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Question if I buy a bitcoin @$103.89 USD as of today’s prices where does the USD payment go? Do the funds paid in any world currency go into a pool to back the bitcoin or into the developers of bitcoin clients? What are the IRS requirements as to the value of ones account? The Norfed dollars where backed or made of precious metals and taken down by the federal coinage act. The $20.00 coin is now worth about 30% more than face value, go figure. Thanks any info would be appreciated.

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Just like any other currency exchange, then you find a person/company, agree on a rate, and you get bitcoins and the exchanger get dollars/euro/whatever you have. –  Nicolai Apr 1 '13 at 22:21
    
So... lets say someone buys a lighter from me, it cost B2, how do i cash the money in order to buy more lighters? And i don't mean only in the USA i mean in more complicate economies, with hardcore money regulations, as Venezuela or Argentina? –  elbreeder Nov 19 '13 at 16:16
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3 Answers

When you buy an ounce of silver bullion at the coin store, who gets the money?

The person who held the coin before you did.

All bitcoins are first issued to miners. From there, miners use those coins for trade or exchange. So when you buy a bitcoin with cash, you are buying it from someone who owned it but initially it was obtained from a miner.

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When I buy a gold or silver coin I have the coin with value, as silver and gold are needed to build computers and other things. I only see the bitcoin as another fiat currency? I still do not quite comprehend the miner aspect, what does a miner do to add value to the bitcoins? The I.R.S. question still not answered. Can bitcoins be held in a ROTH or IRA account? The overall concept sounds ok however a barter system would be value for value, I trade you some food you fix my roof. What am I missing? –  user3788 Apr 2 '13 at 1:35
    
Hi Stephen I can see this is a fraud as my first post has been edited by you? post as I sent here it is again –  user3788 Apr 2 '13 at 2:08
    
Again here was my post before it was changed by Stephen"Question if I buy a bitcoin @$103.89 USD as of today’s prices where does the USD payment go? Do the funds paid in any world currency go into a pool to back the bitcoin or into the developers of bitcoins pockets? What are the IRS requirements as to the value of ones account? The Norfed dollars where backed or made of precious metals and taken down by the federal coinage act. The $20.00 coin is now worth about 30% more than face value, go figure. Thanks any info would be appreciated –  user3788 Apr 2 '13 at 2:11
    
Gold is gold, silver is silver and food is food. I still can not see where the value in bitcoins are? What happens if your computer is hacked? –  user3788 Apr 2 '13 at 3:34
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Bitcoin is neither a commodity or a fiat currency, but has characters of both. The value is derived from the scarcity (since there will only ever be a finite amount of bitcoins, and before then there can only be so many at any given time, with no possibility of finding a new resource of them). The value is also derived from the liquidity perks that commodities and currencies have failed to offer, especially person to person, and over the internet.

If you bought a bitcoin with usd, the person you bought it from you no longer have a bitcoin and would have usd instead.

For the IRS you would most likely have to report your cost basis in US Dollars, and at reporting time report a gain or a loss if you sold them for cash. In the absence of specific regulations (recognized foreign currency trading profits have a max tax rate subject to the 60/40 rule), you will use the short-term or long-term capital gains tax code. Short-term capital gains are treated as normal income and taxed in whatever bracket you are in. Long-Term Capital gains are treated in a lower max different tax bracket. Unless explicitly prohibited you can hold anything in an IRA or Roth account.

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Still the question has not been answered how was or is the bitcoin monetized ? I have a real cool cat that I have trained to give me a high five on command. If I brush him everyday there will be a finite amount of RARE,,,scarce cat hairs from this cat. Are these hairs worth the same as gold, silver or bitcoins? When I dig a hole in my backyard and say goodbye to my beloved kitty are the hairs worth anything? There are a limited amount of these hairs on the market, $1.00 each, any takers? –  user3788 Apr 2 '13 at 4:36
    
what answer do you want to hear? bitcoin is currently very liquid and allows people to transfer large amounts with zero reporting requirements. There are liquidity crisis around the world and people are using bitcoins for liquidity instead of a reserve currency like gold and precious metals. People find value in that. –  CQM Apr 2 '13 at 4:56
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If you are asking about trading on an exchange, then the exchange software matches up buyers and sellers. Since you are a buyer, it matches you up with someone that wants to sell (or potentially several sellers that add up to what you want to buy). The sellers get the money (and usually a small part of it goes to the exchange itself)

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