This issue I'd like to discus today is two-pronged: a double-edged sword if you will. It's starts with the need to respect one's elders and ancestors, and ends with the reasons why. Nope, that's backwards... let's do this.
Start this off with a bang.
So let's say Hive and/or LEO goes x100 and my upvote spikes to some absurd level. Obviously such events will get the interest of the tax-man. How are those scenarios going to play out?
So many lawsuits... so so many.
This is why I always make the claim that privacy coins are going to play a huge role in the cryptosphere in the future. Why? Because it's literally impossible to pay taxes 100% legally in certain contexts.
This is to say that paying taxes will easily be possible and the IRS won't ask questions 99% of the time, but if they have any reason to mess with you there is absolutely no way to avoid it. For example, I was once pulled over by a police officer for not signaling 100 feet before turning. The problem? The stretch of road I was driving on was less than 100 feet long. I was pulled over and scrutinized under false pretenses.
The IRS is going to pull the same bullshit as crypto becomes more mainstream. They usually don't have to obey the law because they are the law. The speed at which crypto is moving is going to straight up blow tax laws out of the water and no one is going to even know which way is up.
Seriously, think about it...
We are all creating money out of thin air... every day... usually at least ten time a day. Half of that money is getting kicked back to us, often times as a frozen asset (VESTS) that don't even have a market value. All of this money we are creating doesn't even have a stable value because of extremely thin liquidity issues.
Let's rewind
Already the system I have described is too complex for tax laws. What about all these DeFi applications, collateralized debt positions, yield-farming, etc etc? It's becoming very clear that what's being built here is completely out of the purview of the legacy economy. Why should we have to pay taxes in USD of an asset that has nothing to do with USD?
Free-range Humans.
How does that make sense? Probably because citizenship is slavery; now that does make sense. This concept will only have more and more light shined on it over time as the way the world works continues to make less and less sense.
Traditional Corporation
In order to ground ourselves back to reality, let us take a few steps back to the legacy economy. How do corporations do it?
- They have products and/or services.
- They generate an income from said products/services.
- They use that income to pay employees that 'automate' this system of logistics and profits.
- They pay their taxes based on declaring profits and losses... unless they can get away with not paying taxes like so many big businesses do... so many loopholes...
- All employees pay income tax and the corporation is legally obligated to declare these wages to the IRS.
As a general rule, a business can claim a tax deduction for the salary, wages, commissions, bonuses, and other compensation it pays to its employees. However, compensation paid to business owners may be subject to serious scrutiny by the IRS.
Sound about right?
Okay, so employees are a business expense, and that expense can be declared as a loss to avoid being required to pay taxes on it. IRS doesn't care, as income tax for employees is out of control, funding broken systems like Social Security that were meant to be temporary band-aids as far back as the Great Depression days and the WW2 era.
Getting off topic...
But how does this work on Hive? Imagine I'm a "business owner" and I'm "paying employees" on Hive. Making cool dapps and whatnot. What if the value of Hive spiked up so high that I could just pay my "employees" by upvoting them? Think about that for a second.
Because in the legacy economy, all USD is the product of private bank called the Federal Reserve (nice name pick, not misleading at all). So when a corporation pays its employees in USD... that USD never actually belonged to them. It was all part of this crazy system that we live in where every dollar in circulation is owed back to the FED, with interest. The debt is just being moved from one entity to another.
On Hive, if I'm paying my "employees" with upvotes... I'm literally a central bank airdropping newly printed money that didn't even exist before. Considering the government won't even admit that cryptocurrencies are currencies in a legal sense, but instead property, we can see how quickly the law can just spiral out of control into the realm of absurdity.
Why are you calling them "employees"?
Because what if instead they are "volunteers"? That completely changes in the law. Poker clubs in Portland are filled with "volunteers". That's how they get around gambling laws. There's a $10 cover charge to get in, zero rake, and the dealers only get paid in tips.
This business model circumvents the gambling regulations and allows poker rooms in Portland to flourish. Seriously though Ace Players Club was amazing and I think it's still around today. So easy to make money with zero rake (only $10 per day cover). Meanwhile, go into a cardroom in Vegas or anywhere else and they are raking $3-$5 out of every single pot. That money adds up quick.
Please stay with me...
Okay so I run a "business" on Hive... I'm paying my "employees" with upvotes like I'm a central bank. Can I then declare those upvotes as a loss on my taxes? What about the kickback that appears inside my wallet as VESTS? Is that even money? I can't sell VESTS on any market until I convert them with a smart-contract back into Hive.
How do big delegations play in to all these variables?
What if I payed for the delegation?
What if I didn't?
Think any of this is going to get less complicated over time? Ha! In ten years this is going to be a thousand times worse with everything that's going on. Crypto tech will continue to explode out of control and the regulators will be constantly scrambling and engaging in crazy lawsuits that don't even make sense just like when the music industry got upended by torrents and file sharing. Except this time it's not the music industry being upended... it's the central banks and governments... and those guys are about a million times scarier than anyone in the music industry.
The point?
Everyone wants crypto to moon, but no one realizes how much work and emotional distress and fighting it's going to take to get there. Do we really think these dinosaurs are just going to roll over and die and let us eat their lunch? Get real. These people are dangerous.
Just like with the music industry and torrents, the top 1% offenders will be paraded into court and be made examples of to instill fear into the population and deter folks from entering this new economic system. Where does that leave us?
Most of the valid altcoins out there are going to outperform Bitcoin during this next mega-bull run, but that doesn't mean we shouldn't own any. Bitcoin's main function is to remain censorship resistant, secure, and resistant to attack. I had to learn this the hard way.
When we get into the cryptosphere and start digging deep, Bitcoin is just the boring grandpa telling us to "not spend it all in one place". Yeah yeah gramps, whatever. Your fees are high and you've got ten minute blocks: I'm over it.
For every reaction there is an equal and opposite reaction. During the next mega bubble there will be huge waves of FUD and pushback from the regulators that will make what's going on today look like a joke.
Imagine Bitcoin at $400k. Imagine how much that will threaten certain powerful individuals and even entire institutions. Powerful people that have lobbyists and have been manipulating laws for generations to their own advantage... does it really need to be imagined? These scenarios are playing out all the time on a day by day basis. Those in power use that power to stay in power. Full stop.
Order of operations.
If you're bullish on LEO, you have to be bullish on Hive. LEO is a derivative of Hive unless it spins off and creates its own chain (extremely unlikely in the short to medium term). If you're bullish on Hive/LEO, you should probably be bullish on Ethereum as well. If you're bullish on Ethereum, you should also be bullish on Bitcoin.
What I'm getting at here is that it's wrong to get greedy about this and only support some niche altcoin thinking it's going to have the most financial gains over the coming year or whatnot. Especially in the case of LEO, how can you not also be bullish on Ethereum? The price of LEO has been dead-pegged to ETH for a while now. We are riding those coattails hard.
However, if nothing else, everyone in this space must be bullish on Bitcoin. The projected competition among crypto networks is just that: an illusion. There is no ______ killer. The real enemy is fiat and the legacy economy. They are the real competition.
So when the legacy economy comes in and tries to attack this space, what is the strongest network out there that will protect all the other networks? That's Bitcoin. Bitcoin is the Anchor of this ship. Gratitude and respect is a requirement.
You'll be thanking granddad when he stops your network from getting absolutely destroyed. In fact, this is likely already happened and we just haven't realized it yet (and likely never will). A lot of this stuff happens in the background and no one will ever know about it or how it would have went down if things were different.
Bitcoin opened the floodgates
I've talked about several times, but digital currency is nothing new.
You know what is new? Bitcoin.
Back during the Dot Com bubble digital currencies were also trying to take root. Do you know what happened to them? They were immediately destroyed by central banking via the regulators. Now digital currencies that were just as centralized as those ones back in the day, that got swatted down immediately, are much harder for the regulators to get rid of. Just look at XRP.
Even if Ripple Labs got completely destroyed, XRP would still survive. Communities can't get killed like corporations can, because, like crypto itself, they are decentralized and don't take kindly to being destroyed. In fact, we've seen this play out countless times already: communities under constant assault have a tendency to get stronger over time, not weaker like many would expect. This is an evolution. Humanity is adapting.
The scaling solution we've been facing for generations has been solved, and its implementation is accelerating.
Bitcoin Protector
Bitcoin is acting as a shield for every other project. Think LEOfinance or any other HiveEngine coin could exist without Bitcoin or blockchain technology? Think again.
Again, it's easy to get greedy in this situation, but we shouldn't. It's easy to engage in tribalism and say things like: "My tribe is the best tribe, fuck your team, we are the winners you are the losers."
But that's exactly what crypto is not about. This is about abundance for everyone and scaling up humanity's tribalism to sustainable levels: something that corporations and governments have been struggling to do since inception, and failing miserably in the most predictable ways, over and over again.
Conclusion
What is crypto? Is it currency? It is property? Can upvotes to other users be declared as a business expense and a tax write-off? How can we determine worth when the liquidity is so thin? When does a crypto have value? Isn't the initial worth of all airdrops $0 because there is no market? What are the rules for giving myself a loan permissionlessly? What happens if Biden implements unrealized tax laws that make no sense in the context of crypto? What happens when my crypto of choice develops so explosively that it falls under intense scrutiny from the government?
The answer to all these questions and more?
YOU BETTER OWN SOME BITCOIN! Because if you don't have an anchor you will be swept out to sea. I guarantee it.
@edicted how did you do it?! How did you become a Hive whale?
Ah well that's easy, sonny boy!
I stacked dem sats.
Aw shoot I can't afford BTC; too expensive.
#facepalm
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Return from Respect Your Elders: Upvotes Facilitate Legalized Tax-Evasion to edicted's Web3 Blog
