Question

1.Explain how to audit a transaction on the blockchain?

2.Managerial/tax issues: When agreeing on a price, should you use a fiat currency or a digital currency? Why? What are the taxes implications?

Answer 1

(1): To audit transactions on the block-chain one has to make use of block explorer. Using a block explorer one can use the transaction ID to determine the transaction details, the number of digital currency exchanged for a good or service. Details like input (in terms of number of units of digital currency), output (in terms of number of units of digital currency), fees, fees rate, etc. Using these details one can review and audit any transaction on the block-chain.

(2): When agreeing on a price one should usually use the fiat currency. This is because the fiat money is the legal tender as declared by the government of the country concerned in which the transaction is taking place. The value of fiat currency is backed by the government that issued it. In terms of tax implications we should note that fiat currency does not have an implicit value while digital currencies usually have an intrinsic value. Thus in case of transactions in digital currency, often there will be a case of capital gains and hence this will be taxed. On the other hand all transactions based on fiat currency do not attract capital gains tax.