Wednesday, 31 May 2017
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A Bitcoin Beginner’s Guide to Surviving the BIP 148 UASF
This is a re-write of A Bitcoin Beginner’s Guide to Surviving a Coin-Split, specifically addressing issues associated with the upcoming BIP 148 UASF.
There is a chance Bitcoin will experience a chain-split on August 1st. A segment of all Bitcoin users is committed to activate a user activated soft fork (UASF) as described in Bitcoin Improvement Proposal 148 (BIP 148). Specifically, they will reject any Bitcoin blocks that do not signal support for Segregated Witness (SegWit), the centerpiece of Bitcoin Core’s scaling roadmap.
If a majority of miners (by hash power) does not signal support for SegWit on August 1st, but at least some do, Bitcoin’s blockchain will split in two. In that case, there would be two types of Bitcoin tokens, which we’ll refer to in this article as “148 BTC” for coins on the soft forked chain, and “Legacy BTC” for coins on the chain that did not activate the soft fork.
The good news is that each bitcoin would effectively be copied to both chains. If you hold bitcoin right now, you will hold both 148 BTC and Legacy BTC after the split.
The bad news is that this coin-split can be messy and risky. And if you’re not careful, you could lose funds.
This guide will provide you with the basics to keeping your funds safe during the UASF and will help to make sure you make it to the “other side” with all your bitcoins intact.
Author’s note: If you want to play the 148 BTC/Legacy BTC markets as soon as possible and you are fine with taking risks, and/or you really know what you are doing, this article is probably not for you: It’s a beginner’s guide.
Before August 1
First off, be aware that a chain-split can be a high-risk situation. There is a chance that some sort of cyber-battle will break out between the two camps, perhaps even escalating to the point where bitcoin’s exchange rate(s) drops sharply, possibly to zero. Make absolutely sure you are not holding more value in bitcoin than what you are willing to lose.
If you do decide to hold onto your bitcoins, the single most important piece of advice is this: Ensure that you control your own private keys.
If you are storing your bitcoins on an exchange, in a custodial wallet like Coinbase, Circle or Xapo, or on any other service that holds your private keys for you, you may or may not eventually receive coins on both ends of the chain. In fact, if these kinds of services aren’t well-prepared, there could be scenarios where you don’t get any coins at all. So far, no exchanges have given any kind of guarantee.
So if you’re using any of these kinds of services to store your bitcoins, you need to create your own wallet. Send your bitcoins to one or several Bitcoin addresses in this new wallet. This wallet now holds your private keys.
What kind of wallet you use is up to you. That said, here are some basic solutions:
If you don’t care about transacting with bitcoin (either 148 BTC or Legacy BTC) anytime soon and really just want to keep both as a long-term investment, printing your private keys on a paper wallet is one option. This option, however, is only really secure if you follow strict security precautions, which you can find here. Another option is to get a hardware wallet. Any of the hardware wallets listed on bitcoin.org will keep your private keys secure.
Most regular desktop or mobile wallets, as listed on bitcoin.org, are about as secure as your computer or phone is. Since most computers and phones are not all that secure, these are not ideal for large amounts. With that in mind, all mobile wallets and desktop wallets listed on bitcoin.org will store your private keys for you.
Additionally, a BIP 148 full node wallet gives you some extra security if you want to be on the 148 BTC chain and accept 148 BTC. More on that below.
In any case: Be sure to make backups of your keys! Most wallets require you to do this when installing: don’t skip this step.
On, and Perhaps (shortly) After, August 1
If a majority of hash power signals support for Segregated Witness on or before August 1st, the protocol upgrade will activate smoothly. In that case, you’re fine, even if you didn’t prepare at all.
But it’s also possible that a majority of hash power will not go along with the UASF on August 1st, in which case the chain could split. If you hold your private keys, you will then have both 148 BTC and Legacy BTC.
Such a chain-split could resolve in several ways.
If on or after August 1st, the 148 BTC chain becomes the chain with most accumulated proof of work, the Legacy BTC chain will completely disappear, and the situation will be resolved as only the 148 BTC chain would be left. It will have conclusively been a temporary split, and you should be fine if you held onto your private keys. You can now continue to use bitcoin as usual.
But unless and until this happens (or other types of precautions are taken), there is always a risk that the Legacy BTC chain can theoretically be overtaken and disappear entirely. That chance should decrease as time goes on, but will realistically exist for days and maybe even weeks or longer — even if not a single block is found on the 148 BTC chain for a while.
As such, buying or accepting (or even holding) Legacy BTC after the split is very risky. These bitcoins can literally disappear if the 148 BTC chain ever overtakes the Legacy BTC chain. Therefore, it’s not recommended that you accept any Legacy BTC — if you do, at least be aware of and comfortable with the risk that your money could cease to exist.
Buying, accepting or holding 148 BTC will be a bit safer, though still risky. Most importantly, there is no guarantee that 148 BTC will continue to be used. While that is of course true for any cryptocurrency, due to slow mining difficulty adjustments and a potentially hostile environment, it’s probably a bit more true for 148 BTC. Additionally, block confirmations may be very slow for quite a while which could make using 148 BTC for transacting impractical.
If you do want to accept 148 BTC, you need to run a BIP 148 full node as a wallet. You can find more information about that here.
On top of the Legacy BTC disappearing, there is a second big risk: replay attacks.
Unfortunately, BIP 148 currently does not include “replay protection.” This means that in case of a chain-split, transactions on both sides of the fork will look identical. If a transaction is picked up by both 148 BTC and Legacy BTC nodes — for example, because the receiver of a transaction retransmits that transaction — the transaction may be valid on both chains. This is called a “replay attack.”
As such, spending coins on one end of the chain could make you accidentally spend the equivalent coin on the other side of the chain. Instead of paying someone only in 148 BTC, you may unintentionally send Legacy BTC as well or vice versa. 148 BTC and Legacy BTC are initially “stuck together.”
The best way to prevent replay attacks is simple: Do not send any transactions. At least not until it is clearer to everyone what the post-fork situation looks like.
After the Chain-Split
In case of the BIP 148 UASF, it is a bit hard to say what “after the chain-split” actually means.
If the 148 BTC chain gets more accumulated proof of work, it should be the only chain to survive, and the split would be over. All 148 BTC would then simply be bitcoins (BTC) again.
But if that doesn’t happen fast, and even if the Legacy BTC chain appears non-active, a chain-split could, at the very least, linger for a while. Miners could start mining on that chain at any time. As such, the 148 BTC chain can in theory always wipe out the Legacy BTC chain — theoretically, even after months.
And there are also possible scenarios where the two chains — 148 BTC and Legacy BTC — coexist. What’s more, even a scenario where more than two chains emerge can’t be taken out of the equation. In these scenarios, you will have coins on both (or all) sides of the fork.
But as mentioned, it will be tricky to spend coins on one chain without accidentally spending the equivalent on the other(s). And the bad news is that splitting these coins can be a bit complex. (It will require freshly mined or double-spent coins.)
The good news, however, is that some exchanges will likely set up coin-splitting services and take care of most of the complexity behind the screens. You’d just need to send your bitcoins to an exchange, and the exchange will credit your account with 148 BTC and Legacy BTC. (They should even replay the transaction for you to make sure they indeed receive both your coins.) At that point, if you want, you will be able to sell or trade your coins.
If the split persists, there should be wallets for both coins soon enough. Of course, you may need to upgrade your existing wallet or download a new wallet if and when this happens. This outcome also remains to be seen. Do not accept any transactions on your wallet before this is clear.
Further specifics on what to do after a coin-split will be announced on Bitcoin Magazine (and most likely on bitcoin.org and other sources of information) if and when a coin-split occurs and we have a better understanding of the post-fork situation.
So, to Recap ...
1. Control your private keys.
2. To be on the safe side, avoid any transactions on and shortly after August 1st. (How “shortly after” depends on what happens.)
3. If there are still two chains when the dust settles, split your coins into different wallets.
This article will be updated as news develops.
The post A Bitcoin Beginner’s Guide to Surviving the BIP 148 UASF appeared first on Bitcoin Magazine.
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Judges Shoot Down Silk Road Operator's Appeal Bid
Ross Ulbricht, who was sentenced to life in prison in 2015 for operating the now-defunct dark market Silk Road, has lost his appeal.
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The makers of web browser Brave have raised new funding through the use of a blockchain-based token it hopes will incentivize user growth.
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Tokenized Dollars: Singapore's Central Bank Details New Blockchain Trial
Singapore's central bank has published new details of distributed ledger trial that saw it issue digital tokens tied to its national currency.
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Bitcoin's 'SegWit2x' Scaling Proposal: Where the Startups Stand
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185 - Brendan Eich: Brave - Reinventing the Monetization of Content and Attention
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The saying goes: if you're not paying for it, it's likely that you're the product. And with the rise of targeted ads, user behavior tracking, and alike, more and more users are turning to ad blocking software to protect their privacy and improve their browsing experience. In the last 25 years, the content monetization and Internet advertising industries have evolved to become complex ecosystems with multiple intermediating layers between users, publishers, and advertisers. This has created a situation where user's rights are constantly violated and where little accountability exists.
We're joined by Brendan Eich, Founder, and CEO of Brave. As an early Internet pioneer, Brendan created Javascript while working at Netscape in the mid 90's, and helped found the Mozilla Foundation and Mozilla Corporation, where he served as CEO for several years. Brave is a new desktop and mobile browser which blocks ads and tracking by default. This has the advantage of drastically improves page load times while protecting users' privacy. But Brave is much more than just a browser. Their team will launch the Basic Attention Token, which will serve as the currency of attention marketplaces between publishers, advertisers, and users. With the ambition to turn the Internet advertising industry on its head, this new attention economy marketplace will eliminate the need for unneeded intermediaries, provide publishers with new content monetization models and remunerate users when they chose to share their data with advertisers.
Topics discussed in this episode:
- Brendan's background as an early Internet pioneer
- How monetization of content and attention on the Internet are broken
- How the Internet advertising industry works and the players involved
- A high-level overview of the Brave browser
- Brave's features and product roadmap
- The Basic Attention Token and its role as a currency for attention
- How BAT will serve to create attention marketplaces between publishers, advertisers, and users
Links mentioned in this episode:
Sponsors:
- Ledger: Smart card security for your Bitcoins - http://ledgerwallet.com
This episode is also available on :
Watch or listen, Epicenter is available wherever you get your podcasts.
Epicenter is hosted by Brian Fabian Crain, S?ƒbastien Couture & Meher Roy.
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Bitcoin Returns to Rangebound Trading As Price Rollercoaster Subsides
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India's 'BankChain' Consortium Launches Blockchain KYC System
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Dutch Bitcoin Exchange BL3P Increases Reach to 34 European Countries
BL3P announced the expansion of their services into the Single Euro Payments Area (SEPA). This marks a significant extension from their original operation which primarily served residents of the Netherlands. BL3P, a subsidiary of Bitonic, is a bitcoin exchange founded in 2013 that allows users to buy and sell bitcoin using Euros.
With their expansion complete, BL3P’s aims to grow their user base outside of their Dutch majority through the targeting of new customers in the EU region. Speaking to Bitcoin Magazine Jeroen Rijnbout of BL3P stated, “We want to put BL3P on the map as a reliable and user-friendly trading platform for users from the Eurozone.” In the long term, BL3P hopes to build its reputation “as an exchange that is run by an experienced team and take Bitonic to the international stage.”
The move brings BL3P into the EU marketplace, which is already competitive in the bitcoin space with dozens of exchanges competing for customers. Rijnbout views this competition with optimism stating, “We believe it is good to have multiple exchanges to choose from. This enables users to spread their risk, profit from arbitrage and choose a party that they trust. Centralization of the majority of bitcoin trading to one exchange is dangerous, as we have seen in the past. We see it as a healthy development for the ecosystem.”
With their recent expansion, the Dutch company now allows all SEPA countries to buy and sell bitcoin. Their current services offer the ability to use market and limit orders. BL3P charges a fixed trading fee of 0.25 percent on all buy/sell transactions. However, for the next five weeks this transaction fee is discounted by 50 percent as part of Bitonic’s 5th anniversary celebration.
BL3P currently offers services that support the bitcoin cryptocurrency, but has stated its plans to expand support to alternative cryptocurrencies in the future. “We pay close attention to the developments in altcoins and see great value in some of them as testbeds for future developments on Bitcoin,” says Rijnbout.
“We tend to be hesitant in adding new currencies, as we want to ensure an altcoin or token has added value before we add them to our platforms,” Rijnbout adds. “However, at the same time, we listen to and understand the needs of traders and investors and we want to be able to meet their wishes.” For example, Rijnbout suggested that support for Litecoin on their trading platform is of particular interest to BL3P with services coming “soon.”
BL3P is the only exchange with headquarters located in the Netherlands; it holds Dutch bank accounts to process euro transactions. Bitonic uses the iDEAL payment method which ensures that SEPA customers receive near-instant deposits and withdrawals of fiat currency into customer accounts.
Bitonic is the largest Bitcoin company in the Netherlands. With more than 11 full-time employees, BL3P has sold well over 250,000 bitcoins with 30-day volumes now processing over 8,200 bitcoins.
The post Dutch Bitcoin Exchange BL3P Increases Reach to 34 European Countries appeared first on Bitcoin Magazine.
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China's Interest and Investment in Ethereum's Blockchain Expands
Copyedit by DoEun
Ethereum Is Dominating in China
Bradley Fink
When we first heard Vitalik Buterin was learning Chinese, it was a clue to his ambitions in China. Less than two years later, the platform he co-founded is now a growing force in the Middle Kingdom. Since he joined the ChinaLedger Alliance (May 2016) and announced the expansion of BlockApps, an Ethereum building-blocks platform, in China (September 2016), there has been a movement in cities and among companies in big industries all throughout China. This is in some part due to the efforts of Wanxiang Blockchain Labs, which has made it their mission in China to bring Ethereum to the mainstream, and also in part to the savvy and persistent efforts of Buterin himself.
At a recent Ethereum meetup in Hong Kong, Buterin said that “Wanxiang Blockchain Labs are making good inroads into China.” Headquartered in Hangzhou, Wanxiang has led the Ethereum charge in China for more than a year. Having partnered with Ethereum early on for the Global Blockchain Summit following Devcon2 in Shanghai in July of 2016, Wanxiang is now China’s top funder of promising blockchain projects.
With its BlockGrantX sponsorship program, it has allocated funds to Ethereum startups including iEx.ec (for fully distributed cloud computing), Proof-of-Identity (for KYC, wallets, multisig, voting, authentication and reputation systems), Golem (P2P computation), Casper (a proof-of-stake consensus protocol), the Raiden Network (an Ethereum off-chain state network) and Micro Oracles (blockchain identity verification). And this month, Wanxiang launched its WanCloud platform for Chinese developers, giving them access to tools for building applications on open-source blockchains.
Since the recent Global Blockchain Financial Summit in Hangzhou, China’s rapid technological developments on the Ethereum platform has been garnering attention. One blog post in particular, from ConsenSys’s Head of Global Business Development Andrew Keys, gave some insight into the rapid rate of Chinese adoption. Highlights of the post, titled “Ethereum Growing Exponentially in China,” include:
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The creation of an Ethereum Laboratory at Peking University, to work on applications for improving supply chain management and energy markets
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The Royal Chinese Mint experimenting with a digital RMB on the Ethereum blockchain
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Chinese companies such as Baidu, Ctrip, JD.com and Meituan utilizing Ethereum technology for aggregated payments services
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Establishment of the Jiangsu Huaxin BIockchain Research Institute (JBI) in Nanjing, which Keys writes “will be a powerhouse in the Ethereum ecosystem and will become a beachhead for corporations outside of China.”
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Experimenting with Ethereum technology by Ant Financial, Alibaba’s $60 billion financial arm, to improve their global payment platforms
In Hong Kong, there has also been a surge of new interest in Ethereum. Jehan Chu is the founder of the Ethereum meetup there and a partner at Jen Advisors, a Hong Kong–based early-stage blockchain VC firm. Though the technology is still very young, Chu has seen a huge uptick in activity.
“Ethereum in Southern China has been on a rampage of growth,” Chu told Bitcoin Magazine, “with the local HK meetup growing by 50 percent to nearly 800 members in the last six months, and ether trade skyrocketing. Banks, corporates and even casual investors have all heard about Ethereum’s white-hot growth and mounting challenge to Bitcoin dominance. More importantly, Ethereum startups worldwide from Status.im and Ox to Golem and MakerDao have made HK’s environment of high-level industry professionals a can’t-miss stop on their Asia business development and capital raising tours.”
Recently the Enterprise Ethereum Alliance (EEA), connecting Fortune 500 enterprises, startups, academics and technology vendors with Ethereum, announced its expansion into China with a new office in Hangzhou.
At the Global Blockchain Financial Summit in Hangzhou, EEA China said that its main objectives are to “explore and develop new standards and technologies using blockchains, so that Chinese enterprises can more easily meet domestic market needs.” Founding members of the EEA include JP Morgan, Banco Santander, CME Group, Microsoft, Intel, Accenture and blockchain startup ConsenSys.
Over the past week, the price of ether has surged from $85 on May 17 to a high of around $211 on Coinbase on May 25. While many credit this rise to the announcements of the EEA, it is also notable that ETH trading was added to some of China’s digital asset exchanges. On May 14 CHBTC.com added an ETH/CNY trading pair, and on May 16 Yuanbao.com added ETH trading to its platform. It has also been confirmed that China’s top Bitcoin exchange OKCoin will soon add ETH trading.
The post China's Interest and Investment in Ethereum's Blockchain Expands appeared first on Bitcoin Magazine.
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The Crypto Show with Danny On The Road Again & Scrooges Matrix
Tonight?'?s episode explores the ongoing saga of Danny?'?s road trip to cannabis-legal states to preach Bitcoin and Dash to marijuana dispensaries, growers, and others for the purposes of bringing the advantages of cryptocurrency to the industry and to bank the unbanked. He is also promoting Defense Distributed?'?s Ghost Gunner, which he will be demonstrating at a gun shop tomorrow. We also broach Stash?'?s intent to integrate Dash into the Stash Node Pro, and we briefly discuss the run-up in cryptocurrency prices and the moral and philosophical issues involved in the Ethereum split.In the final couple of segments, Daniel Krawicz, a.k.a., ?'?œScrooge McAltcoin,?' leads us in an interesting discussion about an unusual interpretation of the movie ?'?œThe Matrix,?' and of course it has to do with his favorite topic, cults.
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Peach Airline to Accept Bitcoin After Japan Recognizes Cryptocurrency
Peach Aviation will be the first Japanese airline to accept bitcoins as payment for plane tickets, according to a statement made by the budget carrier’s CEO Shinichi Inoue on May 22. Peach also plans to install bitcoin ATMs in Japanese airports as part of its bid to attract more tourism from Asia.
Peach operates domestic flights as well as flights to China, Korea and Thailand, and passengers should be able to purchase tickets with bitcoin by the end of the year, Inoue said.
Although Peach is not the first carrier to embrace the cryptocurrency, the decision is still significant.
Three years ago, airBaltic became the very first airline to accept bitcoin payments. In 2015, the Universal Air Travel Plan (UATP), a payment network owned by a consortium of major international airlines, partnered with Bitnet to accept cryptocurrency payments for its more than 260 member airlines.
UATP’s membership represents approximately 95 percent of global airline capacity, and the industry group had earlier added support for other alternative payment options like PayPal and Alipay.
Although paying for airline tickets with bitcoin on most major airlines is technically possible, it’s still up to individual airlines to decide if they will support the practice. As of yet, only a handful have elected to do so, despite the anti-fraud benefits of bitcoin transactions. Third-party online travel booking sites like CheapAir and Expedia accept bitcoin payments, but precious few airlines feature a simple “Pay With Bitcoin” button that UATP’s integration supports.
Peach’s announcement comes hot on the heels of a landmark regulatory decision: Japan’s official recognition of bitcoin as a legal payment method, thanks to an act of parliament that took effect on April 1.
The law came as the result of more than a year of debate in Japan about how to handle the cryptocurrency. The Japanese parliament first called for the regulation of bitcoin and bitcoin exchanges by the country’s Financial Services Agency, the country’s financial regulatory watchdog, in May of last year.
The new law also brings Japan’s bitcoin exchanges, which handle nearly half of global trading volume, under the same know-your-customer and anti-money laundering rules that apply to banks and other financial institutions.
Bitcoin exchanges in Japan must now meet minimum capital requirements, follow operational and cybersecurity best practices and submit to annual audits by the Financial Services Agency. More than twenty exchanges have applied for FSA licenses since the new law took effect.
Even before the Japanese government officially recognized bitcoin, merchants were already rushing to accept payment with the cryptocurrency. Merchant adoption of bitcoin quadrupled last year, from about 900 merchants at the start of 2016 to more than 4600 today, according to a survey by NHK. The rush of acceptance of the new payment method comes as consumer spending in Japan has stagnated in recent years.
Earlier ideas to boost consumer spending included “helicopter money” or simply mailing checks to Japanese citizens, but now both merchants and the government are hoping that a new payment method will encourage consumers to get out and spend.
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The post Peach Airline to Accept Bitcoin After Japan Recognizes Cryptocurrency appeared first on Bitcoin Magazine.
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How to Hold Bitcoin in an IRA and Why It’s Still Not Easy
As bitcoin continues its bull run, more U.S. investors are looking for ways to protect their gains from taxation, and Individual Retirement Accounts (IRAs) are slowly emerging as a viable option.
While holding bitcoin in an IRA has technically been possible since IRS Notice 2014-21, which declared bitcoin property for tax purposes, the process remains complicated and fraught with liabilities.
Some regulators are trying to fix that. On January 9, the Government Accountability Office (GAO) released a report calling on the IRS to better inform taxpayers about the reporting requirements and potential liabilities of holding bitcoin and other cryptocurrencies in their IRAs.
But for adventurous and capable investors who want to bet some of their retirement on bitcoin, there are currently two ways to get the tax protection of an IRA.
First, investors will need to find a custodian to administer the IRA. Most IRA custodians allow “unconventional investments” like real estate and precious metals, but do not allow clients to hold bitcoin, at least not directly.
The alternative is to open an account with an IRA custodian that works with a fund like the Bitcoin Investment Trust (BIT), which holds bitcoin and issues shares based on its value. BIT is an approved investment vehicle offered by IRA custodians like PENSCO, Entrust, Millennium and Equity Institutional. However, there are several disadvantages to this method.
The first is that BIT shares are only available to accredited investors, those with a net worth of more than $1 million or with an annual income greater than $200,000. The second is that the account owner does not hold any bitcoin directly, only shares in a fund that promises to hold actual bitcoin on his or her behalf. The third is that the intermediary custodian who holds the asset, in this case shares in the BIT fund, charges fees to cover compliance and management costs.
For non-accredited investors who want to buy and hold bitcoin directly and avoid high custodial fees, there is really only one option, and that’s to set up a Limited Liability Company within a self-directed IRA.
A self-directed IRA LLC allows investors to hold bitcoin directly without giving up their wallet keys to a custodian and without seeking custodial approval for transactions, but it comes with more paperwork and liability risk.
Investors will still need to find the right custodian. Any IRA custodian that offers “checkbook LLCs” should allow clients to hold bitcoin in an LLC. However, only a few custodians specialize in bitcoin specifically and can streamline the process.
BitcoinIRA, headed by former U.S. Mint director Edmund Moy, specializes in setting up self-directed IRAs for clients who want to invest in bitcoin, but it charges a hefty one-time fee for the service. IRA Financial Group recently announced a self-directed IRA structure that will allow investors to hold bitcoin directly in an LLC, without the intermediary of a fund like BIT.
There are many risks to holding bitcoin in a self-directed IRA LLC, including a lengthy list of “prohibited transactions” that can disqualify the tax protection of assets within the IRA.
Legally, an IRA and its owner are separate entities and must act separately. The list of “prohibited transactions” is intended to prevent account owners from drawing double benefits from the IRA’s tax protection.
For example, account owners cannot put up the assets of their IRA LLC as security for a loan, since that would give them the double benefit of tax-protected assets and collateral.
Under these same rules, account owners cannot sell bitcoin to their own IRA LLC and must buy and store bitcoin in the name of the LLC, not their own names.
For investors who own bitcoin and want to transfer it into an IRA LLC, there’s only one option: sell the bitcoin, then contribute the proceeds — in U.S. dollars — to the IRA LLC, and then buy bitcoin in the name of the LLC with its own cash assets.
As with real estate and other unconventional investments, it’s also the responsibility of investors to report the fair market value of their assets to their custodian each year, whether those assets are held in an LLC or not.
For assets such as stocks and bonds, these values are assessed automatically. For real estate and unconventional investments like bitcoin, a third-party assessment is usually required.
If an account owner fails to report the value of their assets accurately to their custodian or engages in a “prohibited transaction,” their IRA can be disqualified and all assets distributed and taxed. Last but not least, account owners must also file annual reports and pay fees to the Secretary of State where the IRA LLC is incorporated.
Even if account owners cross all the t’s and dot all the i’s, bad custodians can still get them in trouble.
In some cases, custodians have failed to update fair market values accurately in their reporting to the IRS, and account owners have had to pay taxes on assets that have gone down in value. However, the potential tax savings still make self-directed IRA LLCs an attractive option for many bitcoin investors.
As property, investors must pay capital gains tax on any increase in the value of their bitcoin. With a Roth IRA, investors can buy bitcoins with post-tax dollars and avoid paying any taxes on their gains when they cash out. As with any IRA, however, investors can only withdraw disbursements without suffering penalties after age 59 ½.
Although holding bitcoin in IRAs has been possible since 2014, regulators are still worried the complicated process could land unwary taxpayers in trouble. As the GAO’s report pointed out, the IRS currently provides no guidance to IRA custodians or account owners about how to properly assess the fair market value of unconventional assets such as bitcoin, even though such assessments are mandatory.
This article is for general information purposes only and should not be taken as investment advice. Investors should conduct their own due diligence and consult with a qualified tax professional before attempting anything described in this article.
The post How to Hold Bitcoin in an IRA and Why It’s Still Not Easy appeared first on Bitcoin Magazine.
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How, When and Where Will Regulators Accept Bitcoin ETFs?
Will we see a bitcoin ETF anytime soon? Analysts remark on the global landscape and future outlook for exchange-listed cryptocurrency products.
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How a Tiny Island Could Give Cryptocurrency a Big Boost
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The Crypto Show with Dr. Brian Goss Live at The Las Vegas BTC Meetup
On tonight's episode of "The Crypto Show," Danny goes to Las Vegas to the local Bitcoin meetup, where we interview Brian Goss, radiologist, former member of the Bitcoin Foundation, and all-around tech and science enthusiast. We get his very informed and insightful opinions on all sorts of topics, such as the block-size issue, the current run-up in crypto prices, his view of altcoins, and the future of Bitcoin and the crypto space at large. We flow in and out of other topics as well, but the discussion is very interesting, enlightening, and surprisingly coherent for its spontaneity.
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