Accounting for Cryptocurrency Mining Operations

[Adrien Monteleone]

After some more creative search phrasing, I found those mining entries, but they don’t really apply. I’d think then you’re dealing with a situation more like farming. You’re not extracting a depleting resource but creating one, with limited inputs. (unless you consider the artificial hard limit on the number of possible coins, but you still don’t have any predetermined value of them)

Do you want to try to quantify and account for your electrical usage, PC depreciation, and personal time and do so in CPU cycles? I doubt it. How do you then value the CPU cycles?

There is the added complication that cryptocurrency has no set value except at the exchange point. At the creation point you don’t know what it is really worth. This would align with growing crops. You have them on your books based on the input value, but you don’t know what they are really worth till you sell them, and then book the difference as revenue. Even worse with cryptocurrency, the input value is likely immaterial per coin, which means any value they end up with is likely to be 100% profit.

If there is no measurable or ‘material’ input value, then you may be dealing with the conversion of an intangible into cash. I’m sure there are example journal entries for that floating around somewhere, but I can’t see any of them as being analogous.

I suspect however, the most likely answer is an entry similar to what central banks use, they use a liability account, but you’d have to create equity out of thin air instead, and therein lies the rub.

Cryptocurrency is not a currency. It is not a medium of exchange. It holds no value on its own. It merely facilitates a barter transaction by calculating the relative value between two goods, while removing one of the actual goods from immediate consideration. (thus building in a ‘time value’ of one or both of the goods into the calculation)

Thus, it is not an asset and has no value. You shouldn’t track it as a stock or commodity or any other thing of value. It is a factor(term) that is part of a calculation, not a ‘thing.'

Regards,
Adrien

> On Oct 25, 2017, at 11:21 PM, Rodney Elliott <rodney.elliott at rbendeavours.com> wrote:
> 
> Hi All.
> 
> 
> If I were to purchase a cryptocurrency (say Bitcoin) with a fiat currency recognised by gnucash (say USD), then the procedure to record the transaction is clear - create an asset account of the type 'stock', associate it with a new security that uses the coin ticker (BTC) and the maximum number of significant figures supported by gnucash, etc.
> 
> 
> 
> What to do in the case of mining a cryptocurrency is less clear. The BTC asset account would need to be credited with the amount of coins mined, but then what? How do you balance this transaction, given that no fiat currency was involved? The cryptocurrency was effectively created out of thin air. I feel like the answer is an equity account of some description, but I do not think that it would be appropriate to have an equity account of the type 'stock'. Is there a tractable solution to this problem?
> 
> 
> 
> 
> 
> - Rodney
> 
> 
> 
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