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Bitcoin Businesses

Energy Riches Fuel Bitcoin Craze For Speculation-shy Iceland (apnews.com) 99

Iceland is expected to use more energy "mining" bitcoins and other virtual currencies this year than it uses to power its homes. From a report: With massive amounts of electricity needed to run the computers that create bitcoins, large virtual currency companies have established a base in the North Atlantic island nation blessed with an abundance of renewable energy. The new industry's relatively sudden growth prompted lawmaker Smari McCarthy of Iceland's Pirate Party to suggest taxing the profits of bitcoin mines. The initiative is likely to be well received by Icelanders, who are skeptical of speculative financial ventures after the country's catastrophic 2008 banking crash. "Under normal circumstances, companies that are creating value in Iceland pay a certain amount of tax to the government," McCarthy told The Associated Press. "These companies are not doing that, and we might want to ask ourselves whether they should."

Energy Riches Fuel Bitcoin Craze For Speculation-shy Iceland

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  • People are already taxed on the profits they make from selling bitcoin...
    Taxes are already levied on the hardware purchased for mining bitcoins, and the power consumed to operate the hardware.
    Any extra tax which singles out bitcoin differently from any other legal activity

    “We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation,” he said. “That can’t be good.”

    There are MANY financial trading companies doing exactly the same thing, and have been doing so since long before bitcoin came into existence.

    • Re:Whats new? (Score:4, Insightful)

      by MrL0G1C ( 867445 ) on Monday February 12, 2018 @05:34AM (#56107041) Journal

      People are already taxed on the profits they make from selling bitcoin...

      Get real, they will be tax haven based.

      Taxes are already levied on the hardware purchased for mining bitcoins,.

      Not all locations have sales taxes, you don't think they bought their custom ASICs or GPUs in Iceland do you? Anyway I don't know how it works in the whole world but in the EU corporations don't pay sales taxes.

      and the power consumed to operate the hardware

      But will they be around for long enough for the generating capacity to be paid for?

      There are MANY financial trading companies doing exactly the same thing, and have been doing so since long before bitcoin came into existence.

      Financial companies tend to be in it for the long term and their server power usage is nothing like that of bitcoin miners.

      • Anyway I don't know how it works in the whole world but in the EU corporations don't pay sales taxes.

        You're saying that if a corporation buys, for example, a desk, there's no VAT or sales tax in the price? That they would get a better price than an individual would?

        • by MrL0G1C ( 867445 )

          Pretty much yes, it's slightly more complicated, some companies pay the tax and then claim it back.

          https://www.investopedia.com/a... [investopedia.com]

          But it does look like it can only be offset against vat charged to customers, so I guess these companies would simply have to buy from vat&sales tax-free regions like some areas in the US. They'd likely be paying sales tax based upon where the company making the hardware is based, they mostly won't be using middle men. Gamers Nexus was told by a GPU card manufacturer that t

          • But it does look like it can only be offset against vat charged to customers, so I guess these companies would simply have to buy from vat&sales tax-free regions like some areas in the US.

            At least in the UK if you import stuff from outside the EU you need to pay VAT

            https://www.gov.uk/guidance/va... [www.gov.uk]

            If there's customs duty (tariff) you'd have to pay that too

            https://www.gov.uk/goods-sent-... [www.gov.uk]

            It's the same in other EU countries

            https://travel.stackexchange.c... [stackexchange.com]

            Incidentally personal belongings usual don't count. The rules on this are a bit vague though - I've flown all over the place with a laptop and no one has demanded VAT or duty on it. It's rumoured that so long as you don't have the original b

        • EU Companies pay VAT, but there's more than just their purchases involved. When they buy something, the tax they pay* is offset by the sales tax they collect from their own sales (which they have to transfer to Internal Revenue). Example with a 10€ VAT: a metalworker buys €100 worth of steel stock and pays €10 VAT on that. He turns that steel into iPhone SIM ejector pins and sells those for €200, collecting €20 VAT on those sales. Each month, he deducts the VAT he paid from the
          • they get a better price on stuff than an individual would, but they get taxed on whatever value they create with it.

            They pay the same price as everyone else. They only need to collect sales tax on the value they add.

            If an individual bought the same thing as the company and later sold it for the same price, they would make more money*, as they don't have to pay the sales tax.

            * as long as they are under the threshold of having to collect VAT

            eg:
            VAT is 15%
            Supplier sells $10 item for $11.50 incl VAT

            Company on-sells for $23 incl VAT and makes $11.50 profit. Must pay $1.50 of the $3 VAT they collected. Profit after VAT is $10.
            P

      • by Bert64 ( 520050 )

        Not all locations have sales taxes, you don't think they bought their custom ASICs or GPUs in Iceland do you? Anyway I don't know how it works in the whole world but in the EU corporations don't pay sales taxes.

        If they aren't bought there, then Iceland will be charging them import taxes when they bring the hardware into the country...

        Financial companies are all about short term gains, and financial trading has ruined many other businesses by forcing them to concentrate on short term gains that make the financial traders happy rather than long term benefits that could give the company stability.

        • by MrL0G1C ( 867445 )

          Financial companies (mostly) don't buy 10s of thousands of graphics cards and run them full throttle 24/7. What you're calling short term is long term for these crypto miners, There really is no comparison, apples and oranges.

    • This is the properly worked out sales tax that Europe uses to raise a lot of revenue. Every company pays VAT on its inputs, charges it on what it sells, and sends the difference to the government. Bitcoin miners avoid this charge, so it is reasonable for the legislator to make this point.

      • Bitcoin miners avoid this charge, so it is reasonable for the legislator to make this point.
        They don't.
        They pay VAT and other taxes on electric power.
        And they pay on the full earnings on the coins income or corportate tax.

        They are in no way different than a 'true miner', fisher or farmer. None of them pays VAT on buying raw products, they simply 'get them' and 'sell them' and pay VAT on the sales.

        • It sounds like the issue is that selling BTC isn't properly covered by existing VAT rules.
        • by Rei ( 128717 )

          They pay VAT and other taxes on electric power.

          Please start with looking up what VAT stands for. Value Added Tax. At each stage where value is added to the product stream, VAT is levied. Are you saying that bitcoins are worth no more than the power? That the company is mining them for giggles?

          If a company makes alumium, their alumium sales are taxed as well as them paying corporate taxes. It should be no different with bitcoin mining.

          • Re: (Score:2, Informative)

            Every bussiness where you create value 'from nothing', like fishing and farming, has VAT rates for the sold products that are actully not worth colecting as the oversight about it costs more than the VAT returns.
            So you want to say: if you mine gold in Icelands and sell the gold you have to add VAT on the sale, and give it to the tax bureaus? If that is the case, bitcoin should be handled similarily (and the law actually most likely covers that already, so no law change required, or not?)
            If it is not the cas

            • Every bussiness where you create value 'from nothing', like fishing and farming, has VAT rates for the sold products that are actully not worth colecting as the oversight about it costs more than the VAT returns.

              Huh? VAT is just a percentage of (sale price - cost of goods). If cost of goods is zero (which is basically never true, but ignore that), then it's just a percentage of sale price. The only way this is "not worth collecting" is if the sale price is nothing, in which case those engaged in the business are going to have a hard time eating.

              if you mine gold in Icelands and sell the gold you have to add VAT on the sale, and give it to the tax bureaus? If that is the case, bitcoin should be handled similarily

              Sure. Cost of goods would be power, hardware, probably cost of leasing space, etc. (labor is not usually included in "cost of goods" for VAT purposes, as I understand it).

              • VAT on agriculture goods in Germany was until recently 1.5%

                So: not really worth collecting. Considering that a farmer or fisherman pays VAT on fuel and other goods, and that those payments are deducted from the VAT he has as revenue, it is bottom line still again a zero sum game. Unless the farmer has an relatively high harvest with very low consumption of energy etc. it is always a negative for the state.

                One complication is that the bitcoin mining operations might find it easy to transfer excess coins to

        • They're not like a true miner.

          When was the last time someone paid VAT on the bitcoins they mined?
          When was the last time someone paid VAT to customs when they bought bitcoins from another country?

          People are treating bitcoins like shares or currency. They should be treated as a commodity.

    • by dwywit ( 1109409 )

      People are already taxed on the profits they make from selling bitcoin...
      Taxes are already levied on the hardware purchased for mining bitcoins, and the power consumed to operate the hardware.

      Do you have citations for these claims? Do you have relevant links to icelandic law and policy to support your assertions?

      No? Then shut up.

      Any extra tax which singles out bitcoin differently from any other legal activity

      A government may tax anything it wishes, consistent with its legal framework - so what's your point?

  • by MrL0G1C ( 867445 ) on Monday February 12, 2018 @05:21AM (#56107027) Journal

    Iceland has every reason to be wary, mining algorithms and technological advancement ensure that whatever equipment you have will be obsolete soon enough. The crypto-mining company might still exist in a year or two but it might not. These companies run on a month-by-month basis and they'll happily up sticks and move to another country if the electricity is cheaper.

    If they're not making sure that these crypto mining companies pay for the electricity generating equipment then they could easily be left with big generating capacity and no customers to use it and pay for the loans that were made to build it.

    • by Zocalo ( 252965 )
      While there is some massive centralised hydro and thermal power generation in Iceland (they smelt bauxite to aluminium, which uses a lot of power), data centres - even for mining - in Iceland are nothing new; this is just people late to the party catching up with the early adopters. In Iceland's major urban locations, mostly around the Reykjavik/Keflavik area and the handful of other larger towns, the DCs are often connected to the local power grid, but the more serious players in the cottage DC industry t
      • While there is some massive centralised hydro and thermal power generation in Iceland (they smelt bauxite to aluminium, which uses a lot of power), data centres - even for mining - in Iceland are nothing new;

        Cryptocurrency uses a lot more power than a normal DC, though. Computation is what consumes power. My PC idles at about 100W but it will peak out at about 350W when GPU and GPU are busy. Your average server's CPU is near idle most of the time and it doesn't even have a GPU.

        The only place it makes sense on a species level to be mining cryptocurrency is where we're already using resistive electrical heating. There's really no drawback to that plan. Different parts of the world have winter at different times,

    • There were plans to connect the icelandic grid to the EU via Scottland ... however with the BREXIT going on tjose are on hold. They likely get reactivated after the Scotland went independent and rejoins the EU. That would in the long run give Scotland the option to beccome a majour power hub, based on interconnects to Icelands, Faroer and Norway - and their options to upgrade water and wind power significantly.

      • by Rei ( 128717 ) on Monday February 12, 2018 @06:50AM (#56107205) Homepage

        Actually, most Icelanders are rather wary of that scheme. The big issue being that it will raise our power rates. It would be worth it if the revenue from those power sales would go to the general public (offsetting taxes), but we have way too much history with corporate dealmaking here to buy into such a story. The other issue is of course that it means a mass expansion of power generation infrastructure. If it were just wind and geo, I wouldn't have an issue, but (again, as history consistently tells) they'll just build giant dams, destroying our highlands one canyon at a time.

        This article's title, BTW, that Iceland is "speculation shy"... if only it were true. Iceland is, and probably always will be, a country that goes through one bubble after the next, always hopping head-first into the next get-rich-quick scheme with little to no advance planning or caution. Not that there are parties (including the aforementioned Pirates, to which Smári belongs) who would take a more cautious, you-really-should-think-things-out approach. But so long as Sjálfstæðisflokkurinn gets in power - and they virtually always do - "due caution" will not be in the government's vocabulary. And there's all too many parties willing to go right along with them down the fast-money rabbit hole (Framsóknarflokkurinn, Miðflokkurinn, etc).

        BTW, trivia: while "Smári" most commonly means "clover", it can also mean "transistor" [wikipedia.org] - which I find ever-so-fitting for a Pirate MP. ;)

        • Why would power prices go up if icelands decide to store and provide power for the EU?

          Interesting that a ccountry that has less than twice the population of the mediocre town I live, can not gang up and gets its shit together like Icelands displayed during the last soccer world championships :)

          • by Rei ( 128717 )

            Why would power prices go up if icelands decide to store and provide power for the EU?

            Power prices are much lower here than in mainland Europe. So they'd rather sell to mainland Europe than here, until prices go up enough here to match mainland Europe.

            • If you produce more power than the island needs, why would that affect the price on the island, sorry, I don't get it.

          • by Rei ( 128717 )

            Oh, and to give you an idea of what Icelanders generally think of planning ahead: there's a place near where I live where there's bridge piers in the middle of a fjörd, but no bridge. And no road, either. Where you'd need a road to connect to the hypothetical bridge, there's houses on one side and businesses on the other, blocking any way to access it. They started building the bridge, then just changed their mind and put neighborhoods and businesses instead, and then later built a different bridge

      • There were plans to connect the icelandic grid to the EU via Scottland ... however with the BREXIT going on tjose are on hold.

        Yeah, I'm sure that was the only reason. Odd though, I didn't realise the conductance of wires was affected by political boundaries.

        They likely get reactivated after the Scotland went independent and rejoins the EU.

        Given the demographics it's much more likely that the UK will rejoin before that happens. If, indeed, they ever manage to actually leave in the first place.

        • The lack of conductivity of wires is grately overrated.

          Right now, I'm as well of the opinion that the UK might not leace after all.

          But: that will require interesting shifts in many things.

          If the UK really exits, it is unlikely they rejoin in the near future. They basically don't fullfill any requirement for joining.

          • by es330td ( 964170 )

            They basically don't fullfill any requirement for joining.

            They are the fifth biggest economy in the world. That fact, and no other, should be sufficient for any organization of countries to want the UK as a member.

            • Depending on what the economy can contribute, or not?
              If the don't want foreign workers in their country then there is no deal.
              If they have nothing to sell of interest, then there is no deal anyway.

  • Schmeptical (Score:5, Informative)

    by Hognoxious ( 631665 ) on Monday February 12, 2018 @05:31AM (#56107035) Homepage Journal

    Icelanders, who are skeptical of speculative financial ventures after the country's catastrophic 2008 banking crash

    Skeptical my arse, they made out like bandits.

    It was their customers that lost out.

    http://www.thisismoney.co.uk/m... [thisismoney.co.uk]

    • In the short term a lot of people were very uncomfortable. True - they've recovered well and established the new (for them) industry of tourism which is very nice. But the real value of their economy, given the substantial fall in the value of their currency, is still damaged.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Icelanders, who are skeptical of speculative financial ventures after the country's catastrophic 2008 banking crash

      Skeptical my arse, they made out like bandits.

      It was their customers that lost out.

      http://www.thisismoney.co.uk/m... [thisismoney.co.uk]

      Why should a nation's population pay the price for a few bankers' gambling? Some people lost money, the people responsible for the crash went to prison, and the majority of the people weren't shouldered with a debt they had no say in creating.

      • Re:Schmeptical (Score:5, Insightful)

        by Rei ( 128717 ) on Monday February 12, 2018 @08:54AM (#56107585) Homepage

        What gets me about all of the Icesave nonsense is all you had to do was click through to the terms - just 1-2 clicks from the front page of the website about Icesave accounts - and it listed the insurers. The #1 insurer was a private fund. The #2 insurer was the British government (in the UK; the Dutch government in the Netherlands). It was explicitly spelled out! And indeed, that's how it should have been according to banking regulations; private funds were perfectly acceptable as the primary insurer, and the country of the citizens purchasing the product is the secondary insurer. Of course, the private Icelandic banking fund went bankrupt in the crash, which passed the liability on to the secondary insurers (aka, the UK and Dutch governments). Who sued Iceland in the EFTA court, to try to get Iceland to take on their liabilities. And - I can't stress emphasis on this enough - lost on all counts.

        Should banking regulations have allowed private funds to back accounts? Probably not. But they were what they were.

        That's not to say that there weren't Icelanders who contributed to the crash - far from it. The level of criminality going on among top figures in the banking industry to deliberately prop up bad assets and make off like bandits was insane. But people here are as angry with them as people elsewhere, as they crashed our economy. Our currency literally got cut in half. Picture that, in a country where most goods are imported. Picture that, in a country where loans were generally denominated in foreign currencies. The 3 banks that went under had combined liabilities equal to half that of Lehmann Brothers... but in a country 1/1000th the population of the US. It was devastating.

        And on top of that, we had the British trying to stick us with their liabilities and treating us as terrorists [thorkell.com]. You know, the UK - the country that spent decades stealing our fish and depleting our stocks. But hey, if you want your nets back, you can have them [wikipedia.org]. ;)

  • by Drethon ( 1445051 ) on Monday February 12, 2018 @07:06AM (#56107241)

    Need a crypto coin that is unlocked by doing processing for cancer genetic research. Probably no way to make it work but it would be nice if all this crypto coin mining processing went to something worthwhile.

    • > Probably no way to make it work

      Well, IIRC there used to be some '@Home' calculation projects where they'd let the clients determine whether they'd been successful or not initially, but nothing mattered until it was confirmed by the central authority.

      So... if you have a crypto that was able to do something similar to the already present distributed transaction confirmation requirements, it should be possible.

      Then again, that's a guess based on superficial similarities between the tasks, not an answer b

    • Modern coins are no longer using Proof of Work but instead using Proof of Stake. So really it's just the Bitcoin dinosaur that's wasting all of this electricity. The crypto currencies that will matter the most in the future (Ethereum (Soon), NEO, NANO, etc) are proof of stake and require very little power to run. Some can even be run on mobile phones.

  • Is also cheap electricity to mine bitcoin.

    Those nabobs whining about squandering renewables need to learn about Iceland's renewables. It's all hydro and geothermal. Use it, don't use it. The rivers still run, the ground is still hot.

    People are going to mine bitcoin. Frankly I can't think of a better place to do it.

    • by Rei ( 128717 )

      Mostly hydro. And if you don't use it, you don't dam up our beautiful river canyons.

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