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We know that number of blockchain transactions has been more or less constant for a while and in the range of several tens of thousands per day. This means eith

by wsxcde 12y ago

We know that number of blockchain transactions has been more or less constant for a while and in the range of several tens of thousands per day. This means either merchants aren't seeing too many bitcoin sales OR a lot of these sales are happening offchain through coinbase/bitpay. In the latter scenario, coinbase just looks like a giant transaction fee with nothing changing except an entry in their database. Are they generating enough value to justify these fees? Note coinbase/bitpay makes money when (1) they sell you (the customer) bitcoin (2) the buy/sell spread when you buy btc (3) merchant fees and (4) buy/sell spread again when the purchase occurs. A big selling point for bitcoin was that you'd avoid credit card processing fees. Has someone done the math on whether this is turning out to actually be cheaper than credit cards after all fees are considered? And even if they turn out to be marginally cheaper, is it justified from the consumer's point of view given you don't even get the consumer protections that you get for free with a credit card?

mrb 12y ago
"number of blockchain transactions has been more or less constant" No: 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...
- vijayboyapati 12y ago
  Also the number of transactions per se is not the best measure of bitcoin's importance; it is the total purchasing power being transferred that should be considered. Bitcoin is a medium of savings that allows people to transfer value easily, from any point on the globe to any other point with minimal fees. The total purchasing power being transferred has growth tremendously because BOTH the number of transactions has grown AND the purchasing power of bitcoin has increased manyfold in the last few years. This, of course, does not even factor in all the transactions that happen off blockchain.
  - wsxcde 12y ago
    I think looking at transactions is a reasonable metric. In fact, even this metric may be overstating things. Tim Swanson has analyzed transactions excluding popular addresses (apparently this excludes things like SatoshiDice) to identify transactions that are positive-sum in an economic sense and then the numbers look even lower. [1] Another factor to consider is that if you count purchasing power transferred (which I assume means dollar value times transactions) you'll end up giving a lot of weight to events like when coinbase/mtgox moved their coins from one wallet to another. [1] http://www.ofnumbers.com/2014/06/23/separating-activity-from-growth-on-bitcoins-network/ http://www.ofnumbers.com/2014/06/23/separating-activity-from...
    - vijayboyapati 12y ago
      I've already had this debate with Tim in private (we're friends). Some of his analysis of transactional use is quite misleading. For instance: http://letstalkbitcoin.com/blog/post/a-marginal-economy-versus-a-growth-economy http://letstalkbitcoin.com/blog/post/a-marginal-economy-vers... Here he compares bitcoin to m-pesa which is a deeply misleading comparison. The former has a floating price, the latter is a money substitute and its price is fixed against the currency which is substitutes for. This is why I've suggested to Tim that it is total purchasing power transferred that should be measured, and I think I have convinced him of that.
- wsxcde 12y ago
  From Jan'13 to now, which is when most of this merchant adoption has occurred, I can see an increase from around 40,000 transactions to about 60,000 transactions, which is rather modest and one can easily cherry pick points which show that the number of transactions has actually declined. ed: And like I said in my other comment to vijay, it's not even clear that much of this represents positive-sum economic activity.
  - deleted 12y ago
    [deleted]
  - mrb 12y ago
    "40,000 transactions to about 60,000 transactions" Exactly. You called this +50% growth "more or less constant", which is why I corrected you. As to judging how much of this +50% growth is due to increased economic activity, it is impossible to prove due to the anonymous nature of Bitcoin. However indicators like the growth of Bitcoin payment processors (BitPay and Coinbase) very clearly show there is extreme growth. Eg. look at this data about BitPay: https://news.ycombinator.com/item?id=7974197 https://news.ycombinator.com/item?id=7974197
    - wsxcde 12y ago
      The Bitpay numbers are very impressive. I do think that 50% growth in a year, especially when it is not that clear-cut that it really is 50%, isn't that impressive by itself. Perhaps there's a lot more growth in off-chain activity. I remember reading an estimate that Bitcoin has < 500,000 users which seemed quite small to me given the hype surrounding it. So I'd be interested in seeing if there is growth in the number of wallets holding bitcoin. If bitcoin is taking off, we should be seeing that number explode, right?
- paletoy 12y ago
  That doesn't look like a growth story in the last year and half.
  - mrb 12y ago
    How is going from 40k transactions (Jan 2013) to 60k+ (Jul 2014) not growth? That's +50%!
    - sanswork 12y ago
      Because almost all of that growth was reached by Mar 2013 and it's been mostly flat since then(one bubble, a few small dips).
      - mrb 12y ago
        No. For noisy data like this, you need to look at averages to make sense of it. Eg. see the quarterly averages, they show a growth from 45k to 65k transaction/day: http://i.imgur.com/XJs4V74.png http://i.imgur.com/XJs4V74.png (or see www.quandl.com/BCHAIN/NTRAN-Bitcoin-Number-of-Transactions and select "quarterly".) Same reason why corporate financial reports are done on a quarterly basis. Or else there would be plenty of peaks and dips from week to week.
        sanswork 12y ago
        And if you scroll back to weekly you see any quarterly growth exists in one or two peaks pushing the quarterly numbers up then rapidly falling back down. Realistically though we're both playing with figures to show the result we expect. I've found plenty of merchants who accept it who have seen little to no revenue from it or shrinking revenues when they original saw some. Do you know of many merchants that are seeing increasing bitcoin customers and revenue?
        mrb 12y ago
        Who do you think is more guilty of playing with figures: the one who looks at temporary peaks and dips, or the one who looks at quarterly averages to find the overall macro trend? ;) I once compiled datapoints showing the growth of BitPay (ie. customers spending bitcoins on real goods and services from real merchants). You will find it interesting: https://news.ycombinator.com/item?id=7974197 https://news.ycombinator.com/item?id=7974197
- sanswork 12y ago
  According to that we're at the same level as we were in March of 2013 with a few dips and a bubble in the middle. Thats 17 months of more or less constant.
rockyleal 12y ago
So, you start by assuming the answer to your own question: "This means either merchants aren't seeing too many bitcoin sales OR a lot of these sales are happening offchain through coinbase/bitpay." (...) "in the latter scenario..." And then you say something that makes little sense... what giant fee are you talking about?? Merchants are actually offering DISCOUNTS for payments via Bitcoin.
- wsxcde 12y ago
  I explained what fees I am referring to in my comment.
Hermel 12y ago
For Bitcoin to succeed as a means of payment, chains of payments need to arise. I.e. merchants not only accepting Bitcoins, but also keeping them and spending them on suppliers and paying their employees (partially) in Bitcoin. As you say, buying Bitcoins to buy something and then the merchant immediately selling them again is pointless. That's why I'm skeptical with Bitcoin as a replacement for everyday payments. However, there is a chance of it finding significant niches online and internationally. Furthermore, it also has a value as a store of wealth, which is its main price driver (buying an hording a Bitcoin has a much bigger impact on price than buying and spending a Bitcoin with a merchant that sells it again).
- sillysaurus3 12y ago
  I.e. merchants not only accepting Bitcoins, but also keeping them and spending them on suppliers and paying their employees (partially) in Bitcoin. I think this is illegal now in New York. The new regulation requires that companies keep profits in USD and not bitcoin. For bitcoin to succeed, it needs to become safe. It's still incredibly easy to lose your money if it's stored in bitcoin.
  - embolalia 12y ago
    Nothing is illegal yet. The regulations have been proposed, but there's still a 45-day comment period that hasn't started yet. I don't know if there are more comment/review periods after that. Moreover, as I understood it, the proposed regulations apply pretty much entirely to those holding others' BTC, not to retailers. I didn't see anything in my (admittedly very cursory) reading to suggest a company that only takes BTC as payment for services would be disallowed from investing in, or making payments in, BTC.
  - fragsworth 12y ago
    > For bitcoin to succeed, it needs to become safe. It's still incredibly easy to lose your money if it's stored in bitcoin. It's not that "bitcoin has to become safe" - it's that the users have to become security-minded. If it's even possible for that to happen in a mainstream way, it's going to be a very slow process. Like decades or generations.

by wsxcde 12y ago

mrb 12y ago

"number of blockchain transactions has been more or less constant" No: 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...

vijayboyapati 12y ago
Also the number of transactions per se is not the best measure of bitcoin's importance; it is the total purchasing power being transferred that should be considered. Bitcoin is a medium of savings that allows people to transfer value easily, from any point on the globe to any other point with minimal fees. The total purchasing power being transferred has growth tremendously because BOTH the number of transactions has grown AND the purchasing power of bitcoin has increased manyfold in the last few years. This, of course, does not even factor in all the transactions that happen off blockchain.
- wsxcde 12y ago
  I think looking at transactions is a reasonable metric. In fact, even this metric may be overstating things. Tim Swanson has analyzed transactions excluding popular addresses (apparently this excludes things like SatoshiDice) to identify transactions that are positive-sum in an economic sense and then the numbers look even lower. [1] Another factor to consider is that if you count purchasing power transferred (which I assume means dollar value times transactions) you'll end up giving a lot of weight to events like when coinbase/mtgox moved their coins from one wallet to another. [1] http://www.ofnumbers.com/2014/06/23/separating-activity-from-growth-on-bitcoins-network/ http://www.ofnumbers.com/2014/06/23/separating-activity-from...
  - vijayboyapati 12y ago
    I've already had this debate with Tim in private (we're friends). Some of his analysis of transactional use is quite misleading. For instance: http://letstalkbitcoin.com/blog/post/a-marginal-economy-versus-a-growth-economy http://letstalkbitcoin.com/blog/post/a-marginal-economy-vers... Here he compares bitcoin to m-pesa which is a deeply misleading comparison. The former has a floating price, the latter is a money substitute and its price is fixed against the currency which is substitutes for. This is why I've suggested to Tim that it is total purchasing power transferred that should be measured, and I think I have convinced him of that.
wsxcde 12y ago
From Jan'13 to now, which is when most of this merchant adoption has occurred, I can see an increase from around 40,000 transactions to about 60,000 transactions, which is rather modest and one can easily cherry pick points which show that the number of transactions has actually declined. ed: And like I said in my other comment to vijay, it's not even clear that much of this represents positive-sum economic activity.
- deleted 12y ago
  [deleted]
- mrb 12y ago
  "40,000 transactions to about 60,000 transactions" Exactly. You called this +50% growth "more or less constant", which is why I corrected you. As to judging how much of this +50% growth is due to increased economic activity, it is impossible to prove due to the anonymous nature of Bitcoin. However indicators like the growth of Bitcoin payment processors (BitPay and Coinbase) very clearly show there is extreme growth. Eg. look at this data about BitPay: https://news.ycombinator.com/item?id=7974197 https://news.ycombinator.com/item?id=7974197
  - wsxcde 12y ago
    The Bitpay numbers are very impressive. I do think that 50% growth in a year, especially when it is not that clear-cut that it really is 50%, isn't that impressive by itself. Perhaps there's a lot more growth in off-chain activity. I remember reading an estimate that Bitcoin has < 500,000 users which seemed quite small to me given the hype surrounding it. So I'd be interested in seeing if there is growth in the number of wallets holding bitcoin. If bitcoin is taking off, we should be seeing that number explode, right?
paletoy 12y ago
That doesn't look like a growth story in the last year and half.
- mrb 12y ago
  How is going from 40k transactions (Jan 2013) to 60k+ (Jul 2014) not growth? That's +50%!
  - sanswork 12y ago
    Because almost all of that growth was reached by Mar 2013 and it's been mostly flat since then(one bubble, a few small dips).
    - mrb 12y ago
      No. For noisy data like this, you need to look at averages to make sense of it. Eg. see the quarterly averages, they show a growth from 45k to 65k transaction/day: http://i.imgur.com/XJs4V74.png http://i.imgur.com/XJs4V74.png (or see www.quandl.com/BCHAIN/NTRAN-Bitcoin-Number-of-Transactions and select "quarterly".) Same reason why corporate financial reports are done on a quarterly basis. Or else there would be plenty of peaks and dips from week to week.
      - sanswork 12y ago
        And if you scroll back to weekly you see any quarterly growth exists in one or two peaks pushing the quarterly numbers up then rapidly falling back down. Realistically though we're both playing with figures to show the result we expect. I've found plenty of merchants who accept it who have seen little to no revenue from it or shrinking revenues when they original saw some. Do you know of many merchants that are seeing increasing bitcoin customers and revenue?
        mrb 12y ago
        Who do you think is more guilty of playing with figures: the one who looks at temporary peaks and dips, or the one who looks at quarterly averages to find the overall macro trend? ;) I once compiled datapoints showing the growth of BitPay (ie. customers spending bitcoins on real goods and services from real merchants). You will find it interesting: https://news.ycombinator.com/item?id=7974197 https://news.ycombinator.com/item?id=7974197
sanswork 12y ago
According to that we're at the same level as we were in March of 2013 with a few dips and a bubble in the middle. Thats 17 months of more or less constant.

rockyleal 12y ago

So, you start by assuming the answer to your own question: "This means either merchants aren't seeing too many bitcoin sales OR a lot of these sales are happening offchain through coinbase/bitpay." (...) "in the latter scenario..." And then you say something that makes little sense... what giant fee are you talking about?? Merchants are actually offering DISCOUNTS for payments via Bitcoin.

wsxcde 12y ago
I explained what fees I am referring to in my comment.

Hermel 12y ago

For Bitcoin to succeed as a means of payment, chains of payments need to arise. I.e. merchants not only accepting Bitcoins, but also keeping them and spending them on suppliers and paying their employees (partially) in Bitcoin. As you say, buying Bitcoins to buy something and then the merchant immediately selling them again is pointless. That's why I'm skeptical with Bitcoin as a replacement for everyday payments. However, there is a chance of it finding significant niches online and internationally. Furthermore, it also has a value as a store of wealth, which is its main price driver (buying an hording a Bitcoin has a much bigger impact on price than buying and spending a Bitcoin with a merchant that sells it again).

sillysaurus3 12y ago
I.e. merchants not only accepting Bitcoins, but also keeping them and spending them on suppliers and paying their employees (partially) in Bitcoin. I think this is illegal now in New York. The new regulation requires that companies keep profits in USD and not bitcoin. For bitcoin to succeed, it needs to become safe. It's still incredibly easy to lose your money if it's stored in bitcoin.
- embolalia 12y ago
  Nothing is illegal yet. The regulations have been proposed, but there's still a 45-day comment period that hasn't started yet. I don't know if there are more comment/review periods after that. Moreover, as I understood it, the proposed regulations apply pretty much entirely to those holding others' BTC, not to retailers. I didn't see anything in my (admittedly very cursory) reading to suggest a company that only takes BTC as payment for services would be disallowed from investing in, or making payments in, BTC.
- fragsworth 12y ago
  > For bitcoin to succeed, it needs to become safe. It's still incredibly easy to lose your money if it's stored in bitcoin. It's not that "bitcoin has to become safe" - it's that the users have to become security-minded. If it's even possible for that to happen in a mainstream way, it's going to be a very slow process. Like decades or generations.