Bob, I look at it a little different... Take this example.
Imagine there is a company that makes frozen banana machines. I purchase a banana machine and produce my own frozen bananas. I then find a group of people who are willing to accept payment for my goods in frozen bananas. Im no tax expert, but it seems to me that the IRS has no control over my frozen bananas in this barter system and only when it changes to fiat and I start selling them, then I pay sales tax/business taxes. Now even if I do decide to sell them, seems i should only pay sales taxes/biz taxes. I dont see where a capital gains tax comes into play here. Even if i produced TONS off banans when the price was lower.. Or if the great banana shortage of the 30s comes back and they skyrocket. Its still a banana, not fiat...
Is this an incorrect assumption?
It is an incorrect assumption of how the IRS will treat such a frozen banana maker.
There is nothing magical about converting to fiat triggering tax, any soft of conversion can work similarly.
Bitcoin is a pretty good unit of account in its own right.
Take your cost of production, and the value at which they are converted to something else (and as proudhon reminds us, the interval between the dates, for LTCG) and do the math.
Including all your costs of production for some people they will have losses as a miner depending on their depreciation rate for equip.
Then there are wash-sale rules, and mark-to-market opportunities... there is a lot of money to be made in writing or adapting software to read your block chain inputs, pulling exchange data, and making tools for automating this.