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Transaction fees back then weren’t as brutal so I will ignore that issue as I believe it is 100% solvable. What was truly brutal is that using standard FIFO accounting practices I owe an additional 30% tax on the “money” I spent. My cost basis for that particular coin amount was 10% of what the current price of BTC was when I made the transaction.

For tax purposes, Bitcoin is not considered a currency, it is considered an asset.[1] When you used it to buy some software, you were treated as exchanging that BTC for the software. Because that BTC had increased in value, you were tax on the gain in the value of the BTC actually used in the software-purchase transaction. This analysis generally applies in all of the Western world.

[1] Even if Bitcoin would be considered a currency for tax purposes, it would be considered a foreign currency (meaning, not the legal tender of your jurisdiction), so the same analysis applies. When transacting in foreign currency, you need to do gain/loss calculations for each transaction. Note that IRS advice for calculating digital currency gains/losses is essentially the advice they give for calculating foreign currency gains and losses, but simplified to layman's terms.

Oh I knew that before I spent it, it was more for the novelty of making a Bitcoin purchase.

You legitimately made gains on those coins though and in this country we currently have a capital gains tax.

What would you prefer? A loophole the size of a mountain for bartering appreciating assets? A special carve out for bitcoin? A removal of the capital gains tax (which would result in raising taxes for the poor or large deficits)?

The system works the way it does for rather decent reasons.

I would prefer that the government control the supply of money and take a part of a preset emission to fund itself.

A second part of the emission could be used for UBI protecting the poor and getting buy in from the populous.

It would rid ourselves of the debtor's prison and the government would no longer be providing a yearly negative reward signal to it's financially successful citizenry.

Oh well enough fantasizing, time to guess how to report income tax on low liquidity asset income that hasn't, and sometimes can't, be liquidated. If I'm wrong it's time for bank account freezing and fines. Maybe jail time if I upset the wrong employee.

Feeling pretty scared in the home of the brave right now..

> Since it’s tax time I can’t help but feel that the true long term danger to block chain technology isn’t draconian government regulation, it’s the IRS.

Sorry but no, one country's tax authority is not a long term danger to block chain.

The tax authority behind the world's reserve currency? I don't think they'll do anything or even need to, but if they wanted to, they absolutely could.

Unfortunately this one country is a leader in tech and has millions of people with the disposable income to actually use the block chain. I am not myopically focused on the US, but to say that it won’t hurt block chain adoption is willful ignorance.

Might hurt blockchain adoption in the US, but there is much more than BTC out there. There are specific chains that many Asian companies are adopting for use that will proliferate and generally stay out of American news. There's a lot happening in the crypto space beyond BTC/ETH/LTC.

Adoption may still not take off, but it won't be because of the IRS.

Why should crypto currencies get special tax treatment?

Because it's different this time, and I stand to make a lot of money.

For a while I have been thinking about a startup idea, a Stripe Atlas for tax free cryptocoin trading if you will. There are tax free vehicles, but so few people actually understand the initial tax implication of buying and selling coins like yourself, I don’t think the market would be there.

Curious, what might you be will to pay for such a service?