Bitcoin: Anatomy of a transaction

Michael’s Auto Plaza general manager Eugene Rubinchuk stands in the lot of his family’s business in East Greenbush, N.Y. The car dealership accepts bitcoin and several other digital currencies. (AP)
Updated 27 February 2018

Bitcoin: Anatomy of a transaction

NEW YORK: Bitcoins can buy you a TAG Heuer watch, a cross-country flight or a meatball marinara sub.
Purchases with bitcoin and other digital currencies remain rare relative to cash and credit cards. Many bitcoin holders value it more as an investment than a day-to-day currency.
And the complex workings behind the notoriously volatile currency can be off-putting to neophytes. What are the fees? Are there taxes? How do you spend a currency that can devalue dramatically between ordering appetizers and paying the check?
Buying with bitcoin can be as easy as tapping your phone, though there are some cautions. A look at a single bitcoin transaction, the sale of a 2017 Subaru from an upstate New York car dealer to a buyer from Virginia, offers some insights into the currency’s uses.
IN BUSINESS WITH BITCOIN
Eugene Rubinchuk didn’t get into digital currency for the anonymity or to strike a blow against centralized banking. He was just looking for more business.
Rubinchuk and his father, who goes by “Mike the Russian,” already ham it up in local TV commercials for Michael’s Auto Plaza wearing furry hats. Digital currency is just another potential edge.
“It’s just a way to reach customers we normally couldn’t reach, that normally wouldn’t think of us,” he said.
The cars and truck on the lot near Albany are priced in US dollars. Rubinchuk simply signed up for one of the services that allowed him to accept digital currencies if a bitcoin buyer came along.
CASHING IN CRYPTOCURRENCY
Jonathan Cypert got into bitcoin early and made out well.
In 2011, he read about a 2-year-old currency skyrocketing in value and soon invested $2,000 in computers to “mine” bitcoins for about a year and a half. That’s the complicated process that rewards tech-savvy participants for verifying bitcoin transactions in its public ledger, called the blockchain.
When he started, a single bitcoin was worth around $2.50. By the time he was ready to buy a used, low-mileage Subaru for his wife, a bitcoin was worth over $14,000.
The 32-year-old Virginia resident sees his bitcoin cache as a nest egg to tide him over after he retires from the military. (Wary of attracting scammers, Cypert requested that his hometown and military branch not be made public). The purchase gave him a chance to recoup his investment many times over with a fraction of his cache.
“At this point it’s like, why not?” Cypert said. “I might as well realize some of that gain.”
BITCOIN BARGAINING
Rubinchuk and Cypert talked on the phone on the evening of Jan. 2 and settled on a sale price on the Subaru WRX STI of $34,640.
Then they had to agree on what that equaled in bitcoins judging by the exchange rates that moment. Tracking bitcoin prices on their screens, the pair agreed to proceed with one bitcoin equaling about $14,755. Cypert sent 2.34790481 bitcoins from his personal electronic wallet to the public address of Rubinchuk’s wallet.
Cypert also paid a fee of about $3.50, which goes to reward miners and keep the system running.
Then Rubinchuk watched bitcoin’s value go up and down as he waited to convert his digital money into dollars.
BLOCKCHAIN BLUES
Rubinchuk wanted to convert quickly in case bitcoin’s value suddenly dropped against the dollar, costing him money. The fear is well-founded, since bitcoin’s value can gain or lose more than $400 in a half-hour.
But the digital currency service he uses required him to wait for multiple confirmations from the bitcoin network before he could convert it into dollars, a process that can be affected by network congestion and other factors. Rubinchuk recalls waiting about 30 to 45 minutes.
“I’m sitting there on pins and needles checking every five minutes if it’s available,” he said.
Rubinchuk converted the sale into dollars with bitcoin just slightly below where it was at the time of the sale earlier that evening. He made about $7 less than the sale price.
The money was in his business’s bank account within 48 hours.
Rubinchuk soon after signed up for a separate merchant account through another provider that assesses him a 1 percent fee on all transactions, insulating him from short-term volatility. He compares it favorably to credit card fees that run 2 to 3 percent for merchants.
KEEPING IT LEGAL
Digital currencies are notoriously used by criminals to transfer funds anonymously. But Rubinchuk told the tax collector about this transaction.
In a standard IRS form for cash payments over $10,000, he reported the money he received, from whom it came and the fact that it originated “via bitcoin.”
Cypert avoided sales tax under a federal law covering service members that lets him retain his official residency in Alaska, which does not have a sales tax.
But he will pay taxes on a long-term capital gain.
YOUR TIME MAY VARY
Bitcoin miner fees have dropped markedly this year, and advocates say congestion issues are being solved by new technologies. Rubinchuk waited about 15 minutes to make a dollar exchange last week for his second bitcoin sale, a 2016 Hyundai Elantra.
And recently in Hillsboro, Oregon, Jeff Hanzlik bought $288 worth of marijuana-growing supplies from a store in a transaction that took a few minutes to finalize. He transmitted 0.03305451 in bitcoins from his phone, which read a code on the merchant’s tablet. The same phone app allowed Hanzlik to choose to pay about a quarter in fees.
“Once you understand what this technology is and this genie’s out of the bottle, you’re not going to have any choice but to be using it in the future,” Hanzlik said.
But the bitcoin network at this stage is still not suited to smaller, everyday transactions, said Christian Catalini, founder of the Massachusetts Institute of Technology’s Cryptoeconomics Lab.
“If you’re thinking about paying for coffee in bitcoin, that’s not what it’s good at right now,” he said. “Things can change.”


Oil prices fall but losses limited by Brexit deal hopes

Updated 18 October 2019

Oil prices fall but losses limited by Brexit deal hopes

  • US retail sales in September fell for the first time in seven months adding to economy fears

LONDON: Oil prices fell on Thursday as industry data showed a larger than expected increase in US inventories but losses were limited after Britain and the EU announced they had reached a deal on Brexit.

Global benchmark Brent crude was down 37 cents at $59.05 in afternoon London trade while US WTI crude was also down 37 cents, at $52.99.

US crude inventories soared by 10.5 million barrels to 432.5 million barrels in the week to Oct. 11, the American Petroleum Institute’s weekly report showed, ahead of official government stocks data.

Analysts had estimated US crude inventories rose by 2.8 million barrels last week.

“US sanctions imposed on Chinese shipping company COSCO are seriously denting demand for imported crude ... This has a profound impact on US crude oil inventories as reflected in last night’s API report,” said Tamas Varga, an analyst at PVM Oil Associates.

“US refinery maintenance is not helping to reverse the current trend and further builds in US crude oil inventories can be expected in the next few weeks.”

The US imposed sanctions on COSCO Shipping Tanker (Dalian) and subsidiary COSCO Shipping Tanker (Dalian) Seaman & Ship Management for allegedly carrying Iranian oil.

Adding to concerns about the global economy — and therefore oil demand — data from the US showed retail sales in September fell for the first time in seven months. Earlier data showed a moderation in job growth and services sector activity.

Nevertheless, Brexit developments helped limit oil’s decline. Prime Minister Boris Johnson said Britain and the EU had agreed a “great” new deal and urged lawmakers to approve it when they meet for a special session at the weekend.

Analysts have said any agreement that avoids a no-deal Brexit should boost economic growth and oil demand.

However, the Northern Irish party whose support Johnson needs to help ratify any agreement, has said that it refused to support the pact.

Hopes of a potential US-China trade deal also supported oil. The commerce ministry in Beijing said China hoped to reach a phased agreement with Washington as early as possible.

But the German government has lowered its 2020 forecast for economic growth to 1 percent from 1.5 percent, the economy ministry said. It said Germany, Europe’s largest economy, was not facing a crisis.