7 ms·

A Look at the Bitcoin Economy

55 points by icedicedavid 13y ago

TwoFactor 13y ago
This. There's been a lot metrics growing in bitcoin beyond the large price increase and VC funding.
klochner 13y ago
Is there really an exponential growth in transactions per day? The last I heard it has been constant for months: https://blockchain.info/charts/n-transactions https://blockchain.info/charts/n-transactions [edit] I see he's excluding the 100 most popular addresses. Is there any justification for that? I'm sure he would have left them in if the chart looked right.
- rnicholson 13y ago
  >I see he's excluding the 100 most popular addresses. Is there any justification for that? Probably because most of the top 100 are things like SatoshiDICE.
- jnbiche 13y ago
  >I'm sure he would have left them in if the chart looked right. Really? You're sure? Actually, the top 100 addresses would almost certainly have supported his thesis even more, since they include high-transaction rate addresses from the exchanges, and the betting companies.
- aqme28 13y ago
  They're mostly things like Satoshi Dice, which will skew the results weirdly. https://blockchain.info/popular-addresses https://blockchain.info/popular-addresses
lumberjack 13y ago
What is an example of a service* or product* that is served better with cryptocoins than with cash, bank transfers or credit cards? What are people spending bitcoins on and why? That would be nice to know and definitely more informative than a graph of daily activity within the blockchain. * preferably something mundane and totally within the boundaries of the law
- nmarley 13y ago
  Technical books in electronic format: http://www.cointagion.com/ http://www.cointagion.com/
- deleted 13y ago
  [deleted]
- TomGullen 13y ago
  > Served better From whos point of view? As a merchant, I'd love it if our customers all paid in BTC as it would eliminate all fraudulent/charge-backed transactions which cost us $15 each time. (A nice little money earning industry for the CC companies btw!) As a customer, I'd rather pay with my CC so I have some protection over my payment. If you're looking for something that's better from both points of view, then drugs is the obvious one that springs to mind. Consumer based foreign exchange (swapping my GBP for USD for my holiday to USD) by using Bitcoin as an intermediary vehicle could save me a ton of money as well, this isn't exactly possible yet but would be awesome if it could be done one day. It's better for everyone except the rip off middle men who charge horrible fees and rate spreads. Another service that would be better with Bitcoin would be remittance. This one is cited often, and should not be overlooked. Again, middle men banks and rip off services are the only ones who would suffer. And it's a huge huge market. Take a look at the control large institutions have on the market as well to see further benefit. Wikileaks for example endured a "banking blockade". The banking industry stopped for a moment in time Wikileaks being able to accept donations via Mastercard, Visa etc. With Bitcoin, no corporations can interfere with fund raising. What about charity? > When you donate via credit card, the charity has to pay a transaction fee of 2-3% on the transaction. If you make a $100 donation, your charity only gets $97 of it. According to a Huffington Post article, banks and card networks make about $250 million a year off of charitable donations. http://www.nerdwallet.com/blog/nonprofits/donate-charities-corporations/ http://www.nerdwallet.com/blog/nonprofits/donate-charities-c... Let's cut these middle men out of the equation, if I donate to charity 100% of my Bitcoin are guaranteed to arrive in their control. It makes me feel sick that when I donate to charity some credit company is taking their cut.
  - TylerE 13y ago
gojomo 13y ago
I find it interesting that the current value of all mined Bitcoins is currently about $5.4B, per http://blockchain.info/charts/market-cap http://blockchain.info/charts/market-cap. (I've seen this value described as "one Nakamoto".) And, the number of full peer nodes is about 130,000 – per the network scan done by http://getaddr.bitnodes.io/ http://getaddr.bitnodes.io/. To an extent, the total value is an emergent property of all the nodes together. But for grins we could distribute the value over them equally, to discover each node's pro-rata contribution to the total value. That number, $5.4B/130K, is $41,538/node. So, fire up Bitcoin-QT! It's free open-source software that'll use about 15GB of your hard drive space (<$2) and suck up some fraction of your cycles. Even if your wallet is empty, your peer instance will be backing over $40K of Bitcoin market capitalization!
- sliverstorm 13y ago
  use about 15GB of your hard drive space (<$2) My 64GB SSD disagrees with this proposition :(
- Aldo_MX 13y ago
  I find surprising the fact that you say it uses about 15Gb, 6 months ago it used around 10Gb and at this point I can imagine that around 2016 it will need around 100Gb and the number will keep increasing...
  - gizmo686 13y ago
    Bitcoin was designed with a pruning ability, which can delete unnecessary data from a local copy of the blockchain. Based on the Bitcoin website [1] the blockchain as of 2012 is less than 100mb when pruned. [1]https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability
  - nwh 13y ago
    The cap on the block size means it'll increase at a maximum per year, I think it's something like 60GB if every block is filled to the brim.
jval 13y ago
With respect, the press is regularly quoting how many places now 'accept bitcoin' but it is all really a vanity metric. I know it is difficult to know how much these merchant accounts get used without internal information from the providers themselves, but from all internal accounts I have heard, the usage is dismal. For no surprising reason customers are generally disinterested in purchasing anything with Bitcoin that they can already purchase with their credit card. I think Bitcoin is going to be revolutionary but the application is lacking - entrepreneurs really need to find a real world application where the use of Bitcoin actually improves the experience. Remittances and International Money Transfers are the first legal industry I can think of where that will work, but businesses in that area need time to grow and navigate the uncertain regulatory environment before Bitcoin will actually see adoption that really means something.
- JohnDoe365 13y ago
  Usage will rise once the value starts to drop. Why would anybody spend on real god as long as the value is soaring? This is of course only true for those currently holding Bitcoins. The current rise of Bitcoins' value is actually very unhealthy for the market.
  - BrokenPipe 13y ago
    Why would I spend bitcoin when the value is soaring? Because I have no alternatives eventually. See, let's say i start out with 5k worth of bitcoin and 5k worth of USD. The bitcoin go up in value while the USD go down via QE. As you suggested I avoid spending the 5k in BTC but thing is eventually I will run out of USD and even if I don't because say I got a day job source of USD income eventually I will want to buy something which is above my pay rate and I will have to use my btc. The same thing happens with gold or with an estate property, only thing, bitcoin is more liquid than that and unlike gold or a house I can decide to use a tiny part at anytime without selling or exchanging the whole cake. And with BTC merchant can offer discounts which may encourage the use of btc. Time will tell.
    - JohnDoe365 13y ago
industrialwaste 13y ago
So, if I had invested when I planned to a couple of years ago (or actually bought decent hardware to mine on) I would have made a decent return. But now I'm curious if we're in a bubble that will decrease in popularity or if it's still something that will continue to be on the rise. Seems to me that all of the recent news has brought attention to bitcoin which has helped with it's popularity. Is it something that will continue to rise or will it fall once people aren't talking about it as much? Can anyone weigh in with their opinions?
- ra 13y ago
  The market price of BTC has grown fairly consistently on the logarithmic scale for a couple of years now. There have been ups and downs, but the majority of the price growth obviously comes from an increase in demand that isn't being met by supply. Supply will not increase, but demand might. What would further increase demand? Well the status quo, i.e. BTC breaking new market highs, having crashes and recovering, that's news and so increases the public awareness of BTC, and so more people buy. More companies accepting BTC will increase it's usefulness (therefor provide some intrinsic value), more startups working to make transacting in BTC easier will also help increase demand. What would decrease demand in a meaningful way? Unfavourable legislative changes. These are mitigated in that they have to happen on a country by country basis, but generally countries follow the leader on matters of new policy or policy related to new technology. At the moment most BTC demand is for speculative hoarding by investors. Most realise that it's a gamble where the downside is losing 100% of capital, but the upside is potentially 1000% or more. <opinion>There are undoubtedly future market rallys and crashes ahead, but I think in the long run BTC has a long way to go. It's very difficult to "price" BTC because it generates no return in it's own right, and has no intrinsic commodity value. It's a gamble but the potential return seems worth the risk of potentially losing 100% of your capital.</opinion> It is important that you regard BTC as speculative - i.e. not an investment. In the end the long term survival of BTC will depend on it's adoption. So if you want to make money, horde some BTC and work on a project that makes uses it to solve a real business problem for a meaningful market.
  - industrialwaste 13y ago
joosters 13y ago
How do (real world) shops accept bitcoin? I thought that it takes some time for a transaction to be confirmed by the blockchain. Even if it is a matter of minutes, you can't expect customers to wait by the checkout until their payment is cleared. And yet without this confirmation, you are opening yourself up to fraud.
- mateuszf 13y ago
  Doing fraud is very unprofitable for amounts of money which are not huge. Companies like BitPay take this risk as man in the middle.

55 points by icedicedavid 13y ago

This. There's been a lot metrics growing in bitcoin beyond the large price increase and VC funding.

Is there really an exponential growth in transactions per day? The last I heard it has been constant for months: https://blockchain.info/charts/n-transactions https://blockchain.info/charts/n-transactions [edit] I see he's excluding the 100 most popular addresses. Is there any justification for that? I'm sure he would have left them in if the chart looked right.

rnicholson 13y ago
>I see he's excluding the 100 most popular addresses. Is there any justification for that? Probably because most of the top 100 are things like SatoshiDICE.
jnbiche 13y ago
>I'm sure he would have left them in if the chart looked right. Really? You're sure? Actually, the top 100 addresses would almost certainly have supported his thesis even more, since they include high-transaction rate addresses from the exchanges, and the betting companies.
aqme28 13y ago
They're mostly things like Satoshi Dice, which will skew the results weirdly. https://blockchain.info/popular-addresses https://blockchain.info/popular-addresses

lumberjack 13y ago

What is an example of a service* or product* that is served better with cryptocoins than with cash, bank transfers or credit cards? What are people spending bitcoins on and why? That would be nice to know and definitely more informative than a graph of daily activity within the blockchain. * preferably something mundane and totally within the boundaries of the law

nmarley 13y ago
Technical books in electronic format: http://www.cointagion.com/ http://www.cointagion.com/
deleted 13y ago
[deleted]
TomGullen 13y ago
> Served better From whos point of view? As a merchant, I'd love it if our customers all paid in BTC as it would eliminate all fraudulent/charge-backed transactions which cost us $15 each time. (A nice little money earning industry for the CC companies btw!) As a customer, I'd rather pay with my CC so I have some protection over my payment. If you're looking for something that's better from both points of view, then drugs is the obvious one that springs to mind. Consumer based foreign exchange (swapping my GBP for USD for my holiday to USD) by using Bitcoin as an intermediary vehicle could save me a ton of money as well, this isn't exactly possible yet but would be awesome if it could be done one day. It's better for everyone except the rip off middle men who charge horrible fees and rate spreads. Another service that would be better with Bitcoin would be remittance. This one is cited often, and should not be overlooked. Again, middle men banks and rip off services are the only ones who would suffer. And it's a huge huge market. Take a look at the control large institutions have on the market as well to see further benefit. Wikileaks for example endured a "banking blockade". The banking industry stopped for a moment in time Wikileaks being able to accept donations via Mastercard, Visa etc. With Bitcoin, no corporations can interfere with fund raising. What about charity? > When you donate via credit card, the charity has to pay a transaction fee of 2-3% on the transaction. If you make a $100 donation, your charity only gets $97 of it. According to a Huffington Post article, banks and card networks make about $250 million a year off of charitable donations. http://www.nerdwallet.com/blog/nonprofits/donate-charities-corporations/ http://www.nerdwallet.com/blog/nonprofits/donate-charities-c... Let's cut these middle men out of the equation, if I donate to charity 100% of my Bitcoin are guaranteed to arrive in their control. It makes me feel sick that when I donate to charity some credit company is taking their cut.
- TylerE 13y ago

gojomo 13y ago

I find it interesting that the current value of all mined Bitcoins is currently about $5.4B, per http://blockchain.info/charts/market-cap http://blockchain.info/charts/market-cap. (I've seen this value described as "one Nakamoto".) And, the number of full peer nodes is about 130,000 – per the network scan done by http://getaddr.bitnodes.io/ http://getaddr.bitnodes.io/. To an extent, the total value is an emergent property of all the nodes together. But for grins we could distribute the value over them equally, to discover each node's pro-rata contribution to the total value. That number, $5.4B/130K, is $41,538/node. So, fire up Bitcoin-QT! It's free open-source software that'll use about 15GB of your hard drive space (<$2) and suck up some fraction of your cycles. Even if your wallet is empty, your peer instance will be backing over $40K of Bitcoin market capitalization!

sliverstorm 13y ago
use about 15GB of your hard drive space (<$2) My 64GB SSD disagrees with this proposition :(
Aldo_MX 13y ago
I find surprising the fact that you say it uses about 15Gb, 6 months ago it used around 10Gb and at this point I can imagine that around 2016 it will need around 100Gb and the number will keep increasing...
- gizmo686 13y ago
  Bitcoin was designed with a pruning ability, which can delete unnecessary data from a local copy of the blockchain. Based on the Bitcoin website [1] the blockchain as of 2012 is less than 100mb when pruned. [1]https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability
- nwh 13y ago
  The cap on the block size means it'll increase at a maximum per year, I think it's something like 60GB if every block is filled to the brim.

jval 13y ago

With respect, the press is regularly quoting how many places now 'accept bitcoin' but it is all really a vanity metric. I know it is difficult to know how much these merchant accounts get used without internal information from the providers themselves, but from all internal accounts I have heard, the usage is dismal. For no surprising reason customers are generally disinterested in purchasing anything with Bitcoin that they can already purchase with their credit card. I think Bitcoin is going to be revolutionary but the application is lacking - entrepreneurs really need to find a real world application where the use of Bitcoin actually improves the experience. Remittances and International Money Transfers are the first legal industry I can think of where that will work, but businesses in that area need time to grow and navigate the uncertain regulatory environment before Bitcoin will actually see adoption that really means something.

JohnDoe365 13y ago
Usage will rise once the value starts to drop. Why would anybody spend on real god as long as the value is soaring? This is of course only true for those currently holding Bitcoins. The current rise of Bitcoins' value is actually very unhealthy for the market.
- BrokenPipe 13y ago
  Why would I spend bitcoin when the value is soaring? Because I have no alternatives eventually. See, let's say i start out with 5k worth of bitcoin and 5k worth of USD. The bitcoin go up in value while the USD go down via QE. As you suggested I avoid spending the 5k in BTC but thing is eventually I will run out of USD and even if I don't because say I got a day job source of USD income eventually I will want to buy something which is above my pay rate and I will have to use my btc. The same thing happens with gold or with an estate property, only thing, bitcoin is more liquid than that and unlike gold or a house I can decide to use a tiny part at anytime without selling or exchanging the whole cake. And with BTC merchant can offer discounts which may encourage the use of btc. Time will tell.
  - JohnDoe365 13y ago

industrialwaste 13y ago

So, if I had invested when I planned to a couple of years ago (or actually bought decent hardware to mine on) I would have made a decent return. But now I'm curious if we're in a bubble that will decrease in popularity or if it's still something that will continue to be on the rise. Seems to me that all of the recent news has brought attention to bitcoin which has helped with it's popularity. Is it something that will continue to rise or will it fall once people aren't talking about it as much? Can anyone weigh in with their opinions?

ra 13y ago
The market price of BTC has grown fairly consistently on the logarithmic scale for a couple of years now. There have been ups and downs, but the majority of the price growth obviously comes from an increase in demand that isn't being met by supply. Supply will not increase, but demand might. What would further increase demand? Well the status quo, i.e. BTC breaking new market highs, having crashes and recovering, that's news and so increases the public awareness of BTC, and so more people buy. More companies accepting BTC will increase it's usefulness (therefor provide some intrinsic value), more startups working to make transacting in BTC easier will also help increase demand. What would decrease demand in a meaningful way? Unfavourable legislative changes. These are mitigated in that they have to happen on a country by country basis, but generally countries follow the leader on matters of new policy or policy related to new technology. At the moment most BTC demand is for speculative hoarding by investors. Most realise that it's a gamble where the downside is losing 100% of capital, but the upside is potentially 1000% or more. <opinion>There are undoubtedly future market rallys and crashes ahead, but I think in the long run BTC has a long way to go. It's very difficult to "price" BTC because it generates no return in it's own right, and has no intrinsic commodity value. It's a gamble but the potential return seems worth the risk of potentially losing 100% of your capital.</opinion> It is important that you regard BTC as speculative - i.e. not an investment. In the end the long term survival of BTC will depend on it's adoption. So if you want to make money, horde some BTC and work on a project that makes uses it to solve a real business problem for a meaningful market.
- industrialwaste 13y ago

joosters 13y ago

How do (real world) shops accept bitcoin? I thought that it takes some time for a transaction to be confirmed by the blockchain. Even if it is a matter of minutes, you can't expect customers to wait by the checkout until their payment is cleared. And yet without this confirmation, you are opening yourself up to fraud.

mateuszf 13y ago
Doing fraud is very unprofitable for amounts of money which are not huge. Companies like BitPay take this risk as man in the middle.