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Comment by ketamine__ | Hacker News Reader

It's magic until you realize you need to spend $15 to get off chain to buy a coffee. And then you realize you aren't ready to commit a bunch of cash to a speculative currency (or investment) so that you can buy coffee.

Also, you will need to file taxes for your coffee if your bitcoin goes up after you bought it. Fun!

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You may have been downvoted for a snarky tone, but this is the first time I've seen it mentioned here - bitcoin is taxed as a commodity in the US, each exchange is a capital gain or loss.

This is the poison pill for BTC in my opinion. I have a very small amount of BTC and this is the primary reason I don't have a larger investment, don't make more of an attempt to use it as currency, etc. The central banks/governments aren't going to give up their power so easily. They may have low-key destroyed crypto by considering them commodities.

The only way crypto can win* is if a plurality of people just choose not to follow the tax laws. It has to be enough people that it becomes unenforceable.

win* in this case is defined as being a 1st order currency largely unencumbered by central banking/government authority.

You can just borrow against it to spend it. No tax whatsoever and you hold on to your asset.

How do you eventually repay that loan (or at least pay interest)?

Guessing: you can sync up once a year (or even once every 5 or 10 years) and pay taxes on that transaction at that day's price.

That's ok if you are happy with shifting the tax date. I can definitively see how this decreases the accounting burden but not the tax burden.

>The only way crypto can win* is if a plurality of people just choose not to follow the tax laws. It has to be enough people that it becomes unenforceable.

That's impossible if you spend your Bitcoin via Visa.

If you buy euros with dollars, keep them, then buy dollars back, is that lunged as capital gain/loss?

In short, yes, in the US, with a few exceptions.

I believe currency trading has special tax treatments distinct from commodities.

https://www.investopedia.com/articles/forex/09/forex-taxatio...

The idea is to never go off-chain, so no need to close your channel(s). And aren't you already committing cash if you're "in" bitcoin?

The tax filing doesn't sound so bad in the long run. I'm sure someone will write some nifty tool to extract whatever payments you've done.

Arguably, the tax filing sounds like the single worst part of it. Imagine if you really used Bitcoin for every purchase you make in a normal tax year. Suddenly how much you pay in taxes depends on the path integral of the exchange rate over the entire period. That's an absolute accounting nightmare. Now you have a huge incentive to batch all of your purchases at market low points to minimize tax burden and you're stuck trying to beat the market just to buy groceries. That isn't something I want to have to think about.

Fair enough, that’s why I wrote ”in the long run”. Also, there’s always the option of moving somewhere that doesn’t have this issue. Well, unless you’re from the US and must file taxes even when you’re not even in the country, I suppose.

Some exchanges will let you withdraw to a lightning wallet so you never have to interact with the base blockchain layer for smaller day-to-day transactions.

I would imagine most exchanges will have similar lightning withdrawal options in the future, if there's demand for it.

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