Bitcoins are so hot right now! Never mind that Satoshi Nakamoto doesn’t exist, or that it crashed 35% over the new year, or that it’s not real. Everyone wants some now!
Remember Beanie Babies in the 90’s? Beanie Babies were the brainchild of Mr. Ty Warner (who’s still pretty rich). In the early 90’s, he introduced these little toys which were half stuffed with beads via “scarcity strategy”. It worked! People were paying up to $5,000 for a toy that originally retailed for $5. This poor family – the Robinsons (who made a documentary called “Bankrupt by Beanies” wasted $100,000 on 20,000 of these beanie babies,which sit alone and worthless in a garage today. Well, maybe not worthless. 50 cents a piece.
Ah indeed, in the 90’s, couples going through divorces considered their beanie baby collections a major assets, and as pictured above, some brought in the stuffed toys to divide in front of the Judge.
Fast forward to 2018: today’s latest craze is Bitcoin. Everyone and their mothers are convinced that spouses are hiding their money in Bitcoin. Hopefully the blog gives you a practical understanding on bitcoin, then some tips and checks/balances in how to handle your divorce if there may be bitcoin involved.
What is Bitcoin?
Bitcoin is one of several “crypto-currencies” on the market that you can buy and sell. Kinda like money, but not really because there are no bills or coins – and it exists only on the internet. Kinda like magic. It is defined as a “peer-to-peer electronic cash system”, which means there is no bank holding the money, something they call “decentralized”. Although, there is some guy on the internet now arguing it isn’t decentralized anymore, because Proof-of-Work is dead. There is a finite number of bitcoins – 21 million to be exact. As of the time of me writing this, there are 16,790,000 out there. Roughly 4,300,000 still have to be mined. Its finite number makes it a perfect candidate for scarcity strategy. It’s like that Hermes Himalaya Croc Birkin that sold for over $300,000. There is only one, which makes it “wanted”.
When did this madness start?
Bitcoin started in 2009. Some mystery person named Satoshi Nakamoto is credited with the birth. However, nobody knows who this person is. And many speculate he/she isn’t Japanese because his English is too perfect, and some even speculate he may be British because he says “bloody this and bloody that” a lot. This Satoshi dude allegedly mined 1 million Bitcoins (worth 14 BILLION TODAY) and disappeared.
The first Bitcoin transaction is the purchase of Papa John’s pizzas. Some Florida guy paid 10,000 bitcoins for 2 pizzas, then worth $30 USD. Yum. (10,000 bitcoins is now 1.5 million US dollars).
How do does one buy bitcoin?
- Through a bitcoin exchange, such as Coinbase or Bitstamp.
- Through payment of goods and services (ie, you pay me $5,000 BTC for my retainer);
- Mine it by solving some complex computer problems or what not(I have no idea how this works – you can google it, but explaining it blows my mind).
- Exchange with someone you pair up with at this LocalBitcoins website.
Why is Bitcoin so valuable?
I have no idea! History has been replete with instances of complete idiocy. As Alan Greenspan says, “Bitcoin is a fascinating example of how human beings create value and is not always rational.”
Personally, I think scarcity, lemming-mentality and hype all contribute. Most people who buy Bitcoin isn’t completely clued into the inner workings of the blockchain; they often do it because their friends did it.
There is also something enticing about being a participant in an exclusive “club”. It’s like the “it” thing right now. First, it’s Bitcoin, and now it’s Etherium and Litecoin. People are jumping into it in masses. Smart companies are creating their own “cryptocurrency” – Today, Kodak announced its own form of “cryptocurrency”. Its stock went up 30%.
Should you trust Bitcoin?
I don’t think so, but apparently a lot of people do. Bitcoin is now accepted at major places like Overstock.com, Expedia, Subway
The Bitcoin website cryptically says this, “Much of the trust in Bitcoin comes from the fact that it requires no trust at all.”
Um, ok. I guess they are referring to the trust blockchain, which is this digital ledger that keeps track of all the transactions, but it’s bundled up in code. Supposedly, this prevents fraud and the prevalent double-spending problems (ie if you know some computer code, you can enter it twice and try to use the “money” twice”). I am not too clear on why the blockchain is so secure – but you can read about it here.
So they claim it’s secure. However, you should know that the blockchain has failed before, and was exploited. On August 15 2010, it was discovered that block 74638 contained a transaction that created 184,467,440,737.09551616 bitcoins for three different addresses This incident is called the “value overflow incident”.
BTW, just because I don’t trust it doesn’t mean that I can’t play with it. I personally love gambling and I definitely don’t trust it. (Vegas!) However, buying BTC on Coinbase for research-purposes has been also kinda fun. I just personally think you should be very careful when you’re gambling. After all, bitcoin went from being practically worthless in 2009 to $750 in Jan 2017 to $17,900 in December 2017. I say – if you are in it for fun, have fun. But I predict this:/ like tulip mania (in 1636, some guy exchanged 12 acres of his family land for a single tulip bulb), subprime mortgages (remember when everyone was buying real estate on nothing down and stated income?) and beanie babies, Bitcoin (and all accompanying cryptocurrencies) will eventually crash.
So I am going through a divorce and have Bitcoin. Do I disclose?
Obviously, yeah. You disclose anything and everything. Unless you are one of the early “miners” and programming people in 2010, you probably bought your BTC on an exchange like Coinbase. This means there is a paper trail.
Even if you paid cash, yes, you should still disclose! There are great penalties for not disclosing, like Denise Rossi, who won the lottery and didn’t disclose. Post-divorce, her husband found out and brought her back to Court. The Judge awarded the ENTIRE ticket to him!
I think my spouse is hiding our assets in BitCoin. I want to get it.
Many people going through a separation or divorce are worried that their spouse is hiding assets. In a most fertile soil of mistrust, lawyers and forensic will sow these seeds. They will want to conduct an expensive search, whether or not it unveils any new assets.
Again, unless your spouse was a miner or in it before the action prior to 2011 – he probably bought it on Coinbase – which you would see as a transaction on your bank statement or credit card statement. It’s there. Also, don’t be deluded into thinking it’s easier to hide Bitcoin. It’s just as easy to hide cash! The truth is – if someone wants to hide money from the IRS, they are engaging in criminal behavior and it takes a certain mentality. Sure, your spouse may have cheated on you, but cheating the IRS is a bit different.
Obviously, I would advise that you undergo discovery at the outset. But if the PDD’s come back and there is no mention of Bitcoin, and you have no real reason to believe there are cryptocurrencies involved, I would not institute a lengthy and costly discovery battle (feeding your lawyers).
There is no real reason to go after cryptocurrency in particular. I recommend focusing on other assets, REAL assets.
All this cryptocurrency stuff is mind-blowingly fascinating and I loved researching it. It was thrilling to buy .005 BTC on Coinbase! But truth is, the government can easily just shut it down. In fact, on Bitcoin’s website FAQ, in response to “Is Bitcoin legal”,their response is, “To the best of our knowledge, Bitcoin has not been made illegal”.
Don’t let Bitcoin or any other cryptocurrency distract you and prolong your divorce.
Because this too, like your divorce, shall pass.