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The fact that Bitcoin has flourished despite numerous high profile incidents of theft and fraud, the relative difficulty associated with buying and selling them

The fact that Bitcoin has flourished despite numerous high profile incidents of theft and fraud, the relative difficulty associated with buying and selling them, and the rather unsavory nature of many of its most popular uses today, is a testament to its long-term viability as a currency. The Bitcoin ecosystem has a long way to go before it is considered mainstream, but I believe its long-term success is almost inevitable at this point. The price would likely be even higher right now if Bitinstant, once one of the most popular and easy ways to obtain Bitcoins, hadn't had serious financial and technical issues over the last two weeks. Here's hoping they get their issues sorted.

oijaf888 14y ago
Are you sure its not proof that there's a huge market for an internet based currency and despite all of bitcoin's issues it is still growing?
- downandout 14y ago
  There have been hundreds of virtual currencies introduced both before and after Bitcoin. However, Bitcoin remains the most popular of all of them. While it has some obvious advantages over many of the other schemes, it would be speculative to try to explain exactly why it has succeeded where others have failed. However, regardless of the reasons, it has a strong enough foothold to last for a very long time. My personal opinion is that Bitcoin is popular because it makes money more flexible, and enables people to take absolute control over their money - in the same way that the mp3 standard enabled them to take control of their music.
glesica 14y ago
It says to me that there is a large amount of speculation. As a currency, Bitcoin is basically useless except for illicit transactions (which are usually pretty inefficient anyway). Would you use dollars if the value of a dollar could change by hundreds of percentage points in a few months? No one would.
- wolfpackk 14y ago
  high volatility is natural for all new currencies, as volume continues to increase then volatility will decrease.
  - derrida 14y ago
    I was wondering what your reasoning behind this was. Do you have any past examples to support this assertion? Or do you base this position on some prior principles?
- eof 14y ago
  Well your logic is obviously flawed, because people do use bitcoins for transactions and they have changed by hundreds of percentage points. "No one" is patently false. Besides, illicit transactions are still transactions. And.. you are just plain wrong. Bitcoin is also useful for buying many completely legal things. Including a VPN that can't be linked to your identity. (Illicit you say? What about a journalist in a repressive regime).
  - glesica 14y ago
    Illicit plus grey market and a few special cases. Fine, you win the Pedant's Prize for nitpicking. The point is that they don't make a good general-purpose currency. Just because they're awesome for buying drugs and secret VPNs doesn't mean very much in the grand scheme of things (most transactions, at least in the developed world, do not take place in the grey market). Also, just because some people do something doesn't mean that there aren't strong incentives against doing that thing, and doesn't make a statement such as "people don't do that" false. It just means that there are exceptions, but when the exceptions don't affect the point it is common to ignore the exceptions in general conversation.
    - mayneack 14y ago
      Vpns are a gray market? Does not wanting my car searched imply that I have illegal things in it?
kjackson2012 14y ago
A rising price does not imply long-term viability. A stable price does. For long term viability, people can't just be buying and selling it, they should be transacting with it. It seems like the most active form of Bitcoin use that I've seen is trading. There's nothing wrong with that, but it's a double-edged sword, as people learned last year. Once more and more regular people actually start using it for real purchases, then I'd be more willing to say there is long-term viability.
- downandout 14y ago
  You are correct that a rising price does not necessarily imply long-term viability. It indicates a sharp increase in demand. In Bitcoin's case, I believe demand is rising because of fundamental advantages it has over other forms of virtual currency that won't soon be rivaled. It enables new business models and transactions that would not have otherwise occurred (in many cases, for legal reasons). For this reason, I believe that demand (and resulting prices) will continue to rise.
  - Jabbles 14y ago
    for legal reasons Oh come off it. You mean illegal reasons. You know you do. If you believe people should be free to buy any kind of drug they wish then say so, I don't think HN would view it as too radical a view. But your post sounds like typical corporate bullshit.
    - eurleif 14y ago
      "For legal reasons" doesn't mean "because what they're doing is legal", it means "for reasons related to the law" (i.e., what they're doing is against it). That wasn't doublespeak, it was pretty clear.
  - mehwoot 14y ago
    > In Bitcoin's case, I believe demand is rising because of fundamental advantages it has over other forms of virtual currency that won't soon be rivaled. So demand has increased 1000% since the low of $3 less than a year ago? I don't buy that reasoning. I think it is 90% speculation and 10% increased demand. Demand is increasing, but nowhere near the amount to explain the large price shifts. Disclaimer: I have a reasonably sized investment in bitcoins.
yaix 14y ago
> is a testament to its long-term viability as a currency. Until governments notice they are losing control and outlaw it.
- guard-of-terra 14y ago
  It's not an easy feat to accomplish. You can't reliably outlaw it for citizens because in democratic societies it's kind of very hard to reliably harass citizens. Look at the copyright lobby and still not many people are really scared of persecution. They can easily take bitcoin-based businesses down but they would just shift to different/distributed jurisdictions (Japan, Eastern Europe) where they will be hell to control or influence.
  - yaix 14y ago
    I hope you are right. Maybe I am just to pessimistic.
  - deleted 14y ago
    [deleted]
  - speeder 14y ago
    Mtgox alreadyrely on Japan and Europe, and yesterday's they announced they offloaded US operations to coinsomething that is YC alum
netcan 14y ago
I read this a little different. I think this is proof of incredible demand. I'd also add poor usability and difficult to understand to the list of hurdles that bitcoin is overcoming. I think this is one of those cases where the demand is so strong that people put up with anything. Online Payments really sucks, for both sides. Merchants aren't guaranteed that the money they get will stay in their accounts. They need to become experts in fraud & risk & money laundering. The whole process is mitigated by a duopoly with 150 years of technical debt. Credit Cards, Payment Gateways, Merchant Accounts, Paypal, Chargebacks. All these suck. Not everyone has access to them. No one feels safe using them. When natural demand is that high, it can overcome everything else. There's a whole class of products priced at insane prices. Quality is uncertain. They product can be dangerous. It's only available from dangerous criminals. You need to be introduced to the vendor by your least favorite "friend." If this product was breakfast cereal, people would just eat something else. But since natural demand for ilegal narcotics is so high, all those hurdles get jumped.
- nacker 14y ago
  The increased demand seems to be largely from current users rather than new users, as this chart shows: http://blockchain.info/charts/n-unique-addresses http://blockchain.info/charts/n-unique-addresses
  - netcan 14y ago
    That doesn't sound like a bad thing.
    - nacker 14y ago
      Not saying it's good or bad, but when people hear that demand for BTC is increasing, the natural assumption is that it is attracting lots of new participants. What seems to be happening instead is that the people who have already surmounted the hurdles involved in becoming users are responding to the positive press recently by doubling and tripling down on their bets. The stats don't indicate a large wave of new users - yet.
vellum 14y ago
It's more a testament to high demand than long term viability. In addition to the other things mentioned in this thread, Bitcoin lets you evade oppressive currency controls. For example, Argentina's real inflation rate is around 18-25%. Because of that, they've taken drastic measures to prevent their citizens from transferring money out of the country. Here's one guy’s story of using a Bitcoin mailing list to buy pesos at a 25% better exchange rate, due to number of Argentines who wanted to offload their pesos: http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollars-and-pot-banging-protests-in-argentina/ http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollar... As the Euro crisis deepens, and the chances of one or more countries leaving the Euro gets higher, we should see a spike in Bitcoin prices. For example, if Greece was about to leave the Euro, they'd have to impose draconian currency controls, because everyone's bank deposits would be devalued overnight.
- derringer 14y ago
  You speak of this as though it is a inherently bad thing to have centralized control. I'm as techno-libertarian as the next HN user, but I know that when the market riegns completely free there is a non-trivial chance that boons can swiftly turn into depressions. There is a reason the Greek government will impose draconian currency controls. It is for the benefit of the Greek people, so their savings accounts will only drop 50% rather than 80-90%. A purely decentralized currency may be the way of the future, but it will be replacing old problems with new ones. Whether it is ultimately better is anyones' guess.
  - wslh 14y ago
    For sure, the Argentinian Government measures are not for the benefit of the Argentinian people.
    - derringer 14y ago
      Please enlighten me. I know the story of how Argentina wound up in the situation of needing to prop up their currency. It's an old story, the same as Greece's except for the ending which is uncertain. The government went into massive debt mostly for public works projects (yes, for the people of Argentina), but when the debt came due, the people of Argentina voted to default. Now all future governments have to try to clean up this mess. Is there corruption? Absolutely. But that is only tangential to the real problem. 1) http://www.npr.org/blogs/money/2011/10/14/141365144/friday-podcast-the-price-of-default http://www.npr.org/blogs/money/2011/10/14/141365144/friday-p... 2) http://www.economist.com/blogs/americasview/2011/11/argentina%E2%80%99s-currency-controls http://www.economist.com/blogs/americasview/2011/11/argentin...
epscylonb 14y ago
I'm a fan of bitcoin, and I think it may well have a bright future, but this recent rise over the last couple of months is probably a bubble. New mining equipment called asics are being produced, at least one manufacturer, demands payment in bitcoin, and the price of bitcoin rises. Other people see the rising price and start thinking, hmmm should I buy an asic?. My prediction is that by the end of the summer the price will be back to around $15, lots of people will have received their asic and will want to pay off the cost of the unit (~$1200+). Of course there is always silk road, according the ars article last year they were doing 10,000 btc a week in revenue. Apart from SR I don't see where the demand is coming from except asics. As I hold a few bitcoins, I would love to be proved wrong.
- ankeshk 14y ago
  This is a chart for number of bitcoin transactions per day: http://blockchain.info/charts/n-transactions http://blockchain.info/charts/n-transactions ASIC hardware sales don't even make 1 days worth of transactions (when we account for the "number" of transactions). I don't see the bitcoin price going back to where it was 3 months ago.
  - epscylonb 14y ago
    Interesting, I wonder how much of that is Satoshi Dice though?. Not that SD doesn't count as demand, but it's unlikely to be sustainable due to the way it bloats the blockchain.
    - ankeshk 14y ago
      I had read that 55% of all transactions are due to Satoshi Dice. Can't find the source right now, but it seems about right by going through the latest transactions on blockchain.info

oijaf888 14y ago

Are you sure its not proof that there's a huge market for an internet based currency and despite all of bitcoin's issues it is still growing?

downandout 14y ago
There have been hundreds of virtual currencies introduced both before and after Bitcoin. However, Bitcoin remains the most popular of all of them. While it has some obvious advantages over many of the other schemes, it would be speculative to try to explain exactly why it has succeeded where others have failed. However, regardless of the reasons, it has a strong enough foothold to last for a very long time. My personal opinion is that Bitcoin is popular because it makes money more flexible, and enables people to take absolute control over their money - in the same way that the mp3 standard enabled them to take control of their music.

glesica 14y ago

It says to me that there is a large amount of speculation. As a currency, Bitcoin is basically useless except for illicit transactions (which are usually pretty inefficient anyway). Would you use dollars if the value of a dollar could change by hundreds of percentage points in a few months? No one would.

wolfpackk 14y ago
high volatility is natural for all new currencies, as volume continues to increase then volatility will decrease.
- derrida 14y ago
  I was wondering what your reasoning behind this was. Do you have any past examples to support this assertion? Or do you base this position on some prior principles?
eof 14y ago
Well your logic is obviously flawed, because people do use bitcoins for transactions and they have changed by hundreds of percentage points. "No one" is patently false. Besides, illicit transactions are still transactions. And.. you are just plain wrong. Bitcoin is also useful for buying many completely legal things. Including a VPN that can't be linked to your identity. (Illicit you say? What about a journalist in a repressive regime).
- glesica 14y ago
  Illicit plus grey market and a few special cases. Fine, you win the Pedant's Prize for nitpicking. The point is that they don't make a good general-purpose currency. Just because they're awesome for buying drugs and secret VPNs doesn't mean very much in the grand scheme of things (most transactions, at least in the developed world, do not take place in the grey market). Also, just because some people do something doesn't mean that there aren't strong incentives against doing that thing, and doesn't make a statement such as "people don't do that" false. It just means that there are exceptions, but when the exceptions don't affect the point it is common to ignore the exceptions in general conversation.
  - mayneack 14y ago
    Vpns are a gray market? Does not wanting my car searched imply that I have illegal things in it?

kjackson2012 14y ago

A rising price does not imply long-term viability. A stable price does. For long term viability, people can't just be buying and selling it, they should be transacting with it. It seems like the most active form of Bitcoin use that I've seen is trading. There's nothing wrong with that, but it's a double-edged sword, as people learned last year. Once more and more regular people actually start using it for real purchases, then I'd be more willing to say there is long-term viability.

downandout 14y ago
You are correct that a rising price does not necessarily imply long-term viability. It indicates a sharp increase in demand. In Bitcoin's case, I believe demand is rising because of fundamental advantages it has over other forms of virtual currency that won't soon be rivaled. It enables new business models and transactions that would not have otherwise occurred (in many cases, for legal reasons). For this reason, I believe that demand (and resulting prices) will continue to rise.
- Jabbles 14y ago
  for legal reasons Oh come off it. You mean illegal reasons. You know you do. If you believe people should be free to buy any kind of drug they wish then say so, I don't think HN would view it as too radical a view. But your post sounds like typical corporate bullshit.
  - eurleif 14y ago
    "For legal reasons" doesn't mean "because what they're doing is legal", it means "for reasons related to the law" (i.e., what they're doing is against it). That wasn't doublespeak, it was pretty clear.
- mehwoot 14y ago
  > In Bitcoin's case, I believe demand is rising because of fundamental advantages it has over other forms of virtual currency that won't soon be rivaled. So demand has increased 1000% since the low of $3 less than a year ago? I don't buy that reasoning. I think it is 90% speculation and 10% increased demand. Demand is increasing, but nowhere near the amount to explain the large price shifts. Disclaimer: I have a reasonably sized investment in bitcoins.

yaix 14y ago

> is a testament to its long-term viability as a currency. Until governments notice they are losing control and outlaw it.

guard-of-terra 14y ago
It's not an easy feat to accomplish. You can't reliably outlaw it for citizens because in democratic societies it's kind of very hard to reliably harass citizens. Look at the copyright lobby and still not many people are really scared of persecution. They can easily take bitcoin-based businesses down but they would just shift to different/distributed jurisdictions (Japan, Eastern Europe) where they will be hell to control or influence.
- yaix 14y ago
  I hope you are right. Maybe I am just to pessimistic.
- deleted 14y ago
  [deleted]
- speeder 14y ago
  Mtgox alreadyrely on Japan and Europe, and yesterday's they announced they offloaded US operations to coinsomething that is YC alum

netcan 14y ago

I read this a little different. I think this is proof of incredible demand. I'd also add poor usability and difficult to understand to the list of hurdles that bitcoin is overcoming. I think this is one of those cases where the demand is so strong that people put up with anything. Online Payments really sucks, for both sides. Merchants aren't guaranteed that the money they get will stay in their accounts. They need to become experts in fraud & risk & money laundering. The whole process is mitigated by a duopoly with 150 years of technical debt. Credit Cards, Payment Gateways, Merchant Accounts, Paypal, Chargebacks. All these suck. Not everyone has access to them. No one feels safe using them. When natural demand is that high, it can overcome everything else. There's a whole class of products priced at insane prices. Quality is uncertain. They product can be dangerous. It's only available from dangerous criminals. You need to be introduced to the vendor by your least favorite "friend." If this product was breakfast cereal, people would just eat something else. But since natural demand for ilegal narcotics is so high, all those hurdles get jumped.

nacker 14y ago
The increased demand seems to be largely from current users rather than new users, as this chart shows: http://blockchain.info/charts/n-unique-addresses http://blockchain.info/charts/n-unique-addresses
- netcan 14y ago
  That doesn't sound like a bad thing.
  - nacker 14y ago
    Not saying it's good or bad, but when people hear that demand for BTC is increasing, the natural assumption is that it is attracting lots of new participants. What seems to be happening instead is that the people who have already surmounted the hurdles involved in becoming users are responding to the positive press recently by doubling and tripling down on their bets. The stats don't indicate a large wave of new users - yet.

vellum 14y ago

It's more a testament to high demand than long term viability. In addition to the other things mentioned in this thread, Bitcoin lets you evade oppressive currency controls. For example, Argentina's real inflation rate is around 18-25%. Because of that, they've taken drastic measures to prevent their citizens from transferring money out of the country. Here's one guy’s story of using a Bitcoin mailing list to buy pesos at a 25% better exchange rate, due to number of Argentines who wanted to offload their pesos: http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollars-and-pot-banging-protests-in-argentina/ http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollar... As the Euro crisis deepens, and the chances of one or more countries leaving the Euro gets higher, we should see a spike in Bitcoin prices. For example, if Greece was about to leave the Euro, they'd have to impose draconian currency controls, because everyone's bank deposits would be devalued overnight.

derringer 14y ago
You speak of this as though it is a inherently bad thing to have centralized control. I'm as techno-libertarian as the next HN user, but I know that when the market riegns completely free there is a non-trivial chance that boons can swiftly turn into depressions. There is a reason the Greek government will impose draconian currency controls. It is for the benefit of the Greek people, so their savings accounts will only drop 50% rather than 80-90%. A purely decentralized currency may be the way of the future, but it will be replacing old problems with new ones. Whether it is ultimately better is anyones' guess.
- wslh 14y ago
  For sure, the Argentinian Government measures are not for the benefit of the Argentinian people.
  - derringer 14y ago
    Please enlighten me. I know the story of how Argentina wound up in the situation of needing to prop up their currency. It's an old story, the same as Greece's except for the ending which is uncertain. The government went into massive debt mostly for public works projects (yes, for the people of Argentina), but when the debt came due, the people of Argentina voted to default. Now all future governments have to try to clean up this mess. Is there corruption? Absolutely. But that is only tangential to the real problem. 1) http://www.npr.org/blogs/money/2011/10/14/141365144/friday-podcast-the-price-of-default http://www.npr.org/blogs/money/2011/10/14/141365144/friday-p... 2) http://www.economist.com/blogs/americasview/2011/11/argentina%E2%80%99s-currency-controls http://www.economist.com/blogs/americasview/2011/11/argentin...

epscylonb 14y ago

I'm a fan of bitcoin, and I think it may well have a bright future, but this recent rise over the last couple of months is probably a bubble. New mining equipment called asics are being produced, at least one manufacturer, demands payment in bitcoin, and the price of bitcoin rises. Other people see the rising price and start thinking, hmmm should I buy an asic?. My prediction is that by the end of the summer the price will be back to around $15, lots of people will have received their asic and will want to pay off the cost of the unit (~$1200+). Of course there is always silk road, according the ars article last year they were doing 10,000 btc a week in revenue. Apart from SR I don't see where the demand is coming from except asics. As I hold a few bitcoins, I would love to be proved wrong.

ankeshk 14y ago
This is a chart for number of bitcoin transactions per day: http://blockchain.info/charts/n-transactions http://blockchain.info/charts/n-transactions ASIC hardware sales don't even make 1 days worth of transactions (when we account for the "number" of transactions). I don't see the bitcoin price going back to where it was 3 months ago.
- epscylonb 14y ago
  Interesting, I wonder how much of that is Satoshi Dice though?. Not that SD doesn't count as demand, but it's unlikely to be sustainable due to the way it bloats the blockchain.
  - ankeshk 14y ago
    I had read that 55% of all transactions are due to Satoshi Dice. Can't find the source right now, but it seems about right by going through the latest transactions on blockchain.info