll-back mechanisms that can be deployed if the majority of the network agrees to carry it out. I believe the current controversy in the Bitcoin network is partially over the removal of such a mechanism. Various other blockchains and blockchain-like networks have correction mechanisms. Also note, its not always about storing money - thats just one use.
Note that the Chinese government also demanded DVDs of all transaction records at the exchanges. This means that the Chinese citizens who moved their Bitcoin off of the exchange will have to answer to the bean counters.
How could a clever Chinese citizen avoid government scrutiny of their cryptocurrency finances under these conditions? They could trade Yuan (cash) for BTC through an underground mechanism of some sort. The vast majority will already be on the record at the soon to be defunct exchanges.
If you use an exchange, you are one step removed from the cryptocurrency.
Complaining about the lack of privacy of BitCoin when using an exchange is like complaining that you did an illicit transaction in front of a police station to ensure you didn't get mugged, but are surprised when the police use security camera footage as evidence against you.
I am pointing out that it was "sold" as "anonymous", by the establishment. And it clearly could not be that, per spec.
In fact, I also remember that this feature of cryptocurrencies was subtly communicated to a larger audiance in conjunction with stories about "a group of hackers called Anonymous" -- you know, those guys with their suited headless figure in front of a globe with imperial laurels logo. (Someone must have gotten a good lolly laugh coming up with that zinger of a logo. Or possibly merely sniffed in contempt.)
They could buy the hardware and power needed to mine new coins. This seems to be the simplest solution for someone who wants to get a couple thousand bitcoins without leaving a paper trail.
there is a theory that this is the reason the majority of miners are in China. Combine cheap power from bribed officials and the mining ASICs and you have money laundering generators.
