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Comment by sunshinerag | Hacker News Reader

I have no idea what he is talking about.

I use bitcoin to buy things both onchain and via lightning and the experience is so smooth and much much better than the circa 2017 period when fees were high. Don't keep it on exchange. The real thing that is stopping adoption is countries trying to classify it as a commodity and insist to pay capital gains on every microtransaction. Some countries are backwards (US, UK) than the others. Germany and few other countries are forward looking. No VAT on bitcoin transactions and no CGT if held for a year.

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> No VAT on bitcoin transactions

Sounds like a defect in the technology to me. A good currency should be able to support the full range of social policies (like VAT).

One of the problems of the Euro is not being able to inflate different countries within the Eurozone at different rates. If Bitcoin were ever to become popular for regular transactions within many countries, it'd be a fiscal policy disaster. Pretty soon you'd hear Portugal, Italy, Spain, and Greece banning its use, along with similarly wobbly countries in other parts of the world. I remember Malaysia catching flak for halting foreign currency exchange during the Asian Financial Crisis, but it turned out to be a really smart move. It turns out that a globally integrated economy isn't always best for the smaller economies. They need to be able to adjust the spigot.

Edit: I suppose this suggests a feature request for Bitcoin: namespacing, of a sort. If the currency were able to support cross-namespace conversion controls, like a tax determined by a function of the velocity and acceleration of exchange ... that'd be pretty darn cool. Each country could pick its namespace, and have control over its exchange tax function. Taking it further, you could tax intra-namespace transactions. VAT with no bureaucracy. Each account could be tied to a citizen, transactions taxed at some progressive schedule, and then uniformly distributed to every account daily. The transaction tax could be dynamic, to encourage currency flow in bad times, and to add some friction when things are overheating.

You are confused. There is nothing in Bitcoin that prevents VAT. It's just Germany's policy. Elsewhere they charge VAT on it like any other currency. I have paid VAT on all my bitcoin transactions like any other currency. I am not in Germany.

That's good to hear. What about exchange controls? How do you see governments adjusting inflation with widespread international Bitcoin usage?

My understanding is that the inability to control inflation is a “feature” of BTC, not a “bug”. I strongly suspect that this will eventually make BTC too rare for owners to trade very often, and not practical as a day-to-day currency.

There's no theoretical limit to it's divisibility. The total supply is known ahead of time but the world will never run out of Bitcoin to transact.

The comment describes a liquidity crisis, when the market clams up and price begins to fluctuate wildly. It's not that things aren't tradeable, but that very few people want to.

All currencies are infinitely dividable I've never understood this supposed advantage of Bitcoin.

How do I pay 0.005 USD to my friend?

If useful, the US Department of the Treasury can issue a coin or bill with a value of any denomination, including .005 USD, and so is “infinitely divisible”.

Bitcoin divisibility is limited, by design, to 0.00000001 BTC (1 Satoshi)

Whether this is “enough” is very difficult to answer definitively. If the demand for BTC is greater than the supply, the value of BTC will rise until supply and demand reach equilibrium. If the demand outpaces supply, holders (“HODLERS”) have less incentive to trade and more incentive to keep their BTC, because the value of their BTC increases.

If demand gets too great, few to no holders trade, because they get more value by doing nothing, and trades involving BTC slow or stop completely. (We can think of this as kind of a “consensus attack” by “store of value” advocates on the “medium of exchange” advocates.) The demand doesn’t go away, though, so supply and demand can’t reach equilibrium.

Eventually this would lead people to start using something else as a medium of exchange, perhaps just bartering at first, eventually settling on something common. So now we have a problem: BTC demand has been satisfied by another “medium of exchange”. But what happens to the “store of value” part of BTC if it is no longer the “medium of exchange”? Do coins become like works of art, traded infrequently for great sums? Or do they become worthless?

> If useful, the US Department of the Treasury can issue a coin or bill with a value of any denomination, including .005 USD, and so is “infinitely divisible”.

And how much does that cost? I bet it's more than 5 cents.

> Bitcoin divisibility is limited, by design, to 0.00000001 BTC (1 Satoshi)

Not by design, that's an implementation details that can easily be changed in the future if 1 sat starts to become valuable enough to make a difference.

> and trades involving BTC slow or stop completely.

Do you have an example of a single commodity in the history of humanity that simply stopped being traded because it became "too valuable"?

I can't even understand how that makes sense, if it's valuable some people will want to sell it and get something that is more useful to them, like a house, a car, whatever. People don't commonly decide to hold an asset until their death bed.

> But what happens to the “store of value” part of BTC if it is no longer the “medium of exchange”?

What happened to Gold?

> Do you have an example ...?

The Great Depression.

https://en.m.wikipedia.org/wiki/Deflation#Deflationary_spira...

If you're looking for commodities only, it's easy enough to Google "commodities bubble".

https://en.m.wikipedia.org/wiki/2000s_commodities_boom#Opini...

The problem is that when markets get turbulent, they can suddenly shift to going the other direction. Instead of everyone wanting to buy, suddenly no one wants to be the last one out the door. And with Bitcoin, what authority is going to stop the panic?

> What happened to Gold?

I suppose it depends on which branch of Bitcoin you're on. Are we talking about store of value or medium of exchange?

Soros' comments on gold are helpful.

> “Typically, a self-reinforcing process undergoes orderly corrections in the early stages, and, if it survives them, the bias tends to be reinforced, and is less easily shaken. When the process is advanced, corrections become scarcer and the danger of a climactic reversal greater”.

http://blogs.reuters.com/great-debate/2010/09/30/gold-as-the...

> The Great Depression.

What commodities ceased being traded during the Great Depression?

> Are we talking about store of value or medium of exchange?

Mostly store of value for now, both when adoption improves and LN support is more widespread. Eventually the base layer will also need some capacity bumps.

> Soros' comments on gold are helpful.

A multi millennium bubble? Can't get more unprecedented than that.

In case you're not familiar with it, the Great Depression was a period of deflation.

I'm guessing you didn't bother reading Soros' comments I linked. Or maybe you're pretending you don't know the typical usage of "bubble" is in this context?

Government can do whatever inflation adjustments that it wants.

What it can't do, though, is force people to accept them.

If you want your money to inflate, you are free to use any infatuation currency that you want.

But other people, who prefer to not be subject to inflation, are now free to not be subject to it.

Can't the government force taxes to be paid in the currency of its choice, thereby making taxpayers (residents, visitors, and their counter-parties) subject to its currency?

> thereby making taxpayers (residents, visitors, and their counter-parties) subject to its currency?

It does not make them subject to inflation, no.

If you hold entirely cryptocurrency, you are not subject to the inflation of holding the currency. Instead, you can simply convert to that currency, only when you need to pay taxes.

This avoids the inflation, in the same way that hold stock in a company, and not holding any dollars, avoids you from being subject to inflation.

Suppose you had a particular debt, denominated in currency A, owed at the end of the year. Would you want to hold some amount of currency A throughout the year to ensure you could pay that debt? I suppose you could argue that you'd buy some currency swaps or somesuch, but most people would just hold that currency.

Remember the Asian Financial Crisis, when a bunch of the "tigers" had loans denominated in USD, Francs, etc., and then there was a big capital outflow, tanking their local currencies against those debts? People will want to make sure they don't float against the currency they owe.

Holding enough currency to have a small amount of hedged safety against risk of that currency changing in value is not really a good enough reason to say that a country would be able to "force" "taxpapers to be subject to its currency".

Even if we say that people would hold some of that original currency, there could still be a significant benefit to transferring most of your wealth to a deflationary currency. Therefore, people would still be able to avoid being subject to that original currency to a large degree.

> significant benefit to transferring most of your wealth to a deflationary currency

I'm not familiar with any evidence of that claim, despite my economics education. I suppose the best historical corollary would be gold? If so, I think we can agree that almost no one has adopted that practice. Do you think Bitcoin is different enough than gold such that it would motivate different behavior?

Let's consider the effects of owing tax in the national currency. Retail businesses would owe sales tax in that currency, perhaps paid quarterly. Rather than adding complexity to each sale, they'd probably price goods in the national currency, even if not a legal requirement (which it easily could be). If goods are priced in national currency, it's handy to keep your working capital in that same currency. ... The incentives start to align to keep the bulk of domestic economic activity using the domestic currency.

For comparison, we can look at behavior in countries which make significant use of some foreign currency. For example, in some central American countries, banks make it easy to keep a USD-denomimated bank account. Why do people want USD instead of gold?

> I suppose the best historical corollary would be gold?

Not really a good analogy. The difference between gold and other forms of alternative currency, is the ease at which it can be transferred.

This whole situation only works, in the case where it is simple and easy to transfer between the deflationary, and non deflationary currency.

Obviously, the ease at which it is possible to transfer currency to other people, is an important factor as to why someone would or would not use a currency.

> if goods are priced in national currency, it's handy to keep your working capital in that same currency.

Not necessarily. If there are easy ways of instantly transforming your deflationary currency, automatically, without you having to do anything, into that other currency, then there is no need to hold that other currency.

> Why do people want USD instead of gold?

Obviously it is because it is pretty difficult to spend gold at your supermarket.

This isn't a problem though, if you have a cryptocurrency credit card, for example, that immediately turns your deflationary crypto, into USD.

Imagine we had some kind of credit card that was linked to VTI (and the market didn't have these silly business hours). When you charge the card, it automatically sells shares to fund your purchase.

Would you use that card? How does it differ from the scenario you described for Bitcoin?

I can make my whole life in some other currency and then purchase some national currency just for the purpose of paying taxes once a year.

Better buy some swaps to lock in your exchange rate.

> A good currency should be able to support the full range of social policies

This is not true. An infrastructure that does not even support oppressive policies can be (and often is) better. It’s similar to how it’s better that you can’t plug the USB wrongly.

> Don't keep it on exchange. The real thing that is stopping adoption...

The capital gains tax issue isn't stopping your average person from wanting to use Bitcoin. If we're being honest, how many people would be voluntarily reporting taxes on their Bitcoin purchases anyway? I suspect it would be similar to how many people self-reported the sales tax they owed on out of state online purchases before it was automated: Near zero.

The bottom line is that rational consumers like the features and services offered by traditional banks and credit cards.

If someone steals your credit card and spends a ton of money, you just call up the credit card company and get your money back.

If someone gets access to your Bitcoin wallet and takes all of your Bitcoin, that's it. Game over. Should have had better OPSEC, grandma.

Likewise, people don't want to manage wallet passphrases and key files themselves. They want an exchange to handle the details for them, including as much risk as they can move to the exchange.

The reality is that Bitcoin is still far and away an inferior experience to traditional payment methods. If I pay with Bitcoin, I have to deal with transaction fees and variable network delays and I have zero recourse if the vendor simply steals my money. With a credit card, the bank literally pays me 1-3% to use their credit card, payment is instant, and I can simply call the bank up and reverse charges if something goes wrong.

I don't understand all of these mental gymnastics to explain away Bitcoin's shortcomings for payments.

>> The capital gains tax issue isn't stopping your average person from wanting to use Bitcoin

How are you so sure? if I had to report and fill forms for every single transaction that I do, like say buying coffee or video games I would be put off with trying to use the currency. it is a way to cripple it's usage.

>> The bottom line is that rational consumers like the features and services offered by traditional banks and credit cards. >> If someone steals your credit card and spends a ton of money, you just call up the credit card company and get your money back. >> If someone gets access to your Bitcoin wallet and takes all of your Bitcoin, that's it. Game over. Should have had better OPSEC, grandma. >> Likewise, people don't want to manage wallet passphrases and key files themselves. They want an exchange to handle the details for them, including as much risk as they can move to the exchange. >> The reality is that Bitcoin is still far and away an inferior experience to traditional payment methods. If I pay with Bitcoin, I have to deal with transaction fees and variable network delays and I have zero recourse if the vendor simply steals my money. With a credit card, the bank literally pays me 1-3% to use their credit card, payment is instant, and I can simply call the bank up and reverse charges if something goes wrong.

I completely agree with these points. And I hope the ecosystem improves on these. Still the advantage of Bitcoin's fixed supply and it's ability to hold value vs fiat systems whilst it's capacity to also act as a currency is still something valuable. While it doesn't do everything the way horses (fiat) are now, it will get better as it is the car in the race.

> Don't keep it on exchange.

This advice has always made me chuckle. It so profoundly misunderstands how non-techies actually think and operate, that I genuinely wonder how it arose. Exchanges exist and are incredibly popular because they're convenient. If you want to convince people to stop doing something that you think is bad, you need to provide a more convenient alternative, otherwise your advice will be ignored.

Or provide the myriad examples of why "Don't keep it on exchange" is good advice[0][1][2]. But it's not up to the advice-giver to do the due diligence.

[0]:https://cryptosec.info/exchange-hacks/

[1]:https://coiniq.com/cryptocurrency-exchange-hacks/

[2]:https://selfkey.org/list-of-cryptocurrency-exchange-hacks/

You’re kind of sidestepping my point.

Yes, it’s a good idea to keep your coins off the exchange, for all the reasons you’ve provided. The issue is that keeping your money off exchange is far less convenient, which is exactly why most people keep their couns on exchanges despite the risks. If the Bitcoin community in general wants people to stop getting hacked on exchanges, they need to provide more convenient alternatives rather than just continuing to say “keep your coins off the exchange” and blaming users who get hacked for not following this advice.

It’s a bit like recommending that everyone not drive to avoid dying in car crashes. This advice is strictly speaking true; the less you drive the less likely you are to die in a car crash. But it completely ignores why people drive and therefore most people won’t listen. As a society we’ve decided that rather than asking people to not drive, it makes more sense to focus on making driving safer per mile travelled. This is a much more effective strategy at reducing driver deaths.

If some people like to leave their house unlocked because it's convenient it's not my duty to make them a more convenient door lock, it's quite enough to warn them about the dangers and let them make their own decisions.

It's not like using a wallet is hard or inconvenient, it's just an extra step, like reaching for your keys before entering your house.

But there can certainly be a business opportunity there, sure.

This is exactly my point. To you it seems so easy, you have no idea why others don’t do it. Yet the fact that others aren’t doing it enough implies that it isn’t easy for everyone else, which is why the repeated advice given to non-techies isn’t working.

> To you it seems so easy, you have no idea why others don’t do it.

Oh, I know, it's because they haven't tried using a wallet yet. That's the biggest hurdle, choosing one and actually setting it up. After that it's about as convenient as the exchange.

A lot of people trust exchanges way too much, and so they don't see a reason to do any extra steps until they get burned.

Could you give some use examples? As of 2018, Bitcoin still appeared to be basically useless as a day-to-day cash substitute: https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...

I guess it's not impossible that things have gotten better. But at least in my neighborhood and in the online merchants I frequent, Bitcoin adoption has declined. I think the last time I saw a Bitcoin logo on the street was August 2019.

I'd also be interested in statistics demonstrating that the consumer transaction volume is now nontrivial. Last I looked, M-Pesa had orders of more magnitude in use despite launching around the same time as Bitcoin.

What kind of things do you buy with it and where? I remember seeing some adoption back when steam started accepting it, but sometime later they stopped because it was too volatile. I thought paying fees for the transaction made bitcoin very unappealing as well. It's not anonymous either, so I just couldn't find a reason to use it as it didn't solve anything that I couldn't do with my credit card. And my credit card offers me protections against fraud.

Has anything changed that I should look into?

Last time I checked it was the only currency accepted by most dark markets.

> What kind of things do you buy with it and where?

Drugs, CP, cryptotrojan ransom, other crime related transactions.

Bitcoin value is directly related to relevant criminal activity.

Huh. Didn't know these were all the main exports of Nigeria

Dollar is STILL the king of criminal activity, money laundering, kidnapping, ransom ... it will take awhile for the shift to happen.

I didn't say all criminal activity is done via bitcoin. But there are segments of crime like cryptotrojans and CP trading that seem to be almost exclusively bitcoin-based. Others, like internet drug ordering, are at least partially in bitcoin.

Edit: replaced "any" with "all" in the first sentence

yeah, agreed some new type of activities were using bitcoin... but after some of these gangs were busted they seem to be switching to monero...

Its very risky to buy with bitcoin if you are in a jurisdiction that makes drugs illegal. I think still cash is king in those places.

I thought the Euro was taking over thanks to the 500EU note?

They are not printing any more 500EU notes, but they do remain legal tender for now. They might start being worth more than 500EU over time. Seems like a good note to keep your cash savings in if you live in Europe.

Decline of cash is really a shame. When the $100 was introduced it was worth about $2k in today's dollars, and in my lifetime even it was worth almost $300

Yea. When buying a used car it is a pain to count out all those $100 bills. $500, at least, would be nice.

These are all terrible uses of Bitcoin, as mentioned in the OP. All transactions are publicly visible in an immutable database. With a little investigation, law enforcement can find out who owns certain accounts and trace transactions very easily from there. If you are a criminal, you want no paper trail whatsoever, which is why they use paper money.

Bitcoin is pseudonymous if you take enough precautions i.e. always use tor, only use addresses once, coin join everything before converting.

I guess that’d work if you’re the guy from White Collar or something, but I’m not sure your average criminal would have the attention to detail and knowledge to get that all right. And one misclick or bug can pretty much seal your fate.

You are right though that you can take measures to make it much more difficult to trace.

Precautions on that or higher levels of expense and complexity, like burner phones, dead drops, networks of couriers, cell and gang org structure are standard procedures in organized crime. Un"organized" single small criminals might have a larger fraction of bad opsec, but they aren't all stupid.

A few will be caught by making mistakes, but the rest will learn from that. Criminal methods undergo evolutionary pressure.

Never heard of crypto mixing obviously

What happens when the NSA hacks the mixing services or congress passes a law forcing them to store information for law enforcement? Surely the mixing services know at least for a certain amount of time where the coin is coming from and going to.

I think those laws might already exist, imho anonymous mixing could be prosecuted under the relevant money laundering laws.

I buy computer hardware (SSDs, network switches etc.), recently bought t-shirts and etsy like stuff on gethaven.app

Bitcoin has always been pseudoanonymous and its perma history is something that I am aware off and not that bothered off. Though looks like the bitcoin devs are working towards something to improve privacy called taproot and schnorr.

The thing that it solves for me compared to traditional fiat currencies is that it retains its value very well over a period of time. some of the bitcoin stuff I bought long back and spent it on hardware now means I got the hardware for nearly more than 500% cheaper if I had chosen to hold it in dollar or other fiat currencies.

Fiat currencies are a liability (depreciating value) if you are not constantly trying to invest them just to keep their value from crashing due to accelerating money printing/inflation.

I think you might be one of a small handful of people that I've heard from that continue to use BTC as a currency for goods over the past few years. It's good to know that this still happens!

Out of curiosity, you mention depreciating value for fiat being a liability, which is absolutely true. That being said, doesn't appreciation also create a different sort of liability?

For example, let's say I buy a 1TB SSD for $60 worth of BTC on Monday, and then that same amount of BTC is worth $75 on Friday. In theory, would it be reasonable for me to feel like I've overpaid?

Of course in this scenario, I pay for rent, food, taxes etc. using fiat, so I'm exposed to the difference in conversion rates. I suppose if I lived somewhere where I could transact wholly in BTC for everything and its value wasn't in any way tied to a fiat currency and the value of goods and services were negotiated in BTC in a way that's entirely decoupled from market value on exchanges, this wouldn't be an issue for me. Is this possible?

What you are describing is basically how any fiat currency is used, so it's definitely possible to live in bitcoin land. The issue is that price fluctuation for bitcoin is so extreme, not that you can buy other currencies with it.

If on Monday 1 USD buys 1 EUR and on Friday it buys 2 EUR you would have "overpaid" as well for many goods that you could have imported and maybe more directly if you had invested in EUR denominated securities etc..

Well, instead of a liability, it could also be a feature. A mechanism that allows people by choice to reduce consumption, thus lowering their ecologic footprint.

Actually there is a big wave of people using Bitcoin powered Visa cards right now to buy stuff

Go lookup currency deflation and what happens at the end. The transaction rate is to low and the energy use is to high to be useful. We are near the end stage when people and institutions start hoarding it.

The current problem in fiat money is what the new money is funding. This is a society/government policy choice and isn't an inherent flaw in fiat money. In the west the money is primary used to boost asset prices instead of used for production.

The Lightning Network doesn't solve the congestion problem for global adoption. To open a lightning channel you need an on-chain transaction. The same is true to close one. Assuming 2,500 transactions per block, you will need ~970 days to just open a lightning channel for each US citizen (assuming 350 million citizens and no other Bitcoin transactions).

Due to his limitation the Lightning Network is unsuited for any large scale use outside of exchanges.

>Assuming 2,500 transactions per block, you will need ~970 days to just open a lightning channel for each US citizen (assuming 350 million citizens and no other Bitcoin transactions).

>Due to his limitation the Lightning Network is unsuited for any large scale use outside of exchanges.

But do we need to onboard everyone everyone in a year? It's like saying the internet will never scale because modem manufacturers can't keep up.

I'm mostly guessing at this because I'm not very familiar with Lightning Network, but I think they'd need to be closed out periodically as well in order to settle up? Plus, I think you'd ideally want an account with each vendor that you deal with, not just one account, otherwise I think the channel would probably need to be managed by some central authority who manages the accounting between you and whoever you're keeping these side accounts with, which seems not great for a number of reasons....and then on top of that there's that 350 million is just one country, let alone the entire planet.

>I'm mostly guessing at this because I'm not very familiar with Lightning Network, but I think they'd need to be closed out periodically as well in order to settle up?

AFAIK they can be kept open indefinitely.

>Plus, I think you'd ideally want an account with each vendor that you deal with, not just one account, otherwise I think the channel would probably need to be managed by some central authority who manages the accounting between you and whoever you're keeping these side accounts with

The whole point of lightning is that you can use the network to route money between nodes, so you could make payments even if you don't have a channel open with the person you want to make payments with. It's not unlike how international wires work. If you bank with a local credit union in country A and you want to wire money to another local credit union in country B, the wire might bounce between multiple "correspondent banks" eg. credit union A -> big bank A -> big bank B -> credit union B.

https://blockonomi.com/channel-factories-bitcoin-lightning-n...

Now they reinvented credit cards. Cryptocurrencies are really speedrunning financial history.

That a German seller doesn’t charge VAT does not imply that you do not have to pay VAT.

You may have to inform your tax office about the purchase, after which it will send you an invoice for VAT (happens for ‘normal’ bank transactions, too.)

https://europa.eu/youreurope/business/taxation/vat/vat-rules...:

“For EU-based companies, VAT is chargeable on most sales and purchases of goods within the EU. In such cases, VAT is charged and due in the EU country where the goods are consumed by the final consumer. Likewise, VAT is charged on services at the time they are carried out in each EU country.

VAT isn't charged on exports of goods to countries outside the EU. In these cases, VAT is charged and due in the country of import”

It's called "reverse charge". If there is a general tax agreement between your country and the EU, no VAT becomes due at the country of origin (of goods and/or services), but you are supposed to declare the purchase locally and pay local VAT, if applicable. There's also usually a marginal sum, below wich goods and services are free of charge (the sum of it, which includes any postage), about EUR 20.

(Mind that this mechanism requires tax or VAT IDs on both sides of the transactions, which are to be declared.)

Serious question: Bitcoin being subject to deflation, why would you spend it? Sort of like the $82 million pizzas [1]

1. https://qz.com/1285209/bitcoin-pizza-day-2018-eight-years-ag...

Bitcoin is inflating, and will for 130 more years, though it is seeing increased adoption and is riding in price.

But in answer to your question,I’m glad you picked food fir your example— would you starve to hold onto your bitcoin?

Is your computer ten years old because next year better ones will come out? Or did you bite the bullet and upgrade because your time preference made it worthwhile?

It is true, deflation encourages savings, but that is the essence of capitalism, savings keeps people better able to avoid poverty in the event of a bad year, and capital accumulation makes you more able to do a startup and retain control.

Part of the reason there is so much VC money is inflation (VCs get new dollars cheap and carry trade through startups)with a hard currency like bitcoin the fotmula would be reversed, and founders would retain more ownership.

That's $300 million today, which illustrates your point further.

Why do you believe there should be no capital gains on it?

because you can't use it as a money if you need to pay capital gains on every stick of gum you buy. they should find other ways to collect taxes that doesn't inhibit it.

If you held any other foreign currency you would have to track it like this. For example, I live in Canada and if I bought USD and then spent it over the course of a year in Canada I would be responsible for the capital gain tracked on each expenditure based on the day's exchange rate. It's hard to see how Bitcoin should be any different.

because the goal would be to have bitcoin be an international money, not a national one. i'm not saying people shouldn't pay taxes, i would just suggest that there are better ways to collect it such that it doesn't inhibit progress. as it exists right now it is infeasible to use bitcoin as money day to day and accurately report your taxes.

There's an exemption for foreign currencies that does not apply to cryptocurrency.

Or subject to VAT...

Possibly funny thought: If you have to declare a capital gain on every BTC purchase of a cup of coffee, why can't you declare a capital loss every time you spend dollars that you earned long ago, and which have decreased significantly in value since then, due to inflation?

Serious answer: In the US, capital gains and losses are defined relative to the US dollar.

you can and would declare capital losses on gold sold at a loss. Cash does not have gains/losses, as they are themselves the unit of accounting.

The inflation effect causing cash to lose value is something you suck up - it's incentive to invest the cash.

US cash doesn't have gains/losses, but assets held in foreign currencies & converted to USD are subject to capital gains/losses.

Technically yes, the same rules apply as if you were trading in any international currency. If you sell yen at a profit to convert to USD & purchase something, you owe tax. What sort of tax can be complicated depending on how long the asset was held. I'm not an accountant, but I think assets held less than a year are taxed as personal income, so marginal rates apply. Assets held longer than a year are, I believe, taxed as regular capital gains.

I'm not sure what would/should happen with extremely short term trades, i.e, you convert to Euros from USD for a vacation, the USD crashes, you convert back upon return from your vacation. I doubt the IRS worries too much about it, but I suppose technically you should file Form 8949 along with a Schedule D.

The responses are valid as far as they go, but the larger point is that the government in a jurisdiction is free to inflate its own currency at great benefit to itself while simultaneously extracting taxes on fictitious "gains" of other currencies or equivalents (like BTC) against that currency.

> 2017 period when fees were high

Current fees are 8$. That's still too high

They want the USD to stay king of currencies...

Yeah, that is explicit US policy, and implicitly supported by most other nations that have significant debts and reserves denominated in USD.

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