Author [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] Topic: How governments can control Proof of Work overnight by taxes.  (Read 443 times)

0 Members and 1 Guest are viewing this topic.

Offline luckybit

How governments can control Proof of Work overnight by taxes.
« on: September 01, 2014, 05:15:22 AM »

Proof of Work has a single point of failure around chip/hardware makers.

Assume for a moment the metaphor that computation resources are "the land". The land is the true wealth of the cryptocurrencies like Bitcoin, Litecoin, Storj, etc.

While governments cannot tax what we have on our land, they can tax the land itself.

All governments have to do to control Proof of Work is tax the computation resources which make up the land. So there is no way to avoid taxes because they can tax the chips we use to generate Bitcoins which effectively gives them a percentage of ownership of whatever is produced by those chips.

They can't do this with Proof of Stake. They know with Proof of Work the miners are in an arms race where they always have to buy the latest chips so they can raise taxes as high as they like on the certain chips but not others so as to influence which cryptocurrency gets used. Effectively if we assume the winners are the cryptocurrencies which get taxed least then in my opinion a special purpose ASIC chip which does nothing except mine Bitcoins/Litecoins is certainly the easiest to be taxed the most.

You tax general purpose chips and you effect the entire economy. So Intel/AMD chips will never be taxed. You tax ASICs and the only people who suffer are the cryptocurrency community of miners who use that particular chip. The chip isn't good for anything else so it would be just like taxing cigarettes.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline bitmeat

  • Hero Member
  • *****
  • Posts: 1116
    • View Profile
Re: How governments can control Proof of Work overnight by taxes.
« Reply #1 on: September 01, 2014, 05:19:47 AM »
You are mistaken if you think they care about a measly $10B being taxed.

They want to track who does what. It's about information. If they do a tax on mining it would be so they can track who is doing it.

Offline luckybit

Re: How governments can control Proof of Work overnight by taxes.
« Reply #2 on: September 01, 2014, 05:23:41 AM »
Governments can enforce computation taxes and then Proof of Work is no longer very desirable compared to Proof of Stake due to the wasteful computation requirements.
You are mistaken if you think they care about a measly $10B being taxed.

They want to track who does what. It's about information. If they do a tax on mining it would be so they can track who is doing it.

They already make us pay capital gains taxes. It's about control and also the fact that certain more established industries might want to pick and choose the winners in the wild west cryptocurrency environment.

What if the establishment decides that Bitcoin isn't going to win? All they have to do is push the tax authorities to tax ASICs and Bitcoin is finished overnight. All miners will pay the tax or be arrested.

Proof of Stake isn't so easy to tax. Bitcoin is easy to tax because all the ASICs are made in certain countries and all of these countries can be taxed. On top of that the chip marking or resource producing companies can all be extorted if they move to countries with less government surveillance, less police, less regulation.

I don't think governments are so worried about tracking everyone. All of us posting on this forum are likely already tracked. I think governments are after control and that means taxing anything which makes people rich. If you look at the history of government it's always set up like that.
« Last Edit: September 01, 2014, 05:28:34 AM by luckybit »
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline bitmeat

  • Hero Member
  • *****
  • Posts: 1116
    • View Profile
Re: How governments can control Proof of Work overnight by taxes.
« Reply #3 on: September 01, 2014, 05:40:17 AM »
LOL if you think 100 delegates couldn't be tracked down, extorted and/or bribed to comply with their demands.

Offline luckybit

Re: How governments can control Proof of Work overnight by taxes.
« Reply #4 on: September 01, 2014, 05:48:01 AM »
LOL if you think 100 delegates couldn't be tracked down, extorted and/or bribed to comply with their demands.

100 delegates don't all rely on the same chip design, aren't all in the same country, don't all speak the same language, etc.

Also delegates already will be paying capital gains taxes so the tax approach would not work unless somehow every nation in the globe decided to tax delegates and treat them as money transmitters. In any case delegates would be able to move while the chip making companies can be anywhere in the world and when you buy the chip it would be taxed.

A tax on CPUs for example means that particular CPU would be taxed no matter where it's sold from. If you're an American and you're buying that CPU then you pay the 10% tax.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

drekrob

  • Guest
Re: How governments can control Proof of Work overnight by taxes.
« Reply #5 on: September 01, 2014, 05:59:15 AM »
If governments would tax computing power they would punish all the other industries and personal use of computers as well. I even think bitcoin miners are those, who could most easily pay those taxes as they have directly related income and hashpower/price always ends up in the right place while it would hurt the other 99% of computer users a lot.
Also governments don't manage to cooperate on much more important tasks, so i yet have to see how they tax computing power all together.

Offline luckybit

Re: How governments can control Proof of Work overnight by taxes.
« Reply #6 on: September 01, 2014, 06:01:52 AM »
If governments would tax computing power they would punish all the other industries and personal use of computers as well. I even think bitcoin miners are those, who could most easily pay those taxes as they have directly related income and hashpower/price always ends up in the right place while it would hurt the other 99% of computer users a lot.
Also governments don't manage to cooperate on much more important tasks, so i yet have to see how they tax computing power all together.
ASICs make it very easy to tax a specific industry.

Which industry uses Bitcoin ASICs? Only the Bitcoin industry. Which industry uses Litecoin ASICs? Only the Litecoin industry. And it's only used for the purpose of generating money so taxing it makes a lot more sense.

Governments don't have to cooperate. If you're a US citizen the IRS could simply say they are taxing ASICs and everyone who purchases an ASIC from the United States will pay the tax. Dell will cooperate with the IRS, so would Amazon, or anyone else.

What you say would have remained true if Bitcoin remained generated on general purpose CPUs. Now that it's centralized around ASICs which are useless except for generating Bitcoin it's easy.
« Last Edit: September 01, 2014, 06:03:57 AM by luckybit »
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline emski

  • Hero Member
  • *****
  • Posts: 1283
    • View Profile
    • http://lnkd.in/nPbhxG
Re: How governments can control Proof of Work overnight by taxes.
« Reply #7 on: September 01, 2014, 06:12:27 AM »
Increasing the cost of mining will increase proportionally bitcoin price.
If the government want to tax anything they just do as they do now: mandatory customer identification when selling goods or cash.
And then the taxing is easy.
Do you really believe noone can find if you've bought something with bitcoin ?

Offline luckybit

Re: How governments can control Proof of Work overnight by taxes.
« Reply #8 on: September 01, 2014, 06:31:05 AM »
Increasing the cost of mining will increase proportionally bitcoin price.
If the government want to tax anything they just do as they do now: mandatory customer identification when selling goods or cash.
And then the taxing is easy.
Do you really believe noone can find if you've bought something with bitcoin ?
No I'm not talking about taxing Bitcoin users because thats not the source of power. The source of power are the Bitcoin generators and that is what will be taxed.

There is no need to try to find out what users are doing if the miners are taxed and they have the vast majority of current and future Bitcoins. If they want to track the Bitcoins they could color the coins but I don't think it matters much when it's small amounts of money.

https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline emski

  • Hero Member
  • *****
  • Posts: 1283
    • View Profile
    • http://lnkd.in/nPbhxG
Re: How governments can control Proof of Work overnight by taxes.
« Reply #9 on: September 01, 2014, 06:37:14 AM »
Increasing the cost of mining will increase proportionally bitcoin price.
No I'm not talking about taxing Bitcoin users because thats not the source of power. The source of power are the Bitcoin generators and that is what will be taxed.

There is no need to try to find out what users are doing if the miners are taxed and they have the vast majority of current and future Bitcoins. If they want to track the Bitcoins they could color the coins but I don't think it matters much when it's small amounts of money.



Offline luckybit

Re: How governments can control Proof of Work overnight by taxes.
« Reply #10 on: September 01, 2014, 07:00:31 AM »
Increasing the cost of mining will increase proportionally bitcoin price.
No I'm not talking about taxing Bitcoin users because thats not the source of power. The source of power are the Bitcoin generators and that is what will be taxed.

There is no need to try to find out what users are doing if the miners are taxed and they have the vast majority of current and future Bitcoins. If they want to track the Bitcoins they could color the coins but I don't think it matters much when it's small amounts of money.



It's not a fact that the cost of mining is the cause of the Bitcoin price. Correlation is not causation.
It costs more to mine now than ever but the price is only in the $500 range.
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

Offline emski

  • Hero Member
  • *****
  • Posts: 1283
    • View Profile
    • http://lnkd.in/nPbhxG
Re: How governments can control Proof of Work overnight by taxes.
« Reply #11 on: September 01, 2014, 07:20:02 AM »
That statement is difficult to prove "Increasing the cost of mining will increase proportionally bitcoin price".

"It costs more to mine now than ever but the price is only in the $500 range." - The price is not solely dependent on mining cost. It is stable now and this is the highest stable position WITH the highest cost of mining.

If some government taxes miners - then just in that county there will be less miners.
Even if the whole world imposes taxes on miners that means the network will still be more secure (as the cost of mining is increased).
Governments can control bitcoin even without taxing miners. However I doubt that they see $30 mil daily world trading volume as significant.

drekrob

  • Guest
Re: How governments can control Proof of Work overnight by taxes.
« Reply #12 on: September 01, 2014, 09:52:56 AM »
you are right about the asics, but even if all governments would find some odd way to tax something so specific it would only mean back to GPU mining.

Offline santaclause102

  • Hero Member
  • *****
  • Posts: 2486
    • View Profile
Re: How governments can control Proof of Work overnight by taxes.
« Reply #13 on: September 01, 2014, 10:05:03 AM »
No need for taxation. Forbidding it would be more effective and similarly difficult/easy to pass as a law.

Offline luckybit

Re: How governments can control Proof of Work overnight by taxes.
« Reply #14 on: September 01, 2014, 10:10:26 AM »
you are right about the asics, but even if all governments would find some odd way to tax something so specific it would only mean back to GPU mining.

If we could go back to GPU mining why aren't we doing it now? ASICs don't serve any particular purpose.
No need for taxation. Forbidding it would be more effective and similarly difficult/easy to pass as a law.

Forbidding it doesn't give government control over it. Taxing the generation of Bitcoins means it's controlled because governments will have the majority of Bitcoins sooner or later. That is even better because then they could use the technology for their own purposes.
That statement is difficult to prove "Increasing the cost of mining will increase proportionally bitcoin price".

"It costs more to mine now than ever but the price is only in the $500 range." - The price is not solely dependent on mining cost. It is stable now and this is the highest stable position WITH the highest cost of mining.

If some government taxes miners - then just in that county there will be less miners.
Even if the whole world imposes taxes on miners that means the network will still be more secure (as the cost of mining is increased).
Governments can control bitcoin even without taxing miners. However I doubt that they see $30 mil daily world trading volume as significant.

Some miners would move from country to country. But suppose they move to one of those strange countries where it's not taxed? I guess now the miners will be paying the local mafia or street gang a protection fee.

I don't see how miners will be able to avoid taxes of some form from some kind of government. If it's Proof of Work it's easier to tax because hashing power is neatly centralized and isolated to a specific use-case industry.

With delegates it's harder because we elect them. If someone were trying to extort our delegates we could start electing the sort of people who are well protected and harder to extort. No guarantee that it would work but I think it's a lot harder than miners who we don't even elect which means some really fragile individuals could be in key positions.

Generally with delegates if we find out someone is being extorted then we fire them, replace them with people who aren't, and increase the diversity. I think to  certain extent anyone can be extorted or blackmailed out of their position with enough effort but I think DPoS is more expensive to do that than Proof of Work.

Considering you'll be paying capital gains taxes as a delegate then whichever government you live in will have law enforcement who can offer you some protection. Delegates are in a position where they will be paying taxes to whoever is in power, but they aren't in a permanent position of power so if we needed to we could let delegates move to where they are taxed the least.

If Proof of Work mining were to try to move you'd be assuming people wouldn't mine because of taxes? People mine even with higher electricity costs so if they eat those costs they'll eat government taxes as well. If governments like China really wanted to be slick they could tax the companies that create the chips a production tax which would effect everyone because it seems a lot of chips come from China and most of the hashing power is in China.
« Last Edit: September 01, 2014, 10:20:59 AM by luckybit »
https://metaexchange.info | Bitcoin<->Altcoin exchange | Instant | Safe | Low spreads

 

Google+