6 ms·

Bitcoin Surpasses PayPal in Transaction Volume?

91 points by lelf 13y ago

ashray 13y ago
This was just because of that single $147MM transaction yesterday. Of course it's great because this shows bitcoin can sustain a small number of high volume transactions. Unfortunately one of the biggest challenges the bitcoin network is facing right now is getting smaller transactions confirmed faster. This issue will need to get solved and get solved sooner rather than later if bitcoin wants to be a competitor to VISA or MasterCard. Maybe more HNers should take a look at the core: https://github.com/bitcoin/bitcoin https://github.com/bitcoin/bitcoin
- ISL 13y ago
  This is an argument not so different from those often given regarding 'linux on the desktop'. Bitcoin doesn't want anything. It's an idea, not a company. If the protocol is effective, it will thrive in its own right. If it doesn't, something else will appear in its place. The designer(s) of Bitcoin could have favored short confirmation times, but they didn't. Plenty of companies are working on solutions that effectively yield shorter confirmation times for merchants. If I want to buy a car with BTC, I'll be happy to wait five minutes to ensure the transaction goes through. It's a lot faster than going to the bank for a cashier's check.
  - fragsworth 13y ago
    > The designer(s) of Bitcoin could have favored short confirmation times, but they didn't. Shorter confirmation times do not help with anything, because the system is based on proof-of-work. The idea is the longer you wait for the network to compute things, the more solidified your transaction becomes. A coin network that has a shorter block duration (like Litecoin with 2.5 minutes instead of 10) doesn't make any difference because what you really want to wait for to ensure you got your coins is "time spent computing", not "number of blocks computed". Bitcoins (and any other cryptocurrencies) can never have secure real-time transactions as long as they rely on the proof-of-work network.
  - mikeash 13y ago
    Just a nitpick, not arguing your point in general, but: car dealerships generally don't require cashier's checks. Regular checks do just fine. Not that taking ten minutes to pay for a car is a problem, but you can pay for one with a normal check in no time at all.
    - ISL 13y ago
      I've only ever bought used cars :).
- dwild 13y ago
  The real problem is that you consider Bitcoin as an absolute solution for every transaction. I don't know for you, but when I want to transfer cash in my bank to someone in another country, it take way more than 60 minutes (6 blocks). If I want to do it faster, I use a private service that will do it faster. The same will apply with Bitcoin.
  - ashray 13y ago
    I don't really consider bitcoin to be the absolute solution. But it's certainly flexible enough to be a great solution. With increasing transaction volumes the bitcoin network is lately having some issues confirming transactions with low or no fees. Furthermore, with the appreciation of bitcoin/usd value the minimum transaction fee (hardcoded at 0.0001 BTC) is getting too high. (Rising from 0.05 to 0.08 cents) The thing is, bitcoin is still very much a WIP project, a beta if you will. It still needs more bright people working on it to improve it.
- kylebrown 13y ago
  Transactions on the Ripple ledger are much faster, with a new ledger (analogous to a block) every few seconds. The speed-up is because there's no mining (proof of work).
nly 13y ago
More pitiful, bullshit statistics out of BTC fairyland. PayPal currently processes 100 times as many transactions in a day as the Bitcoin network. 8 million [1], versus ~80,000 [2]. The difference is Bitcoin is averaging $17,000/transaction, at current market price, compared to PayPals ~$60. PayPal processes about $500M a day [2]. Even if Bitcoin was pegged at $1000, that's be equialent to ~500,000 coins being traded for USD in a day.... which is 10 times the average daily trading volume of the largest exchange, BTC China [3] ... and most are those are probably from market makers, whereas PayPals volume overwhelmingly reflects real purchases (30% is eBay, for instance). Whatever way you cut it, Bitcoin as an economy is still tiny. Like Gold perhaps [4], a large % of trade is pure investment. [1] https://www.paypal-media.com/about https://www.paypal-media.com/about [2] http://bitcoincharts.com/bitcoin/ http://bitcoincharts.com/bitcoin/ [3] http://bitcoincharts.com/markets/btcnCNY.html http://bitcoincharts.com/markets/btcnCNY.html [4] http://www.gold.org/investment/why_and_how/why_invest/demand_and_supply/ http://www.gold.org/investment/why_and_how/why_invest/demand...
- MarcusVorenus 13y ago
  80,000 are only transactions that are recorded in the blockchain, it doesn't take into account transactions that go through Bitpay, Coinbase, gambling sites, the Reddit bitcoin bot, etc.
  - nly 13y ago
    Coinometrics provide no information on the source of their Bitcoin data. They quote "a metric calculating the average daily transaction volume on the Bitcoin protocol in US Dollars" Of the things you list, only Bitpay and Coinbase offer merchant services directly comparable to PayPal. If you have numbers for those, that'd be great. I'm keen to find quality metrics.
  - seanalltogether 13y ago
    By definition, only transactions handled by the blockchain ARE bitcoin transactions, everything else is just secondary shuffling and would apply to any network that we would be comparing.
- 13y ago
ErikHuisman 13y ago
If i got a million dollar bill and take it out a wallet in my right pocket in put it in a wallet in my left pocket (and vice versa) every 4 minutes. Would i myself be bigger than paypal?
- FBT 13y ago
  That's how these things are calculated. It's nonsense, but it's the best we can do, or something. It's the same with GDP figures. But no one seems to be able to find better metrics to use...
krelian 13y ago
What exactly is bitcoin being spent on?
- a3voices 13y ago
  Even if Bitcoin is spent on nothing, it could become worth as much as gold eventually.
  - Sprint 13y ago
    It could even become worth as much as the moon eventually. Your comment is pretty void of anything but hype.
    - a3voices 13y ago
      My comment is true even if I didn't go into a huge explanation of why.
      - Helianthus 13y ago
        Your comment is nonsense even if you had gone into a huge explanation of why. Hell, I thought it was sarcasm at first.
      - ars_technician 13y ago
        No it's not. The market offers the price it's willing to pay for it. If what you were saying were just 'true', the price would already reflect that.
  - krapp 13y ago
    But it's only really worth whatever you actually spend it on, it is not?
    - a3voices 13y ago
      It might become the world's new way of storing value (like gold), instead of a typical currency.
mpg33 13y ago
I'm more interested in the Daily Transaction Quantity (table on right side http://coinometrics.com/bitcoin/btix http://coinometrics.com/bitcoin/btix ). Bitcoin still lags far behind. To put it in perspective: Paypal 7,700,000 transactions per day Bitcoin 67,000 transactions per day.
- fragsworth 13y ago
  But, by protocol design, bitcoin's number of transactions will not get much higher than that. Only the transaction size will get larger. For a higher number of transactions, you need to include the 3rd parties that provide services as a layer on top of the protocol.
  - yen223 13y ago
    If people have to use 3rd-party services, doesn't that defeat the purpose of using Bitcoin?
  - oleganza 13y ago
    It's not by design. There was a temporary built-in anti-spam limit (max block size of 1Mb) that is not even hit yet. When the pressure of transactions will push blocks closer to 1 Mb, most miners will raise the limit to not diminish the usefulness of the protocol (and therefore value of their own earnings). Essentially, the limit will depend on network latency. No miner wants to risk creating orphan blocks if his 100 Gb block takes too much time to reach everyone else. I don't expect hardcoded limit to be completely removed. Miners will still want to have some limit to still prevent a situation when someone creates a huge block just for fun, so everyone has to carry it around forever. I wrote in detail on economics of block size limit here: http://blog.oleganza.com/post/43849158813/this-is-how-block-size-limit-will-be-raised http://blog.oleganza.com/post/43849158813/this-is-how-block-... It's a question of whether the hardcoded block size should or should not raised. There's no incentive not to raise it when needed, that's all. Of course, there's also need for some ultra-frequent small transactions. Those will be handled just fine by some clearing houses or distributed clearing networks. All debts will be covered very often with real BTC transaction completely automatically, so there's no much risk of fraud (like creation of yet another fractional reserve system).
jfoster 13y ago
One critical difference between PayPal and bitcoin here. PayPal is not treated as a currency to be traded against other currencies. I suspect that the vast majority of bitcoin transactions are currently just trades to/from USD.
- kylebrown 13y ago
  Bitcoin trades happen on exchanges, off the blockchain. Bitcoin "transactions" are bitcoin payments going from one address to another, not trades.
adamors 13y ago
How is this useless blogspam getting upvoted to the front page?
- seanalltogether 13y ago
  I have this fear that too many HN readers have bought into bitcoin and are now using this website to keep promoting it in order to keep the hype (and price) high.
  - adamors 13y ago
    That may be it; in the last couple of weeks there's regularly been some useless Bitcoin related speculation/incorrect statistic etc. on the frontpage. Or the constant announcements how much one is worth.
gesman 13y ago
So if I'd send 1 BTC to myself - this would be considered as $800 transaction?
drakaal 13y ago
Painfully inaccurate. This appears to assume all coins were valued at Today numbers, not the numbers on the days they occurred. PayPal does $44B a year in transactions. https://www.paypal-media.com/about https://www.paypal-media.com/about Today there are $12M Bit coins in existence. If each coin is valued at $800 (make my math easy and assume the sum of all bit coins is $10B) It is possible to have more in transactions than you have in holdings. I pay you, you pay your baby sitter, $20 was $40 in transactions. But for the math to work BitCoin holders would have to be all averaging 4 transactions of 100% of their holdings a year. This isn't possible since we know that the majority of bit coins are held by speculators, not consumers. (We know this because no one would buy bread if the price could double or half in 6 hours).
alexkus 13y ago
One crucial difference:- One system is an utter pain to actually cash out of if you start pulling in decent revenues. The other one is...oh.
- javert 13y ago
  I don't think bitcoin is a pain to cash out of.
eonil 13y ago
It's too early to measure any value of BTC in dollars. Any trial comparing to dollars or in any other currency are hype. BTC transaction meaningless because you don't need to pay commission. It's simply can go infinite at any time if you have enough BTC.

91 points by lelf 13y ago

This was just because of that single $147MM transaction yesterday. Of course it's great because this shows bitcoin can sustain a small number of high volume transactions. Unfortunately one of the biggest challenges the bitcoin network is facing right now is getting smaller transactions confirmed faster. This issue will need to get solved and get solved sooner rather than later if bitcoin wants to be a competitor to VISA or MasterCard. Maybe more HNers should take a look at the core: https://github.com/bitcoin/bitcoin https://github.com/bitcoin/bitcoin

ISL 13y ago
This is an argument not so different from those often given regarding 'linux on the desktop'. Bitcoin doesn't want anything. It's an idea, not a company. If the protocol is effective, it will thrive in its own right. If it doesn't, something else will appear in its place. The designer(s) of Bitcoin could have favored short confirmation times, but they didn't. Plenty of companies are working on solutions that effectively yield shorter confirmation times for merchants. If I want to buy a car with BTC, I'll be happy to wait five minutes to ensure the transaction goes through. It's a lot faster than going to the bank for a cashier's check.
- fragsworth 13y ago
  > The designer(s) of Bitcoin could have favored short confirmation times, but they didn't. Shorter confirmation times do not help with anything, because the system is based on proof-of-work. The idea is the longer you wait for the network to compute things, the more solidified your transaction becomes. A coin network that has a shorter block duration (like Litecoin with 2.5 minutes instead of 10) doesn't make any difference because what you really want to wait for to ensure you got your coins is "time spent computing", not "number of blocks computed". Bitcoins (and any other cryptocurrencies) can never have secure real-time transactions as long as they rely on the proof-of-work network.
- mikeash 13y ago
  Just a nitpick, not arguing your point in general, but: car dealerships generally don't require cashier's checks. Regular checks do just fine. Not that taking ten minutes to pay for a car is a problem, but you can pay for one with a normal check in no time at all.
  - ISL 13y ago
    I've only ever bought used cars :).
dwild 13y ago
The real problem is that you consider Bitcoin as an absolute solution for every transaction. I don't know for you, but when I want to transfer cash in my bank to someone in another country, it take way more than 60 minutes (6 blocks). If I want to do it faster, I use a private service that will do it faster. The same will apply with Bitcoin.
- ashray 13y ago
  I don't really consider bitcoin to be the absolute solution. But it's certainly flexible enough to be a great solution. With increasing transaction volumes the bitcoin network is lately having some issues confirming transactions with low or no fees. Furthermore, with the appreciation of bitcoin/usd value the minimum transaction fee (hardcoded at 0.0001 BTC) is getting too high. (Rising from 0.05 to 0.08 cents) The thing is, bitcoin is still very much a WIP project, a beta if you will. It still needs more bright people working on it to improve it.
kylebrown 13y ago
Transactions on the Ripple ledger are much faster, with a new ledger (analogous to a block) every few seconds. The speed-up is because there's no mining (proof of work).

nly 13y ago

More pitiful, bullshit statistics out of BTC fairyland. PayPal currently processes 100 times as many transactions in a day as the Bitcoin network. 8 million [1], versus ~80,000 [2]. The difference is Bitcoin is averaging $17,000/transaction, at current market price, compared to PayPals ~$60. PayPal processes about $500M a day [2]. Even if Bitcoin was pegged at $1000, that's be equialent to ~500,000 coins being traded for USD in a day.... which is 10 times the average daily trading volume of the largest exchange, BTC China [3] ... and most are those are probably from market makers, whereas PayPals volume overwhelmingly reflects real purchases (30% is eBay, for instance). Whatever way you cut it, Bitcoin as an economy is still tiny. Like Gold perhaps [4], a large % of trade is pure investment. [1] https://www.paypal-media.com/about https://www.paypal-media.com/about [2] http://bitcoincharts.com/bitcoin/ http://bitcoincharts.com/bitcoin/ [3] http://bitcoincharts.com/markets/btcnCNY.html http://bitcoincharts.com/markets/btcnCNY.html [4] http://www.gold.org/investment/why_and_how/why_invest/demand_and_supply/ http://www.gold.org/investment/why_and_how/why_invest/demand...

MarcusVorenus 13y ago
80,000 are only transactions that are recorded in the blockchain, it doesn't take into account transactions that go through Bitpay, Coinbase, gambling sites, the Reddit bitcoin bot, etc.
- nly 13y ago
  Coinometrics provide no information on the source of their Bitcoin data. They quote "a metric calculating the average daily transaction volume on the Bitcoin protocol in US Dollars" Of the things you list, only Bitpay and Coinbase offer merchant services directly comparable to PayPal. If you have numbers for those, that'd be great. I'm keen to find quality metrics.
- seanalltogether 13y ago
  By definition, only transactions handled by the blockchain ARE bitcoin transactions, everything else is just secondary shuffling and would apply to any network that we would be comparing.
13y ago

ErikHuisman 13y ago

If i got a million dollar bill and take it out a wallet in my right pocket in put it in a wallet in my left pocket (and vice versa) every 4 minutes. Would i myself be bigger than paypal?

FBT 13y ago
That's how these things are calculated. It's nonsense, but it's the best we can do, or something. It's the same with GDP figures. But no one seems to be able to find better metrics to use...

krelian 13y ago

What exactly is bitcoin being spent on?

a3voices 13y ago
Even if Bitcoin is spent on nothing, it could become worth as much as gold eventually.
- Sprint 13y ago
  It could even become worth as much as the moon eventually. Your comment is pretty void of anything but hype.
  - a3voices 13y ago
    My comment is true even if I didn't go into a huge explanation of why.
    - Helianthus 13y ago
      Your comment is nonsense even if you had gone into a huge explanation of why. Hell, I thought it was sarcasm at first.
    - ars_technician 13y ago
      No it's not. The market offers the price it's willing to pay for it. If what you were saying were just 'true', the price would already reflect that.
- krapp 13y ago
  But it's only really worth whatever you actually spend it on, it is not?
  - a3voices 13y ago
    It might become the world's new way of storing value (like gold), instead of a typical currency.

mpg33 13y ago

I'm more interested in the Daily Transaction Quantity (table on right side http://coinometrics.com/bitcoin/btix http://coinometrics.com/bitcoin/btix ). Bitcoin still lags far behind. To put it in perspective: Paypal 7,700,000 transactions per day Bitcoin 67,000 transactions per day.

fragsworth 13y ago
But, by protocol design, bitcoin's number of transactions will not get much higher than that. Only the transaction size will get larger. For a higher number of transactions, you need to include the 3rd parties that provide services as a layer on top of the protocol.
- yen223 13y ago
  If people have to use 3rd-party services, doesn't that defeat the purpose of using Bitcoin?
- oleganza 13y ago
  It's not by design. There was a temporary built-in anti-spam limit (max block size of 1Mb) that is not even hit yet. When the pressure of transactions will push blocks closer to 1 Mb, most miners will raise the limit to not diminish the usefulness of the protocol (and therefore value of their own earnings). Essentially, the limit will depend on network latency. No miner wants to risk creating orphan blocks if his 100 Gb block takes too much time to reach everyone else. I don't expect hardcoded limit to be completely removed. Miners will still want to have some limit to still prevent a situation when someone creates a huge block just for fun, so everyone has to carry it around forever. I wrote in detail on economics of block size limit here: http://blog.oleganza.com/post/43849158813/this-is-how-block-size-limit-will-be-raised http://blog.oleganza.com/post/43849158813/this-is-how-block-... It's a question of whether the hardcoded block size should or should not raised. There's no incentive not to raise it when needed, that's all. Of course, there's also need for some ultra-frequent small transactions. Those will be handled just fine by some clearing houses or distributed clearing networks. All debts will be covered very often with real BTC transaction completely automatically, so there's no much risk of fraud (like creation of yet another fractional reserve system).

jfoster 13y ago

One critical difference between PayPal and bitcoin here. PayPal is not treated as a currency to be traded against other currencies. I suspect that the vast majority of bitcoin transactions are currently just trades to/from USD.

kylebrown 13y ago
Bitcoin trades happen on exchanges, off the blockchain. Bitcoin "transactions" are bitcoin payments going from one address to another, not trades.

adamors 13y ago

How is this useless blogspam getting upvoted to the front page?

seanalltogether 13y ago
I have this fear that too many HN readers have bought into bitcoin and are now using this website to keep promoting it in order to keep the hype (and price) high.
- adamors 13y ago
  That may be it; in the last couple of weeks there's regularly been some useless Bitcoin related speculation/incorrect statistic etc. on the frontpage. Or the constant announcements how much one is worth.

gesman 13y ago

So if I'd send 1 BTC to myself - this would be considered as $800 transaction?

drakaal 13y ago

Painfully inaccurate. This appears to assume all coins were valued at Today numbers, not the numbers on the days they occurred. PayPal does $44B a year in transactions. https://www.paypal-media.com/about https://www.paypal-media.com/about Today there are $12M Bit coins in existence. If each coin is valued at $800 (make my math easy and assume the sum of all bit coins is $10B) It is possible to have more in transactions than you have in holdings. I pay you, you pay your baby sitter, $20 was $40 in transactions. But for the math to work BitCoin holders would have to be all averaging 4 transactions of 100% of their holdings a year. This isn't possible since we know that the majority of bit coins are held by speculators, not consumers. (We know this because no one would buy bread if the price could double or half in 6 hours).

alexkus 13y ago

One crucial difference:- One system is an utter pain to actually cash out of if you start pulling in decent revenues. The other one is...oh.

javert 13y ago
I don't think bitcoin is a pain to cash out of.

eonil 13y ago

It's too early to measure any value of BTC in dollars. Any trial comparing to dollars or in any other currency are hype. BTC transaction meaningless because you don't need to pay commission. It's simply can go infinite at any time if you have enough BTC.