FTA: <i>Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't.</i><p>Though many Bitcoin fans don't quite realize it, Bitcoin's radical transparency could in fact be a tax-collector's wet dream. Every public-key, balance, and transaction is public.<p>A government that wants to coopt and efficiently tax Bitcoin could announce the following policy, based on the idea of 'tainted' or 'clean' balances:<p><i>"You can make your Bitcoin legal inside our jurisdiction by registering your public keys. (No, we don't need your private keys.) All transactions between registered keys are great, just make sure they match up with your tax filings, because we can see the endpoints.<p>"You should not receive money to your registered address(es) from an unregistered address. If you do, you can file a disclosure with 30 days, identifying the origin and nature of the transaction, paying all applicable taxes, and then the balance is yours to keep."<p>"If you do not, the entire amount that's mixed with the unregistered-origin balance is subject to forfeit. Your registered keys with any such balance will be blacklisted, making your previously-registered balances unspendable until you come back into compliance."</i><p>Any above-ground business would then stick with clean balances. Both clean and tainted coins could circulate in the same blockchain, but rarely mix... and would have different de facto values. (Would a clean or dirty satoshi be worth more? I'm not sure!) Trying to buy above-ground things with dirty money would face the same 'laundering challenge' as today: making it look like legitimate income via front operations.<p>Except, the blockchain would be a perfect record of earlier related transactions. That means big-data traffic analysis, and occasional meatspace busts discovering the identities of unregistered keys, would create a very strong map of unsanctioned economic activity -- much <i>better</i> than is possible with physical cash.
What a gigantic piece of FUD.<p><i>> How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't. Crypto-currency's strong protections on anonymity make it impossible for any state to know who is buying what, who is paying whom, who earns what, and who has what in savings.</i><p>BS! The state seems to be surviving just fine with its "inability" to track who is buying what with cash, and it could easily require and enforce documentation of large purchases (such as houses, cars, etc. as it already does btw).<p><i>> 2. Police:It would be almost impossible for states to detect certain crimes. One of the major alleged uses of Bitcoin -- though, of course, one can never truly know -- is buying illicit drugs.</i><p>Ohhhh noooo!! Cry me a river!!<p>You mean the batshit insane war on drugs that has destroyed countless lives will become even more ineffective than it already is?!? Please oh please, don't throw me into the briar patch!<p>Every one of these points applies equally to cash. Might as well write a second article titled: "Cash: An Existential threat to the modern liberal state"<p>BTW, there's nothing liberal about the war on drugs, the very existence of which is a cruel affront to basic human liberties.<p><i>> In a world where many transactions are anonymous, it’s unclear how governments could even compile accurate economic data, without which macroeconomic policy is impossible.</i><p>How exactly does having a public history of every transaction ever made somehow make it "impossible" to glean any useful economic data from it?<p>Add to it knowledge of certain transactions (such as those that go through companies), and you start to get a pretty clear picture of exactly what's going on.
The only way you could think bitcoin is a threat to state revenue is by misunderstanding methods of taxation. Income and corporate taxes are determined almost entirely by self reporting and laws that shift tax burdens from one entity to another which require disclosure. It's relatively easy to evade taxes as long as you operate in a closed loop where no one reports even with modern financial instruments.<p>The problem only comes when you want to use the money to buy things from taxpayers, which is, you know, most business. This is such a problem that money laundering is primarily concerned with finding ways to pay taxes not to avoid them, so that people can pay for houses and such. Bitcoin actually makes this far more difficult than USD because of the encoded transactional history - just ask anyone sitting on the large piles of stolen bitcoins that have yet to be retransfered.<p>The methods of enforcement would change, for sure. But anyone who thinks that revenue offices would be unable to model monetary distribution via the blockchain hasn't been paying attention to what US security forces have been doing with the databases of how groups interact based on who they call (association graphs).
<i>"The volume of transactions in Bitcoin is growing only slowly, relative to the massive increase in demand for the currency"</i><p>The author states this without presenting data. He is wrong. In fact, data shows the opposite:<p>- The exchange rate increase by 5x between February (low of $20) and March (high of $100)<p>- BitPay alone recorded a merchant transaction volume increasing by 7.6x between February ($687k) and March ($5.2M): <a href="http://www.marketwatch.com/story/bitpay-eclipses-silk-road-in-bitcoin-sales-with-explosive-52m-march-2013-04-02" rel="nofollow">http://www.marketwatch.com/story/bitpay-eclipses-silk-road-i...</a> (and this is <i>just</i> BitPay - there are many more Bitcoin-accepting vendors who make sales without using BitPay - so total transactions increased by a lot more than 7.6x, maybe 10x, 20x, who knows)<p>Therefore the volume of transactions is increasing faster than the exchange rate. How can a Bloomberg article (edit: opinion piece) be so wrong about such a stupid simple fact that can be easily found? <a href="https://news.ycombinator.com/item?id=5499377" rel="nofollow">https://news.ycombinator.com/item?id=5499377</a> is right: a lot of journalists get a lot of facts wrong about Bitcoin.<p>Edit: BitPay is not the only datapoint. Many other metrics and merchants generally show big increases in transaction volume in the short past:<p>- Estimated volume of USD transactions (attempting to ignore "change"): <a href="http://blockchain.info/charts/estimated-transaction-volume-usd" rel="nofollow">http://blockchain.info/charts/estimated-transaction-volume-u...</a><p>- Silk Road going over 2 years from zero to $2 million/month of Bitcoin revenues: <a href="http://arstechnica.com/tech-policy/2012/08/study-estimates-2-million-a-month-in-bitcoin-drug-sales/" rel="nofollow">http://arstechnica.com/tech-policy/2012/08/study-estimates-2...</a><p>- A bitcoin casino went from 0 to $0.5 million profits in 6 months: <a href="http://arstechnica.com/business/2013/01/bitcoin-based-casino-rakes-in-over-500000-profit-in-six-months/" rel="nofollow">http://arstechnica.com/business/2013/01/bitcoin-based-casino...</a><p>- Etc
"which, for many of its libertarian-anarchist advocates, is the whole idea"<p>The politics the community built around is for me the only reason why it sucks right now, the idea is interesting and it can certainly have some use. Selling all that I have.<p>TL;DR: Well, the link speaks for itself: <a href="http://imgur.com/r/cringepics/gkLJswu" rel="nofollow">http://imgur.com/r/cringepics/gkLJswu</a><p>EDIT: Ultimately what I hate about it is that the almost anywhere you go do discuss it there's this tribal mentality of believers vs. deniers. What about those guys in 2009 that thought it was a good idea to work as a currency and does not care about libertarianism/keynesianism talk?
"Taxation: How do governments collect taxes on transactions in Bitcoin? The answer is they don't, and they can't."<p>Grossly misleading.<p>You tax something at the point at which it gets exchanged into an externally viewable good or service. If either party refuses to disclose the value of the transaction, then the state just assigns one and uses its monopoly on force to collect.<p>That said, an increasing dependence on opaque stores of value would likely shift taxation away from income and towards consumption.
I've been a bitcoin supporter. But there is a twinge in me that remembers government, properly set up, can often protect the weak from the strong. Extremely wealthy corporations and individuals moving around anonymous money would make it impossible to tax and impossible to know where political contributions were coming from. I don't know the answer-- I flip flop back and forth between total openness for everyone and total secrecy for everyone.
Crypto-currencies might be, but I don't think Bitcoin is an existential threat to the modern liberal state.<p>The anonymity that every mainstream article claims Bitcoin has is not nearly as strong as it's made out to be[1][2][3].<p>The built-in deflationary aspect of Bitcoin seems to prevent it from being used as a "serious" currency. Hiding money under your mattress should never be the optimal approach to making more money. (It might not prevent people from using the currency, but it's highly sub-optimal.)<p>The fragility of the currency concerns me (by which I mean the way it's possible to lose massive amounts of money by losing a file or forgetting a password). Maybe this is a technical problem that will be solved with a more mature ecosystem, but I like the way that a real bank always has ways to access money when bad things happen (at least in a functioning banking system). This thread[4] documents the loss of about 70,000 Bitcoins, which is worth about ten million dollars today. Related to this, if somebody hacked the EFF's Twitter account and posted that they were accepting Bitcoin donations on some address, a lot of Bitcoins would disappear into somebodies wallet. You could argue that Bitcoin is a more perfect sort of system, but it's not without downsides.<p>Maybe another crypto-currency will come along and solve these problems. I think I hope it does. But I don't see Bitcoin supplanting modern state-backed currencies. I find it hard to see Bitcoin being used more widely than by the idealogues, the speculators, and those who find utility in it (like Silk Road, but not just that).<p>1. <a href="http://arxiv.org/pdf/1107.4524.pdf" rel="nofollow">http://arxiv.org/pdf/1107.4524.pdf</a><p>2. <a href="http://eprint.iacr.org/2012/584.pdf" rel="nofollow">http://eprint.iacr.org/2012/584.pdf</a><p>3. <a href="https://en.bitcoin.it/wiki/Anonymity" rel="nofollow">https://en.bitcoin.it/wiki/Anonymity</a><p>4. <a href="https://bitcointalk.org/index.php?topic=7253.0" rel="nofollow">https://bitcointalk.org/index.php?topic=7253.0</a>
Macroeconomics is the part of this that isn't FUD. The BTC money supply will remain slightly deflationary regardless of what's in your national best interests. It's not unlike being in the Euro, except that we have pitiless automation playing the part of Germany. You might want to devalue, or print money to cover your pension obligations or restart a stagflation death-spiral, but BTC does not offer you any means to do this.<p>The old way of maintaining control local macroeconomics was to demand that "you may use whatever variety of wooden doubloons you please, but you pay your taxes in USD". For simplicity, people use USD for everything. However if the economy starts to run on BTC, this rule's traction fails, USD becomes funny-money you buy at the government's gate, and its inflation saps the government rather than the taxpayer.
Wow, the financial press is falling in love with writing about Bitcoin.<p>Now that it's been linked to Cyprus there's an increased probability of Bitcoin being discussed in reference to future Eurozone economic events. Which means more mainstream awareness & more potential adopters.<p>I have a hard time seeing Bitcoin going away in the near future. Even if it's a bubble, and I have my doubts about that, odds are we have yet to reach the peak.<p>It's political nature also holds a lot of potential. There are some very, very discontent people all over the world, both Western and non-Western. Segments of the Greek population have latched onto neo-nazism -- is it really that unrealistic that another desperate population might latch onto Bitcoin?
Bruce Sterling considered this, thirteen years ago: <a href="http://www.time.com/time/printout/0,8816,997255,00.html" rel="nofollow">http://www.time.com/time/printout/0,8816,997255,00.html</a>
The OP is not to be taken seriously, thanks to deep ignorance about how currency works in general, and how bitcoin works in particular.<p>In 1998, Paul Krugman described the fatal flaw that will inevitably sink any currency that includes it; a flaw that Bitcoin's designers have overlooked.<p><a href="http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/krugman-baby-sitting-co-op-bitcoin/" rel="nofollow">http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k...</a> …<p>So no, Bitcoin is not an "Existential threat to the Modern Liberal State". Not even close.
I was just reading some posts about potential BitCoin issues:
<a href="http://www.loper-os.org/?p=1009" rel="nofollow">http://www.loper-os.org/?p=1009</a>
<a href="http://www.loper-os.org/?p=939" rel="nofollow">http://www.loper-os.org/?p=939</a>
If the conclusions about the vulnerabilities of BitCoin are correct, then I'm not sure it can qualify as an "existential threat"
Bitcoin is analogous to gold. To the extent it is more of a "threat" than gold, it is because moving bitcoin across national borders is easier. You also don't have to assay it.<p>This article is alarmism. There is no theory of how bitcoin will facilitate more tax evasion or transactions for contraband, than cash or, or bearer bonds, or gold do.
No, it's not. The government can throw you in jail if you don't pay your taxes. Money is a get out of jail free card. That's what makes money valuable.<p><a href="http://en.wikipedia.org/wiki/Chartalism" rel="nofollow">http://en.wikipedia.org/wiki/Chartalism</a>
Anybody else get the feeling that we see an increasing amount of articles where the author writes about what he or she <i>thinks</i> bitcoin is?<p>It's like multiple, recursive generations of FUD.