Bitcoin Taxation: A Gift From The IRS And The Coffee Problem - InformationWeek
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12/31/2014
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Bitcoin Taxation: A Gift From The IRS And The Coffee Problem

Every bitcoin transaction requires a gain or loss calculation between acquired cost basis and the amount it was sold for. This is no problem for large blocks, but on everyday purchases, a gain or loss calculation on every $1.79 cup of coffee is a lot of calculating.

I heard about bitcoin at the end of 2013 when a friend asked me for advice on buying a computer to mine bitcoin. I had never heard of such a thing and I naturally thought they mixed up information and didn't know what they were talking about. My perpetual knowledge-seeking genes kicked in to find out more about the mysterious mining which has turned into the journey of a lifetime.

A knowledge-seeking journey
I'm a CPA, entrepreneur, and Certified Fraud Examiner who loves technology and challenging the status quo, so it didn't take long to find out that bitcoin and I were like long lost friends. A few years earlier, I founded invizibiz.biz, an accounting and business process outsourcing subscription service, bringing together the best technology to provide businesses with a 100% paperless, all-in-the-cloud, transparent, and accessible back-office solution. My fascination with bitcoin is a natural extension of my passion for technology and business.

It's important to think of bitcoin more as a technology with a first successful use case that happened to be a digital currency. Bitcoin is simultaneously a network, a protocol, and a medium of exchange where the capitalized version (Bitcoin) refers to the technology and the lower-case version (bitcoin) refers to the currency. This is worth repeating although it has been explained in many other articles.

Read the rest of this article on Wall Street & Technology.

 

Kirk Phillips in an entrepreneur and Certified Public Accountant (CPA) passionate about technology and the possibilities for bitcoin to disrupt, decentralize and bring transparency into the business world. He is author of "The Ultimate Bitcoin Business Guide," a first of its ... View Full Bio

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Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/5/2015 | 2:09:38 PM
Re: Bitcoin Revisited
@Daniel, thank you for that insight. I had only heard of Bitcoin and Litecoin. However, with a quick Google search they are more than 500 crypto currencies that are showing up.

Bitcoin's algorithm executes the slowest on CPUs, it's relatively better on GPUs and specialized ASIC deliver the best results. If any of the 500 crypto currencies had an encryption method that executes best on general purpose CPUs and the world shifted to crypto currencies, it would be interesting to see the changes in the general price level of computational power.  
Ariella
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Ariella,
User Rank: Author
1/5/2015 | 8:53:56 AM
Re: Bitcoin Revisited
@danielcawrey Mining bitcoin now requires so much computational power that people buy special rigs and often work together in pools that work together to reveal the caches of digital currency. But there is already a lot of it in circulation. And if it were used as a real currency, meaning people don't immediately change it to dollars or euros but just spend the bitcoin directly, it shouldn't incur that kind of taxation.
danielcawrey
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danielcawrey,
User Rank: Ninja
1/4/2015 | 8:51:55 PM
Re: Bitcoin Revisited
At this point, mining in not really possible on a small scale in bitcoin. There are alternetive cryptocurrencies available on the market where you could possibly mine with a computer CPU, but many of them are not sound investments because the people behind them are essentailly running pump and dump scams. 
Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/4/2015 | 6:38:23 PM
Bitcoin Revisited
The last time I research bitcoin mining was in late 2013, at the time E-sports Entertainment was fined $1 million, for infecting user computers with mining software. If I recall correctly, at the time the cost (in terms of compute resources + electricity) and hash rate were such, that the possibility to earn a profit was remote. If things have changed then it would be interesting.

Nevertheless, it is extremely interesting to ponder about a situation in which mining is profitable on a small scale, with a global view in which different economic regions all having a slightly different rate of energy.
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