Coinbase Card
coinbase.com
coinbase.com
Though, of course, neither are perfect, we're going to keep finding attacks on these things for a while: https://crypto.stanford.edu/timings/
Here is an active deanonymization attack [1]:
> We show how an attacker can take advantage of Monero’s Bulletproof protocol, which reduces transaction fees, to flood the network with his own transactions and, consequently, remove mixins from transaction inputs. Assuming an attack timeframe of 12 months, our findings show that an attacker can trace up to 47.63% of the transaction inputs at a cost of just 1,746.53 USD.
Sounds pretty bad to me.
Here's another attack [2]:
> First, about 62% of transaction inputs with one or more mixins are vulnerable to “chain-reaction” analysis — that is, the real input can be deduced by elimination. Second, Monero mixins are sampled in such away that they can be easily distinguished from the real coins by their age distribution; in short, the real input is usually the “newest” input. We estimate that this heuristic can be used to guess the real input with 80 %accuracy over all transactions with 1 or more mixins.
I don't care what "calculations" say, if so many transactions can be deanonymized then those calculations were calculating the wrong thing.
[1] https://eprint.iacr.org/2019/455 [2] https://arxiv.org/pdf/1704.04299/
Though, if there are only a few transactions each day that's not as large of an issue as it sounds; the blockchain still has no linkability between transactions. Active attacks might work but few attackers can pull those off, and no attacker is able to go back in time to deanonymize older transactions (assuming the cryptography holds).
You may be able to trace the addresses that bitcoin is connected to, but you will at some point have to do additional work to investigate ip addresses and hope that they don't all lead to anonymous VPNs ran through a coffee shop wifi before the bitcoin is passed on to someone else.
The reason you should care about that is a pure fiat currency like Bitcoin only has value with other people who agree. Using USD for all real transactions means that merchants continue to have no reason to take on the additional risk and expense of directly accepting it. It lets some speculators cash out but it's not contributing to the growth of the system or give anyone who hasn't already bought in a reason to do so.
You're also making the mistake of assuming equal demand: Bitcoin is inherently deflationary but it's also completely voluntary — few people use it and nobody is required to use it. Bitcoin's high variability over the years shows that speculator demand can last for years but there's no lock-in and many competing options. There are a few people who've put large amounts of money into it but statistically almost nobody uses it so there's little defense against a competitor because most people have no sunk cost and most of the percentage who do have only a small holding at risk.
USD is being actively and significantly devalued (take a look at the US Dollar Index, as an example), as are most other major fiat currencies. I was using hyperinflation a bit hyperbolically, but the point still stands. One potential interpretation for the the appreciation of bitcoin vs. USD (which, I should add, is the longest its ever been over 10K/btc spot) over the last few weeks is a reaction to the ongoing attempts to jumpstart the various economies of the world that have been put on life support since the start of the pandemic.
Obviously bitcoin and USD don't have equal demand curves, but compare the supply curves: stable vs. arbitrary. If you're comparing two assets, they don't necessarily need to have equivalent instantaneous demand functions - that seems a bit specious.
> even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts.
Sir, do you want workers to make a fair wage? We can't have that. You should be supporting inflation.
- Paul Krugman, visionary & scholar
It's also worth noting that the meteoric rises of bitcoin since its inception has very little to do with this fundamental form of cryptocurrency relative appreciation, outside of attracting the kooks who want to believe in alternatives.
Here's a long answer to the question: https://medium.com/@danhedl/planting-bitcoin-sound-money-72e...
Other coins are even harder in just creating ALL supply in one instant. That makes them both harder and worse.
A constant emission would minimize concentration of wealth yet still have inflation rate going to zero.
If you enjoy speculation, that's no more weird than keeping your money in a stamp collection but you don't grow into a real part of the financial system by giving people fewer reasons to care.
Central banks would be crazy to hold Bitcoin. If a better technology came along which had mass adoption Bitcoin could be made worthless overnight. Many people predicted this could happen in 2017 during the rise of Ethereum.
Personally I can't ever see bitcoin surpassing the the market cap. of gold.
There is only the law of supply and demand. Econ 101.
Even the argument that something has intrinsic value because you have a use for it is flawed: how much is a gallon of breathable air worth?
A gallon of air is tremendously useful. How much does it cost ?
Infinite Supply = Zero Value.
There is no such thing as "Intrinsic Value".
https://en.m.wikipedia.org/wiki/Intrinsic_value_(numismatics...
Gold has intrinsic value based on the industrial and jewelry uses: you could lose a lot more over the industrial demand point but it won’t go below that point because people use it for things other than speculation.
In contrast, random hashes have no value outside of a particular community consensus. You can’t do anything with them and the ones in the Bitcoin blockchain have no more inherent value than those in any other network.
I would say the same about gold (though you probably disagree). Gold has some "intrinsic value" (e.g., as a plating on electrical conductors) but would be worth much much less if no one believed that it is a good way to store money.
But perhaps more importantly, Bitcoin differs drastically from most fiat currencies in that its rate of inflation is capped: over 85% of all bitcoin that will ever be created have already been created.
The same BTW cannot be said of gold, which is being mined at an increasing rate:
https://fee.org/media/30406/figure-1_bitcoin_inflation.png
https://fee.org/media/30407/figure-2_inflation_bitcoin_gold....
Yet, gold isn't a fiat asset because its value is anchored to its physical properties. It is finite and cannot be freely created. It doesn't oxidize, is resistant to most acids and other corrosives, and has the highest specific gravity of any naturally occurring element. It is a naturally good store of value because of these properties.
Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics. Take that as you will, but both assets are much more solid than Fed Coin (USD) which is effectively backed by the government's commitment to enforce the federal reserve act while trying their best--and failing--to resist printing more and more money to perpetuate an unsustainable system.
[0] - https://www.statista.com/statistics/299609/gold-demand-by-in...
After all, you can already get gold-plated tungsten bars [1] from companies like chinatungsten as 'novelty paperweights' [2] - even though tungsten is fractionally less dense than gold.
As iridium and osmium are traded in very low volumes and toxic/acidic, platinum is more expensive than gold, and tungsten is fractionally lighter, fake gold is seldom undetectable.
[1] https://www.google.com/search?q=tungsten+gold+bar&tbm=isch [2] http://www.paper-weight.cn/products-show.html
https://en.m.wikipedia.org/wiki/Fiat_money
The source of your misunderstanding is here:
> Bitcoin also has underlying properties, but instead they are guaranteed by mathematics and game theory instead of physics.
The Bitcoin algorithm has some interesting properties but they don’t have much practical value to balance the enormous inefficiency and, far more important to this topic, that doesn’t make any particular blockchain valuable - anyone who wants those properties can set up their own for free without enriching the current Bitcoin holders. The only reason why you would consider those hashes to be worth paying money for is the community belief that they have a certain value - nobody has any need to use it otherwise. That’s why Bitcoin is an especially pure fiat currency: the community consensus is quite literally the only thing backing it’s valuation. In contrast a currency like the US dollar has curbs on fluctuation not just from much greater usage but also because millions of people receive it from government salaries and purchases or need that currency to pay taxes — unlike Bitcoin, which has value only to the extent that you can find someone else who thinks it’ll be worth more in the future.
So did Beanie Babies, until they didn't. But the point of Bitcoin was not supposed to be a vehicle for speculation, it was supposed to be...
well, I've been around HN long enough to know that it's impossible to finish that sentence in a way everyone would agree with. But, remember all those breathlessly optimistic posts and essays from early 2010s about what Bitcoin could be? It seems pretty inarguable that the Bitcoin of 2020 ain't that, and isn't on track to be.
If you want those things, go ahead and use them. Coinbase Card isn't stopping you.
0: In the Bitcoin protocol a transaction which generates new coins and issues them to the miner of a block is called a coinbase transaction.
[1] Which constitute some tiny fraction of the user-base of cryptocurrencies - which is predominantly a gaggle of day-traders, conmen, and the occasional normie who needs to pay a ransomware operator in Belarus.
Sure, a program can calculate this for you, but it does make filing more complicated. You'll probably have a very long list of items on your 1099.
Their fines aren’t extra ordinary, and they are very much willing to help you come into compliance.
For example, if you do have software that can output all your crypto trades, they will accept that in an audit, and likely only fine you for what you got wrong and not merely not following procedure.
I missed the back of a capital gains worksheet once when reporting my taxes. Got a bill for $11,000+, between the missing stock sales and an education credit my wife took that the IRS was suspicious of. After actually tracking down the stock sales in question, reporting their cost basis (the IRS had assumed $0, because they don't have it so why not assume the value most favorable to them?), and refiguring the taxes, the ~$7K in tax liability had declined to $60. Then because that was so low, I got the ~$2K penalty waived. Then I produced documentation to show my wife was eligible for the education tax credit, and there went another $2K. By the time I had a full amended 1040, the $11K was down to $60, so I sent them a check for $60 along with all my documentation and got back a nice letter saying the matter was closed and no further tax was due.
Also be very wary of the CA FTB. They don't send you notices if you owe money; instead, they just record it as a debt, charge interest and penalties on it, and then send you a bill for the full total when the statute of limitations is about to expire. If you're aware of any problems in your federal tax return and you owe anything to California (which may occur even if you're not a CA resident - they tax stock granted at a CA job even if you later move out of state), make sure to pro-actively get in touch with them with an amended return and any money owed.
I agree 100%.
Though, I think that most people hear stories about a multi-thousand dollar tax notice, and become terrified that the IRS will force them to pay that money.
However, as your story illustrates, the notice they give is the worst case scenario. If you have any kind of documentation, you can add that amend your return and it'll be accepted by the IRS drastically reducing your tax bill.
This is made easier, because you're working with a real live human being on the other end---one who at least in my case, I could call and ask questions like 'what do documentation do you specifically need to see for X?' instead of guessing as is the norm for non accountants working within the complex tax code.
e.g. https://www.propublica.org/article/irs-sorry-but-its-just-ea...
Your casual bitcoin spender is not going to be like that at all. Their under reported transactions will be difficult to even find. If you do find them, their true cost basis will be difficult to determine.
I was under the impression that for capital gains taxes it's more so buying, holding, then selling for a profit.
Could be mistaken here though.
e.g. buy $10 of coins, use same coins to buy a meal later, if the value of the meal is $20 (whether denominated in fiat or the equivalent bitcoin), you have a $10 capital gain.
If you decide to send $5 worth of bitcoin as payment for something, they consider that a taxable event. You sold X amount of bitcoin, which appreciated 20% value from when you bought it. That X amount was worth $4, now it is worth $5, so you would owe a tiny amount in capital gains tax on $1 you gained.
Edit: This exact same scenario happens for Foreign Exchange, but the government excludes most transactions under a certain amount because it's too complicated for travelers. Also, the rate of USD to EURO doesn't fluctuate as wildly as crypto can, so the gains are minimal anyways.
The IRS doesn't make the tax law. How cryptocurrency transactions get taxed is a matter for legislatures and the courts.
Obviously, not everyone has the resources to fight the IRS, and your life will go much easier if your interpretation of the tax code matches that of the IRS. But the way you explain it here puts the cart before the horse.
IANAL but tax is also levied on fiat currencies where similar profit/loss occurs. In that sense, the IRS is treating crypto like it treats other currencies.
Congress addressed this in 1986, the IRS is just administering duly enacted tax law:
"In Notice 2014-21, the IRS applied general principles of tax law to determine that virtual currency is property for federal tax purposes"
Here's the current page about IRS policy on crypto: https://www.irs.gov/newsroom/virtual-currency-irs-issues-add...
IRS guidance aren't laws but they detail how the IRS is going to treat tax collection based on current law. At some point in the future Congress may classify crypto currencies as actual currencies such as the Yen, Euro, etc. at which point the tax laws about currency exchange would apply instead of capital gains on property.
Legislative action could of course change this, but until then you are probably tilting at windmills.
It very literally does. Agency rules are delegated law [1].
Congress delegates rule making authority to the agencies within certain boundaries. Those rules have the force of law.
[1] https://en.m.wikipedia.org/wiki/United_States_administrative...
(I've done this before with Betterment, when a bunch of $10 deposits each turned into like 7-8 small lots that were a few dollars each.)
I asked if I could pay with BTC and my bank passed it up until they got word back from Fanny Mae that it was okay so long as you can demonstrate X years of ownership. I think they made a public announcement about it. It was shortly after BTC hit its peak a couple years ago. Coinbase let me export something that satisfied the bank and government that I wasn't money laundering (I'd bought the BTC many years before for less than $10k with money for a bank account I still owned, so I could show the transactions there too).
For my taxes, Coinbase has a tool for exporting that calculates that sort of thing. You just select the time range and it gives you all the transactions and how much they appreciated from when you last bought that much.
E.g. imagine I incur $10 USD on the card. From Coinbase's perspective, I just owe them $10 USD + maybe interest at the end of some fixed time period. I could pay them in USD or I could pay them in crypto. Since it's not mandated I pay in crypto, you can't really say I've "spent" my crypto until I use it to pay off my balance. In which case you only end up with 12 taxable events per year.
I'm sure there's some arbitrage opportunity I'm not accounting for, but it seems like this might work?
which might be the next product from Coinbase
https://help.coinbase.com/en/coinbase/taxes-reports-and-fina...
Makes me sad that they are further entrenching their tentacles in our tax system which further discourages the government from simplifying this process.
If the system is vulnerable to exploitation, that’s not the fault of Intuit. They’re fixing inefficiencies in the market, and adding upsells (common for many companies in tech), is part of their business model.
I don’t get the hate of TurboTax if you’ve actually used it, since it’s incredibly simple and saves time and money (from my experience).
Don’t hate the player.
It's not a game and a matter of hate, it's just a fact that filing your taxes is complicated because of Intuit.
Sure, the vulnerability isn't Intuit's problem. But exploiting it is Intuit's problem.
>They’re fixing inefficiencies in the market, and adding upsells (common for many companies in tech), is part of their business model.
How are they fixing inefficiencies? If they simply wrote software I could see that. But they're lobbying for increasing inefficiencies. That's the opposite of fixing.
>I don’t get the hate of TurboTax if you’ve actually used it, since it’s incredibly simple and saves time and money (from my experience).
I use it every year. Yeah, it works fairly well.
I don't particularly understand why everyone's happy to gloss over tax implications being undiscussed on things like this. Whether or not it's right (I don't believe it is), the fact remains that the average new user is not aware of this quirk of Crypto.
This is also fundamentally not so different from e.g. having spend vehicles with your brokerage. But the addressable market may be higher / different for coinbase which could cause a lot of headaches, like this one, if not carefully managed.
Borrow a stablecoin like DAI and deposit that on Coinbase and you can spend it on the debit card and earn rewards.
Don't forget to buy insurance on your DeFi use to mitigate a wider variety of risks.
If someone at Coinbase is reading this, I'd sincerely like to know the rationale behind this product launch
The tax issues come up if you're storing BTC (or other alts), not DAI.
Risk rise, you're holding DAI for both approaches, so you are exposed to smart contract risks from Makerdao + some market based risks (in cases where there are very large price swings). With compound, you take on additional smart contract risks from the compound platform.
[0] https://help.coinbase.com/en/coinbase/trading-and-funding/ot...
There have been times when I don't want some financial institutions to get transactions from crypto financial institutions, which comes into play when I am considering a wire transfer from an OTC desk. OTC desks require larger amounts before talking to you.
Coinbase for example doesn't always have wire transfers available for withdrawals.
So just being able to spend from a debit card - which also gives rewards - is good.
The conversion possibilities between crypto and fiat change practically every month though. With the paypal and instant debit integration coming out over just the last few weeks after a decade of not existing and being specifically one of the financial institutions I wouldn't want to see my crypto use because their compliance officer would freak out on autopilot.
Regardless, I don't know or care how many people do it, I don't write blog posts or contribute to international headlines just because it was a solution for me. I have a transferwise card too, shrug.
It's powered by Utrust which doesn't add any fee (only the seller gets a fee: 1% of the selling price). They just actually just introduced what they called reverse stacking : If you stack 1000 utk, you can get the 1% fee payed by the seller.
I am not sure about how much fees Visa will add from their part of the currency transfer. But I guess these fees will stay the same no matter which project you use as long as Visa is part of the payment solution.
I think the real death blow here is the 2.49% fee that Coinbase charges on every transaction for liquidating the crypto (I'm struggling to find this on their website, but I see someone posted it in another thread).
https://www.binance.com/en/cards
Their related FAQ articles:
It's my theory that crypto is following the same arc that Microsoft used to dominate personal computers and office software.
Paypal recently announced crypto integration. Other payment processors will follow. Eventually merchants will want to save 3% and accept crypto directly. They might even pass the savings to the user.
https://techcrunch.com/2019/04/10/coinbase-launches-debit-ca...
I'm an existing customer but when coinbase asked me to log in with my device, clicking the link on the email didn't work. So I had to manually log into with my browser.
Additionally, it wanted to send my card to a 5 year old address but there was no way of changing that info within the app.
Lastl,, I was like: Wohh, finally I can get the card. When the app said that I need at least 5€ in crypto before proceeding.
I guess that's no card for me...
Seems only relevant to EU and UK
Gresham's law: "bad money drives out good". Meaning when two forms of commodity money are in circulation, the more valuable commodity will gradually disappear from circulation.
This appears to be another step forward for cryptocurrencies, but consider paying with shitcoin and fiat before you liquidate the good stuff.
It's never been wise, so far, to pay in Bitcoin for pizza.
In many countries, you can exchange US$ for local currency, but not the other way around. That's by government decree. Yet the dollar is prized even though the decree says otherwise. In any case, there's much more than government decree factoring in what's bad money.
Given that Bitcoin is currently worth less than its highs in 2017, 2018, and 2019, I can think of at least three times in which it would have been wise to pay for pizza in Bitcoin (as opposed to holding it).
So imo that's a death blow and no one is reporting about it.
It's basically done on an account by account basis, at the banks and the card issuers. Which means any IBAN known to be associated with a crypto exchange, or any account you attempt payment to with your card.
It's cat and mouse game.
And I'm afraid they're setting a precedence for other European countries. Of course their reasons for this are to chase small time tax evaders while big time corporations like Facebook are being given massive tax breaks because some moron thought a datacenter would bring 30000 jobs.
Because nobody cares about Sweden economically
I mean there isn't a softer way to say it. Even the Nordic bond market is basically in a completely different country.
Edit OK it looks like $6 if you want done within a few minutes, presumably the card can do more slowly so is just a few cents. https://privacypros.io/tools/bitcoin-fee-estimator/