[yebyen]

Dangerous? The only danger is that you might pay 1% fee when sending/converting your earnings back to USD. Also possible that the value of bitcoin tanks overnight, but there are historical charts that show this has not really happened but just once.

What kind of danger are you thinking?

The exchange could also go under and/or rob you. You should be careful about to whom you give your bank account numbers.

[tmh88j]

>What kind of danger are you thinking?

My guess is he's referring to one of the many "dealers" that were hacked and had bitcoins stolen.

[yebyen]

That would fall into the category of exchange going under.

Similar risk to cash in the mail, except with cash in the mail there's nothing you can do to protect yourself (or prove that delivery was accepted.)

[crygin]

It's actually somewhat riskier than cash through the mail (which is shockingly reliable), and you have no recourse, unlike the US postal service which is more than happy to insure cash mailings (up to $25k through Registered Mail) and investigate and prosecute fraud.

[yebyen]

That was the first danger. How much is the insurance? We were talking about 1% at CoinBase, I think that MtGox was 0.65%, and that's only for buying and selling. Withdrawals are free. Bitcoin-to-bitcoin transfers are (still) free.

If it's $20,000 cash in the mail, it weighs about 200g (100 $100's) and to mail it about an hour from here (1 hour 30 minutes by car) Rochester to Buffalo, registered mail with $25,000 insurance, flat rate priority mail envelope is $53. I guess that price is the same across country.

OK, so it's actually cheaper to mail cash than to trade bank dollars for bitcoins. I'll get off my pulpit now.

(PS: I'm pretty sure you actually have to pay taxes on that cash you received by mail, especially if it's registered and insured, now that it's yours, it's income. Bitcoins on the other hand are not cash. I am a newbie to taxes, but I don't think you would have to pay tax on bitcoin income unless you were actually cashing them out. Maybe capital gains. Any experts?)

[tedunangst]

You owe tax on income regardless of the form. If your employer gives you stock, you owe tax based on the stock's value the day you get it. Capital gains (or losses) mostly only applies when you sell the stock, and only to the difference in value. Same deal for bitcoins. Hell, if you're caller #9 and you just won the two week cruise, you're getting a fat tax bill and cruises aren't cash either.

[yebyen]

Ahm... but if you paid cash for the bitcoins, you don't owe any tax on it, right... until they appreciate in value, then it's capital gains?

And then, only if you actually cashed out, right? If you leave them as bitcoins and the value drops below what you paid, now you've got a loss and maybe deduction instead...

It would make sense that you should pay taxes on mining income (if they can find you).

[Karunamon]

> That would fall into the category of exchange going under.

Bitcoin exchanges are not like Paypal, it's a terrifically bad idea to keep your coins in a wallet controlled by a third party for any length of time.

[kragen]

It might be a better idea than keeping them in a wallet controlled by your personal computer, depending on how vulnerable that computer is.

[gknoy]

What do you do with them, then? I thought the point of Coinbase was to have a hosted wallet. I'm not sure I trust my security better than theirs. If the reply to that is that I should not be using Bitcoin, that's probably a sign of an issue that may limit widespread adoption.

[jlgreco]

Treat your local bitcoin wallet like your bank account, and treat your hosted bitcoin wallet like your leather wallet in your pocket. Only keep what you need in the leather wallet / hosted wallet.

Local wallets are easy to keep secure. Just keep it on a flashdrive, don't let it touch your harddrive, and don't use it on a pwnd computer. If you want, you can even keep that flashdrive in a real bank.

[mcherm]

Evidence shows that the track record of hosted bitcoin accounts is a bit disappointing.

But the evidence seems to show that the track record of bitcoin accounts kept by individuals is significantly worse. For instance, http://arstechnica.com/tech-policy/2012/10/78-percent-of-bit... and I think I am safe in concluding that a significant portion of those "non-circulating" bitcoins are actually lost.

So my financial advice would be that you are better off trusting an exchange than trusting your own storage and backup procedures.