Basically, if you are given stock options with a strike price of $small, and then the company has a liquidity event and you exercise your options when the shares are at $large, your AMT taxable income increases by $(large - small), and you'll owe taxes on it for the current year (at AMT rates), regardless of whether you sold (or were able to sell) any shares. This is in addition to the short or long term capital gains that you'll eventually owe after you actually sell shares.
Apparently some people went bankrupt after the first dot-com bust because they owed absurd amounts of money in taxes but weren't able to sell any of their shares (e.g. due to employee lockup) until after their company's stock tanked.
If this happens and you are able to afford the taxes, there's a mechanism to carry your losses forward and get AMT credits in future years, but the rules are hilariously complicated, and you either won't get credit for anywhere near what you paid initially, or you'll end up getting a tiny tiny fraction back for the next hundred years.
It kind of sucks. There's been talk of fixing this for a long time, but I don't think it's ever gotten anywhere.
You usually are awarded stock options. A paper that gives you the right to buy stocks for a specific price. Those options (like most things employers will give you) are seen as income, because the employer give it to you as a reward for your work (just like salary).
So usually, when your company exits, that's when you then "exercise" your options (aka actually buy the stocks the options allow you to buy) and then sell those stocks.
Then:
- Exercising the options triggers income taxes on the value of the stock you are getting (minus what you pay for it)
- Selling the stock triggers capital gain (short term if you sell before 1 year, long term after holding them for 1 year)
A simple example:
- You join and receive 100 stock options at $1. That means you can buy 100 stocks for $100 total.
- Your company IPOs at $5 per stock.
- You decide it's time to sell. You "exercise" your options -> so you spend $100 to buy 100 stocks at $1. Those stocks are worth $5 each, so you receive $500 in value. -> You get taxed on $400 of income (just like salary, bonus, etc).
- You sell your stocks for $500 instantly. You get taxes short term capital gain on $500.
So you had in mind you'd make $500 (yayyy we IPO at $5 and I have 100 stocks) but you actually end up with ~$200 in your pocket.
This is if you exercise at/after the IPO. If you can afford it, you can exercise early, get taxed on that earlier value, and then it will be mostly capital gains. Higher risk, cause it could end up being worth nil, but higher reward.
yes, there are a lot of other situations, but this is the general one and I was explaining the situation where why the person would not be paying capital gain tax
It does. There's little point it debating which currency or index of currencies to analyze, when none of them are showing significant traction as a currency.
The parent comment says nothing about the validity of "it being a currency"..this is an argument the child brings up just to Bitcoin hate. And it's a 'beat the drum' comment, same as the "it's like tulips/.com" that the parent is tired of hearing.
And, it's not the point of every cryptocoin to be a currency, whatever may be your definition of a currency.
It's funny how thick HNers are about Bitcoin. I believe it's evidence of the sort of passive conservatism of the tech community. Bitcoin is some utopian shit, the decentralized technology dream that has a ton of traction, yet many of you just can't seem to get behind it. Is it because YC is an ultra capitalistic investment fund and Bitcoin is just too anarchist for its fanboys?
For all the people out there saying, "I cant find a use case", my question to you is, have you ever used it?!
If you have, did you notice that there wasn't a middleman taking a cut when you sent the money? I mean, do you have any fucking idea how much money businesses pay to the credit card companies?
I just don't see what benefits Bitcoin gives to me over a regular bank.
First of all because it is decentralised, it is much less scalable than the current system, so I don't think it is going to be able to replace regular banking anytime soon (although I don't know a tonne about the scalability issues).
Also I like to have a centralised system, because if my bitcoin gets stolen/I screw up and lose it, it is gone forever. If my money gets stolen somehow, I call up the bank and they reverse the charges. Having a central authority is also pretty nice because they also give me lots of other benefits like credit card rewards, making it really easy to move my money around into different savings accounts or investments, etc. And regular currencies are also backed by the government, so are incredibly stable, unlike Bitcoin which changes values very quickly.
Bitcoin is also deflationary, which is a bad trait for a currency to have, as it discourages investment, and encourages people to hoard money instead of spending it.
I'm sure there are use cases for Bitcoin, but I don't think it is "some utopian shit", since the current system works super well for most people.
I'm very much agree to this, especially the deflationary part. Current Bitcoin pricing seems to favor the early `investors`, and fluctuate too much. That is not acceptable for use as money, which must store a stable value for a long time...
US Dollar lost 95% of it's purchasing power over the last century, so much for "must store a stable value for a long time".
The wealth distribution of dollar is based on how many more people your grandfather killed than my grandfather. I don't have any problem with currency where initial distribution rewards people who took investment risks because they saw potential in innovative new technology.
And volatility - volatility in bitcoin is actually smaller every year, and this trend will continue. And btw volatility is natural and healthy. It's when something is not moving that you should be worried.
The best case scenario for Bitcoin is reaching a consistent price for the rest of its lifetime. That scenario means there's no reason to "invest" in it because ideally it would never change in value.
Only people trying to cash out need people buying in. If you were really invested in the long term you'd rather people not buy in so you can buy more at a lower price.
Bitcoin also has fees. The only reason the fees are lower than credit cards are because people in China can afford to burn electricity at a loss just to turn their Chinese money into anything else.
You still have to pay taxes on the capital gains. And you can't pay taxes in Bitcoin.
The best case scenario for bitcoin is it becoming the de facto monetary standard, meaning there would be no reason to buy or cash out, as everything would be priced in bitcoin.
> as it is inherently flawed: price fluctuate too much, and favor early owner of it.
These aren't flaws, welcome to economics, man. Once bitcoin gains enough things will be priced in BTC, so fluctuation won't be an issue.
Deflationary economics benefit the savers, while inflationary economics benefit the spenders. Just because bitcoin's economic model isn't something you're used to or like doesn't mean it is 'inherently flawed'.
It is flawed because the pool of currency is limited. What happen when our economy grows fast, but then there's not enough BTC to support it? Price will decrease and benefit the savers, sure. But then many people will prefer to save instead of spending, which will not fuel the economy
The reason to want people to buy in is to grow the space and incentivise vendors to build sophisticated services for it. Like with self-driving cars, a large herd benefits all members.
> did you notice that there wasn't a middleman taking a cut when you sent the money? I mean, do you have any fucking idea how much money businesses pay to the credit card companies
"High fees make it impractical to use bitcoin as a day-to-day currency. Paying a $5 fee to send $10,000 bitcoin isn’t a big deal, but it’s hard to justify buying a cup of coffee with bitcoin if the transaction costs more than the coffee."
Realistically, though, from the consumer standpoint Bitcoin is an electronic payments network analogous to credit cards that
1) Takes longer time to confirm (great news when you're standing in a checkout line).
2) Does not have a third party to resolve conflicts and disputes between the consumer and unscrupulous merchant or a straight out scammer.
3) Does not have a rollback mechanism in case of an unauthorized or fraudulent transaction.
4) Does not offer consumer-side rewards - cashback, airline miles, points - for usage.
> "High fees make it impractical to use bitcoin as a day-to-day currency. Paying a $5 fee to send $10,000 bitcoin isn’t a big deal, but it’s hard to justify buying a cup of coffee with bitcoin if the transaction costs more than the coffee."
It's because I can't use it to do business with anyone in my market, I can't buy anything I want with it, it's volatile, and it's an absurd waste of energy.
Enjoy the run, but sell at the right times because ultimately it will end in some form of tragedy.
Only if the US lost its Political Power. Currently the USD still holds its value because OPEC standardize on using it for the Oil Currency (Petrodollar), and early aggressive lending to the third world country with USD.
When electric cars become mainstream, I expect there will be a turmoil in the USD
heh, anarchist? In the course of perhaps 2 or 3 years Bitcoin has turned more anarchists I know into greedy capitalists than anything else over my entire lifetime.
HN is certainly "on board" as ycombinator and affiliates invests in various blockchain retailed companies
I've used it and noticed how miners will only include your transaction in a reasonable length of time if you pay a fee, and even that is artificially low due to the subsidy.
the first time you ever pay anyone for anything the probability that this person can determine your entire net worth is much much higher than if you were to use any other means of value exchange (Cash, credit, check, etc).
The tone of this comment is harsh and inflammatory. But I agree with the sentiment.
The tech is genuinely interesting and certainly doesn't lack hype. That is usually a formula for positive comments on Hacker News. So I'm genuinely curious why so many users here are against Bitcoin.
Is it because they didn't buy in early and want to justify missing the boat? Does it make people feel their own startup is somehow less relevant? Does it threaten the traditional VC funding model?
> Is it because they didn't buy in early and want to justify missing the boat?
Not one bit. It's because people are losing their heads over it, it's got classic bubble written all over it, and you've got people who've made money and think they're all the wiser for it.
They arrogantly carry a sentiment that detractors are just jealous. Human nature to do that--I get it.
There's a saying I heard, something like "Sure, you made a lot of money buying the stocks of tobacco companies. So what? You're still an asshole."
In my mind, buying Bitcoin is like shorting the US financial system with the idea that it sucks and should to hell anyway. But, our system with all it's flaws works pretty damn well. It shouldn't be taken for granted and bet against.
I don't like it because it's bad for the environment.
Eventually someone like Vanguard will come along and offer a blockchain with real value behind it. After this, all the hype around bitcoin will just look embarrassing in the aftermath.
The SEC was useful when information was hard to come by, but now it's just standing in the way of progress.
How many money transfers do Visa or Amex handle per day? The Federal Reserve? What about Western Union?
Is bitcoin capable of doing 50% of that? 10%? 1%?
I know people have just decided to expand the block size but what's a realistic limit on how many transactions can be done per hour? Is that enough for real widespread use?
I can certainly see uses but I worry that he can never get big enough to truly matter. Or if it does that a government or large private entity could easily try to take it over through force of computing power.
The reason it's gone up so much recently is that they just scaled it to handle more transactions. As other pointed out you can send an arbitrary amount whether it's 40 cents or 40 million dollars and it transfers quickly.
There's no holidays for the blockchain like banks have so you can send 24 hours a day, every day.
It's actually less useful. You already have banks doing the exact same thing for free, while insuring your money, you don't get hit 3% for transferring it into the bank, and there's interest accrued, not wildly shifting value where you might lose half in a few hours.
> You already have banks doing the exact same thing for free, while insuring your money, you don't get hit 3% for transferring it into the bank, and there's interest accrued
So much wrong with this statement.
First, not many banks in the U.S. do "the exact same thing for free", actually almost none do. Most ACH transfers take 1-5 days, instead of ~10 minutes with Bitcoin or ~15 seconds with Ethereum. Yes, I know about Zelle, but not all banks support that, and clearXchange isn't always same day, even.
Second, some services like Coinbase[1] insure your holdings, even while in crypto.
Third, almost all services that use ACH, like GDAX (Coinbase), Gemini, etc. don't do a 3% transfer fee through ACH, it's actually free. But it's next business day, like most ACH, where as crypto would've been an hour at most.
Lastly, some countries, like oh I don't know, Japan[2], have negative interest rates, so your money shrinks by the day instead of growing.
Is 10-minute ACH a kind of problem a lot of people face?
Seems like instant liquidity confirmation has been solved with credit cards or Paypal for trivial amounts (third party willing to act as an intermediary) or wire transfers for larger amounts (banks engaging their backchannel comfirmation protocols for a measly $25 fee).
There are also debit card payments, admittedly not as widespread, but impressively fast when used through Square Cash or Facebook Messenger.
None of the existing solutions are perfect, but all seem to be "good enough".
There's no need for anyone to switch at this point. Also, an ACH from Coinbase is 4-5 days not 1 day. Japan is an edge case with a very small population. They have -0.1 interest rate. That is nothing compared to what you might lose based on the wild fluctuations Bitcoin incurs.
Funny part is, you're still wrong. There is a need obviously, as people are switching.
If I deposit to GDAX, sell to USD, and withdraw to my bank it will be there in 1 business day. It's been that way for years, for almost everyone I know. ACH pulls take longer, sure, but what I said is correct.
Also, multiple countries implemented negative interest rates[1]. Japan isn't an anomaly.
What you might lose from BTC fluctuation, you may also gain, as seen by the 400% YTD growth, this year alone[2].
You really should do more research and actually understand the topic instead of dismissing it because it doesn't fit your world-view.
Most musicians who can figure out how to record and upload their own music to SoundCloud could just as easily create a generic website with squarespace or something similar to host a blog. The only value in a comprehensive social network for musicians would be the audience it could bring. A large audience is very hard to build.
