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Set aside what Bitcoin enthusiasts want it to be for a moment, and think about the transactions that are actually happening. Is the majority of the usage patte

Set aside what Bitcoin enthusiasts want it to be for a moment, and think about the transactions that are actually happening. Is the majority of the usage pattern currency-like, where people are getting paid in BTC and buying things with BTC? Or is the majority of the usage pattern that of a commodity, where people are mostly buying and selling it for fiat currency, and trying to do so at a profit? I would strongly suspect the latter: the vast majority of BTC transactions (other than transfers between personal wallets) are the buying and selling of BTC for fiat currency. Even most "Pay with Bitcoin" businesses are this way: in reality, all you're doing is selling your Bitcoin to an exchange who will convert it to USD and pay the USD-denominated price of the item you're buying. Gold certainly can't do this so conveniently, but the principle is the same: I want to buy something, so I sell some gold and use the USD to buy things.

Steko 11y ago
This. Also don't forget that currency and commodity are not always mutually exclusive: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money
danharaj 11y ago
Commodities are increasingly behaving like this, though not to the extent that BTC does. The economy is very, very financialized. Bitcoin is an asset that appeared well into the financialization trend, so I don't think it is that surprising that such activity dwarfs actual uses of BTC as a medium of exchange. Who is interested in bitcoin? Consumers for whom the use of bitcoin is better than currency (so, like, contraband over the Internet), technophiles, libertarians and investors, really.
digi_owl 11y ago
From the outset bitcoin was set up to be digital gold...
- joeyspn 11y ago
  Exactly this. The precursor was Szabo's bitgold [0]. Also, the feeling in the community has always been that bitcoin would remain as the gold of the cryptos, used as both money and a commodity with some industrial applications. [0] http://unenumerated.blogspot.com.es/2005/12/bit-gold.html http://unenumerated.blogspot.com.es/2005/12/bit-gold.html
  - digi_owl 11y ago
    Meh, i hold that what made gold money was the face stamped on them to verify they were of a certain weight. Straight gold without it is a questionable commodity as the usage, at least for the time, was ornamental at best. But once measured up and stamped you had an item that would not lose its weight much over years of storage (even it if was down a hole or at the bottom of a lake etc). What made it money was not the metal itself, but the process.
- shmerl 11y ago
  Or digital cash. Where do you actually draw the line?
  - eru 11y ago
    It's both. Bitcoin's supply is strictly limited. Most cash these days can be printed at will. So the comparison to digital gold coins is apt.
    - digi_owl 11y ago
      Thing is that i think the reason they picked gold back in the day to make coin out of, was that it was durable. You could bury it for decades, or even drop it at the bottom of the ocean, and it would not lose any noticeable weight etc. These days, "paper" notes etc do just as well.
      - eru 11y ago
        Oh, it's more complicated. Pebbles are super durable, too. But they are not rare enough. Gold wasn't the only commodity money, and it's wide popularity is actually fairly recent. Silver was historically more popular, even copper and in some cases iron.
        digi_owl 11y ago
        Was there not some stone wheels used as currency on some pacific islands?
CyberDildonics 11y ago
I doubt that is nearly as true any more. It is likely exotic to be payed in bitcoin, but buying things is a breathe of fresh air. Any electronics, anything that can be bought at overstock, some local food delivery (through restaurant menu startups that take btc), vpns, Louis CK's latest release... If I can pay by btc then I do. The convenience is fantastic. No fraud, no punching in numbers, no hassle from some extension messing with e-commerce tracking that messes up the order, no fraud false positive from using a vpn or privacy tools... The list goes on. If they take BTC? Click a QR code/link, put password into wallet. Done.
- the_mitsuhiko 11y ago
  How many of those places do not instantly convert to USD?
- skizm 11y ago
  Is this an advantage over paypal where I am insured as a buyer?
  - deleted 11y ago
    [deleted]
  - aianus 11y ago
    Try buying something using your Canadian PayPal account on an American IP address with a shipping address in Vietnam. I did, my account got insta-blocked and I could not complete my transaction. I would have been perfectly happy to risk losing my money instead of having a 100% chance of not receiving the thing I want because of PayPal's paranoia.
    - TylerE 11y ago
      Frankly, I see that as a positive. If I made a similar transaction I'd be up set if it didn't at least trigger a fraud alert.
      - 11y ago
mikekchar 11y ago
I actually know someone who receives her salary in Bitcoin. She's a remote contractor who lives in a country where the banking industry imposes really unreasonable fees on international transfers. To me, she is using Bitcoin the way it was originally intended: to break the stranglehold of the monopolies in banks for financial transactions. Similarly, I'm not entirely sure that the "Pay with Bitcoin" approach, where an exchange converts the currency for you is that far removed from this idea. Before Bitcoin, my options for payments were pretty limited. Either credit card or Paypal -- both of which are convenient in the US, but at the time very inconvenient (to the point of impossibility) for people living in poorer countries. I've read the early mailing list archives for Bitcoin to see if I could understand Saotoshi's intent in creating Bitcoin. Interestingly, he doesn't seem to discuss it much at all. It seems to be all about the tech. I think the "bitcoin is going to replace fiat currency" narrative is something that was adopted by overenthusiastic people who arrived on the scene later. I think Bitcoin (and potentially other digital currencies) still has a number of hurdles to get over, but it's succeeded at wresting the payment industry from the banking monopoly (plus Paypal) far better than I originally suspected it might. I certainly hope it can continue.
- superuser2 11y ago
  I don't think it matters (or should matter) to regulators what Satoshi intended, or what one person does, or what a few hundred people do. I agree paying with Bitcoin is a good option and I hope it becomes more accessible (and that the price stabilizes). That doesn't mean regulators should treat it like currency when, practically, the real world doesn't use it that way.
- joeyspn 11y ago
  > I've read the early mailing list archives for Bitcoin to see if I could understand Satoshi's intent in creating Bitcoin. The answer could be here: Thus, bit gold will not be fungible based on a simple function of, for example, the length of the string. Instead, to create fungible units dealers will have to combine different-valued pieces of bit gold into larger units of approximately equal value. This is analogous to what many commodity dealers do today to make commodity markets possible. Trust is still distributed because the estimated values of such bundles can be independently verified by many other parties in a largely or entirely automated fashion. In summary, all money mankind has ever used has been insecure in one way or another. This insecurity has been manifested in a wide variety of ways, from counterfeiting to theft, but the most pernicious of which has probably been inflation. Bit gold may provide us with a money of unprecedented security from these dangers.
wslh 11y ago
Yes, this is the majority of usage but some customers pay me in bitcoins and I pay a few development services with bitcoins too. I can lose or win with the fluctuations but I am more confident that the bitcoin is fluctuating less and eventually will move up, in the mean time I keep this bitcoins moving inside the ecosystem. My rational side thinks that this ecosystem is just starting and there are killer use cases. For example minors offering their services (e.g: web design, software development) for bitcoins where in the real world they can't handle their own credit card or bank accounts without permission. Another killer use case is loans, in developed countries you can pay more than 60% of annual interest, cryptocurrencies are a way to normalize these numbers worlwide.
- eru 11y ago
  > For example minors offering their services (e.g: web design, software development) for bitcoins where in the real world they can't handle their own credit card or bank accounts without permission. Good old regulatory arbitrage. (Hey, it works for Uber.)
eru 11y ago
If memory serves right, the vast number of transactions on the blockchain are people playing Satoshi Dice, ie gambling.
spinlock 11y ago
What about silk road? Do you think people were using it as a currency there or still as a comodity?
- emodendroket 11y ago
  So basically the only example you can come up with is illicit commerce? Guess we should also consider Tide detergent a currency. http://nymag.com/news/features/tide-detergent-drugs-2013-1/ http://nymag.com/news/features/tide-detergent-drugs-2013-1/
- bduerst 11y ago
  Bitcoin was definitely used as a hobby internet currency before it started becoming popular around 2011-12. Now it's largely speculation and hoarding.
analog31 11y ago
It is possible to buy and sell things with commodities, for instance gold bars.
logicallee 11y ago
>Or is the majority of the usage pattern that of a commodity, where people are mostly buying and selling it for fiat currency, and trying to do so at a profit? This sentence would make sense if you had said "that of a security"! I think you forget that the defining aspect of wheat is that eventually it ends up in people's mouths! (i.e. has some actual usage.) Futures contracts are an afterthought on top of what the definition of a commodity is, in my opinion. https://en.wikipedia.org/wiki/Commodity https://en.wikipedia.org/wiki/Commodity
Hermel 11y ago
A large fraction of Bitcoin transactions is gambling. See how the number of transactions suddenly takes off in summer 2012? That's Satoshi Dice. https://blockchain.info/charts/n-transactions?showDataPoints=false&show_header=true&daysAverageString=1&timespan=all https://blockchain.info/charts/n-transactions?showDataPoints... Furthermore, the largest use of Bitcoin volume-wise is indeed trading against other currencies. However, the same holds for the USD. US GDP is below 20 trillion per year, while global forex trading is 5 trillion per day, with the majority of trades involving USD.
- austenallred 11y ago
  And Silk Road
stefanix 11y ago
The function of Bitcoin goes beyond it's use. It's sending a very clear message to other forms of financial transaction to keep it simple and cheap. I think it delineates a threshold where no other financial transaction can go. I think it's very beneficial even though comparatively few transactions go through Bitcoin.
toomim 11y ago
We can answer this question, but first we must make it operational. Let's measure a "usage" of bitcoin as a bitcoin transaction. This is the most simple, general measure of bitcoin usage. Now we have a quantity. We can graph it. [1] Now, we just need to get some data on whether these transactions occurred due to commerce in bitcoin, or due to trading for a profit. We can't see this on the blockchain directly; however payment processors like Bitpay and Coinbase have access to this information. Coinbase, in particular, operates both an exchange and payment processor. It knows what percentage of transactions (within its market segment) are due to buys and sells vs. ordinary commerce. Luckily, Coinbase has gone on the record answering this specific question! [2] Brian Armstrong, the CEO, said specifically at Techcrunch that the majority of bitcoin uses are for buying and selling things -- actual payments. [2] So the answer to your question surprises you -- the majority of usage is very currency-like! [1] https://blockchain.info/charts/n-transactions?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= https://blockchain.info/charts/n-transactions?timespan=all&s... [2] http://techcrunch.com/2014/10/21/coinbase-ceo-brian-armstrong-shares-his-vision-for-the-future-of-bitcoin/ http://techcrunch.com/2014/10/21/coinbase-ceo-brian-armstron...
- sigma2015 11y ago
  Funny coincidence that according to that chart we are right now at an all time high.
  - bduerst 11y ago
    It's because people were flooding transactions and sabotaging bitcoin to prove it doesn't work well by it's current design. [1] http://motherboard.vice.com/read/great-job-everyone-bitcoiners-are-ddosing-bitcoin http://motherboard.vice.com/read/great-job-everyone-bitcoine...
davidgerard 11y ago
During the transaction spam, Bitcoin was all but unusable with the standard wallet software. The price went up. Whatever the Bitcoin price depends on, it sure isn't whether it's usable.

Steko 11y ago

This. Also don't forget that currency and commodity are not always mutually exclusive: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money

danharaj 11y ago

Commodities are increasingly behaving like this, though not to the extent that BTC does. The economy is very, very financialized. Bitcoin is an asset that appeared well into the financialization trend, so I don't think it is that surprising that such activity dwarfs actual uses of BTC as a medium of exchange. Who is interested in bitcoin? Consumers for whom the use of bitcoin is better than currency (so, like, contraband over the Internet), technophiles, libertarians and investors, really.

digi_owl 11y ago

From the outset bitcoin was set up to be digital gold...

joeyspn 11y ago
Exactly this. The precursor was Szabo's bitgold [0]. Also, the feeling in the community has always been that bitcoin would remain as the gold of the cryptos, used as both money and a commodity with some industrial applications. [0] http://unenumerated.blogspot.com.es/2005/12/bit-gold.html http://unenumerated.blogspot.com.es/2005/12/bit-gold.html
- digi_owl 11y ago
  Meh, i hold that what made gold money was the face stamped on them to verify they were of a certain weight. Straight gold without it is a questionable commodity as the usage, at least for the time, was ornamental at best. But once measured up and stamped you had an item that would not lose its weight much over years of storage (even it if was down a hole or at the bottom of a lake etc). What made it money was not the metal itself, but the process.
shmerl 11y ago
Or digital cash. Where do you actually draw the line?
- eru 11y ago
  It's both. Bitcoin's supply is strictly limited. Most cash these days can be printed at will. So the comparison to digital gold coins is apt.
  - digi_owl 11y ago
    Thing is that i think the reason they picked gold back in the day to make coin out of, was that it was durable. You could bury it for decades, or even drop it at the bottom of the ocean, and it would not lose any noticeable weight etc. These days, "paper" notes etc do just as well.
    - eru 11y ago
      Oh, it's more complicated. Pebbles are super durable, too. But they are not rare enough. Gold wasn't the only commodity money, and it's wide popularity is actually fairly recent. Silver was historically more popular, even copper and in some cases iron.
      - digi_owl 11y ago
        Was there not some stone wheels used as currency on some pacific islands?

CyberDildonics 11y ago

I doubt that is nearly as true any more. It is likely exotic to be payed in bitcoin, but buying things is a breathe of fresh air. Any electronics, anything that can be bought at overstock, some local food delivery (through restaurant menu startups that take btc), vpns, Louis CK's latest release... If I can pay by btc then I do. The convenience is fantastic. No fraud, no punching in numbers, no hassle from some extension messing with e-commerce tracking that messes up the order, no fraud false positive from using a vpn or privacy tools... The list goes on. If they take BTC? Click a QR code/link, put password into wallet. Done.

the_mitsuhiko 11y ago
How many of those places do not instantly convert to USD?
skizm 11y ago
Is this an advantage over paypal where I am insured as a buyer?
- deleted 11y ago
  [deleted]
- aianus 11y ago
  Try buying something using your Canadian PayPal account on an American IP address with a shipping address in Vietnam. I did, my account got insta-blocked and I could not complete my transaction. I would have been perfectly happy to risk losing my money instead of having a 100% chance of not receiving the thing I want because of PayPal's paranoia.
  - TylerE 11y ago
    Frankly, I see that as a positive. If I made a similar transaction I'd be up set if it didn't at least trigger a fraud alert.
    - 11y ago

mikekchar 11y ago

I actually know someone who receives her salary in Bitcoin. She's a remote contractor who lives in a country where the banking industry imposes really unreasonable fees on international transfers. To me, she is using Bitcoin the way it was originally intended: to break the stranglehold of the monopolies in banks for financial transactions. Similarly, I'm not entirely sure that the "Pay with Bitcoin" approach, where an exchange converts the currency for you is that far removed from this idea. Before Bitcoin, my options for payments were pretty limited. Either credit card or Paypal -- both of which are convenient in the US, but at the time very inconvenient (to the point of impossibility) for people living in poorer countries. I've read the early mailing list archives for Bitcoin to see if I could understand Saotoshi's intent in creating Bitcoin. Interestingly, he doesn't seem to discuss it much at all. It seems to be all about the tech. I think the "bitcoin is going to replace fiat currency" narrative is something that was adopted by overenthusiastic people who arrived on the scene later. I think Bitcoin (and potentially other digital currencies) still has a number of hurdles to get over, but it's succeeded at wresting the payment industry from the banking monopoly (plus Paypal) far better than I originally suspected it might. I certainly hope it can continue.

superuser2 11y ago
I don't think it matters (or should matter) to regulators what Satoshi intended, or what one person does, or what a few hundred people do. I agree paying with Bitcoin is a good option and I hope it becomes more accessible (and that the price stabilizes). That doesn't mean regulators should treat it like currency when, practically, the real world doesn't use it that way.
joeyspn 11y ago
> I've read the early mailing list archives for Bitcoin to see if I could understand Satoshi's intent in creating Bitcoin. The answer could be here: Thus, bit gold will not be fungible based on a simple function of, for example, the length of the string. Instead, to create fungible units dealers will have to combine different-valued pieces of bit gold into larger units of approximately equal value. This is analogous to what many commodity dealers do today to make commodity markets possible. Trust is still distributed because the estimated values of such bundles can be independently verified by many other parties in a largely or entirely automated fashion. In summary, all money mankind has ever used has been insecure in one way or another. This insecurity has been manifested in a wide variety of ways, from counterfeiting to theft, but the most pernicious of which has probably been inflation. Bit gold may provide us with a money of unprecedented security from these dangers.

wslh 11y ago

Yes, this is the majority of usage but some customers pay me in bitcoins and I pay a few development services with bitcoins too. I can lose or win with the fluctuations but I am more confident that the bitcoin is fluctuating less and eventually will move up, in the mean time I keep this bitcoins moving inside the ecosystem. My rational side thinks that this ecosystem is just starting and there are killer use cases. For example minors offering their services (e.g: web design, software development) for bitcoins where in the real world they can't handle their own credit card or bank accounts without permission. Another killer use case is loans, in developed countries you can pay more than 60% of annual interest, cryptocurrencies are a way to normalize these numbers worlwide.

eru 11y ago
> For example minors offering their services (e.g: web design, software development) for bitcoins where in the real world they can't handle their own credit card or bank accounts without permission. Good old regulatory arbitrage. (Hey, it works for Uber.)

eru 11y ago

If memory serves right, the vast number of transactions on the blockchain are people playing Satoshi Dice, ie gambling.

spinlock 11y ago

What about silk road? Do you think people were using it as a currency there or still as a comodity?

emodendroket 11y ago
So basically the only example you can come up with is illicit commerce? Guess we should also consider Tide detergent a currency. http://nymag.com/news/features/tide-detergent-drugs-2013-1/ http://nymag.com/news/features/tide-detergent-drugs-2013-1/
bduerst 11y ago
Bitcoin was definitely used as a hobby internet currency before it started becoming popular around 2011-12. Now it's largely speculation and hoarding.

analog31 11y ago

It is possible to buy and sell things with commodities, for instance gold bars.

logicallee 11y ago

>Or is the majority of the usage pattern that of a commodity, where people are mostly buying and selling it for fiat currency, and trying to do so at a profit? This sentence would make sense if you had said "that of a security"! I think you forget that the defining aspect of wheat is that eventually it ends up in people's mouths! (i.e. has some actual usage.) Futures contracts are an afterthought on top of what the definition of a commodity is, in my opinion. https://en.wikipedia.org/wiki/Commodity https://en.wikipedia.org/wiki/Commodity

Hermel 11y ago

A large fraction of Bitcoin transactions is gambling. See how the number of transactions suddenly takes off in summer 2012? That's Satoshi Dice. https://blockchain.info/charts/n-transactions?showDataPoints=false&show_header=true&daysAverageString=1&timespan=all https://blockchain.info/charts/n-transactions?showDataPoints... Furthermore, the largest use of Bitcoin volume-wise is indeed trading against other currencies. However, the same holds for the USD. US GDP is below 20 trillion per year, while global forex trading is 5 trillion per day, with the majority of trades involving USD.

austenallred 11y ago
And Silk Road

stefanix 11y ago

The function of Bitcoin goes beyond it's use. It's sending a very clear message to other forms of financial transaction to keep it simple and cheap. I think it delineates a threshold where no other financial transaction can go. I think it's very beneficial even though comparatively few transactions go through Bitcoin.

toomim 11y ago

We can answer this question, but first we must make it operational. Let's measure a "usage" of bitcoin as a bitcoin transaction. This is the most simple, general measure of bitcoin usage. Now we have a quantity. We can graph it. [1] Now, we just need to get some data on whether these transactions occurred due to commerce in bitcoin, or due to trading for a profit. We can't see this on the blockchain directly; however payment processors like Bitpay and Coinbase have access to this information. Coinbase, in particular, operates both an exchange and payment processor. It knows what percentage of transactions (within its market segment) are due to buys and sells vs. ordinary commerce. Luckily, Coinbase has gone on the record answering this specific question! [2] Brian Armstrong, the CEO, said specifically at Techcrunch that the majority of bitcoin uses are for buying and selling things -- actual payments. [2] So the answer to your question surprises you -- the majority of usage is very currency-like! [1] https://blockchain.info/charts/n-transactions?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= https://blockchain.info/charts/n-transactions?timespan=all&s... [2] http://techcrunch.com/2014/10/21/coinbase-ceo-brian-armstrong-shares-his-vision-for-the-future-of-bitcoin/ http://techcrunch.com/2014/10/21/coinbase-ceo-brian-armstron...

sigma2015 11y ago
Funny coincidence that according to that chart we are right now at an all time high.
- bduerst 11y ago
  It's because people were flooding transactions and sabotaging bitcoin to prove it doesn't work well by it's current design. [1] http://motherboard.vice.com/read/great-job-everyone-bitcoiners-are-ddosing-bitcoin http://motherboard.vice.com/read/great-job-everyone-bitcoine...

davidgerard 11y ago

During the transaction spam, Bitcoin was all but unusable with the standard wallet software. The price went up. Whatever the Bitcoin price depends on, it sure isn't whether it's usable.