17 ms·

Bitcoin adoption in 2015

88 points by dalton 12y ago

minimaxir 12y ago
Taking these three charts together, the relatively static USD transaction value per day metric in 2014 appears to be the result of the falling market price of bitcoin being offset by increased transaction volume. This touches dangerously on correlation-implying-causation.
- jrochkind1 12y ago
  Read it again, I think it's just math. If there is a certain amount of transaction volume, at a certain bitcoin value in USD, that just adds up to a certain USD transaction value per day, right?
  - logicallee 12y ago
    At first I agreed with you, and thought the author only wrote 'appears to be' to hedge their sentence, because they didn't think it through 100% to be sure of their reasoning. But consider: does the sentence read exactly the same if we rewrite it as, >Taking these three charts together, the relatively static USD transaction value per day metric in 2014 appears to be the result of the increase in transaction volume being offset by a falling market price of bitcoin. Not at all!! So the author really is saying something that implies a causative effect: the price is falling, so people how need a certain transaction amount (in real terms) will transfer more. This makes perfect sense when you consider the authors follow-on sentences. So absolutely, the author is making a causal relationship. The author even justifies it (pretty well in my opinion.)
- CompelTechnic 12y ago
  Economics has a lot of feedback loops, and separating out cause and effect is near impossible.
  - kordless 12y ago
    There was as story yesterday on here about how they have maybe figured out how to detect causality in a system.
    - ars 12y ago
      That method would not work for a loop - only for a line.
      - kordless 12y ago
        Ohm.
sanswork 12y ago
https://blockchain.info/address/1ABn5L14hXXJ9RowWEpUcsDc8HXqHXFre6 https://blockchain.info/address/1ABn5L14hXXJ9RowWEpUcsDc8HXq... If you look at that and click on the destination, then do the same again you'll see someone pushing out 10s of thousands of very small transactions per day across the network. They do the same thing pretty much every day I've checked(the above is an old link since its the only one I had handy). The days I've checked though these sorts of things have accounted for 30-50% of transaction volume. They are odd not just because of the volume of transactions but the size of them and the fact that they pay a fee for every one. Ideally for the amounts and frequency they would be grouping many outputs into a single transaction to save on fees. I think its safe you ignore transaction volume for the near future and recent past while this is going on unless you start accounting for it.
- dalton 12y ago
  somewhat related: someone on facebook pointed out that XCP is pushing a lot of small transactions on the network and pointed me to this link: https://www.blockscan.com/charts_transaction_all https://www.blockscan.com/charts_transaction_all
- deleted 12y ago
  [deleted]
- qnr 12y ago
  A few weeks ago I made a script to look for transaction chains like this in the blockchain, and it turned out they have been going on every day since mid-2010. Currently they account for 20-25% of tx volume but the percentage was much higher in the past (up to 50-60% for some days in 2012). For most of 2014 it was about 15%. I'm not sure what the sender of these transactions is doing (trying to inflate tx volume? some badly written software?strange mixing algorithm?) though even if you discard those transactions from analysis it doesn't change the overall picture much.
  - sanswork 12y ago
    It'd be great if you could post the data somewhere. I wanted to do a script to go through them but just haven't had the free time.
ars 12y ago
Not sure how I'm supposed to take this seriously when the author doesn't use logarithmic graphs. If you look at a non-logarithmic graph of money and try to draw conclusions from it you will draw the wrong conclusions. It's inevitable, it's just how humans perceive graphs. If you want to avoid this common error, use a logarithmic graph. The fact that the author did not points to a lacuna in his knowledge, and such a lack makes me wonder about the rest of his writing. It's just such a basic error.
- jasonisalive 12y ago
  I'm not sure I follow. Isn't one supposed to select a scale which allows the compiled data to be clearly and informatively expressed? And doesn't the data compiled so far fit comfortably on a linear scale? Would you recommend using a logarithmic graph because you expect Bitcoin use to increase exponentially? In that case, wouldn't the use of a logarithmic scale at this point imply a direct belief in the future of Bitcoin use?
  - mpyne 12y ago
    > Would you recommend using a logarithmic graph because you expect Bitcoin use to increase exponentially? In that case, wouldn't the use of a logarithmic scale at this point imply a direct belief in the future of Bitcoin use? This is pretty much it exactly, and why the whole "OMG log graphs!!!" thing pops up in finance only when you're talking about Bitcoin and its alts. Though even then I can't figure out why, you only would want log graphs for exponential growth or decay, which isn't something we're seeing out of Bitcoin except for a brief period of tulipmania.
    - ars 12y ago
      No, that's not correct in the slightest. > pops up in finance only when you're talking about Bitcoin If you are looking at linear stock value graphs you are being mislead. If you want to make correct decisions based on graphs they must be logarithmic (except percent graphs). Any stock trader that uses linear graphs will lose his shirt. (And I am well aware that the default stock graphs are all linear.) > you only would want log graphs for exponential growth or decay No, that's not correct (for the common meaning of exponential meaning "huge"). You want a logarithmic graph anytime the future value of something depends on the present value (i.e. the mathematical meaning). Which is most of the time. Most things in the world, the amount you have today influences how much you will have tomorrow. It's actually rare to want a linear graph. You only want that when how much you have tomorrow has nothing to do with today. So population should be logarithmic (the more people you have the more will be born), but infant mortality per capita should be linear (future levels of infant mortality do not depend on how many died in the past).
jval 12y ago
The problem with all of these graphs is that the rise of cloud players like Coinbase means that a lot (and I'd think probably most) of the Bitcoin transactions taking place these days are off-chain. Coinbase can settle most trades internally and push out any 'interbank trades' onto the chain. Some of the patterns others have noticed could be them settling internal accounts, not sure though.
- cb18 12y ago
  Did you read the words too? What did you think about this part? Regarding the prospect of growth in value exchange occurring via off-blockchain services: I still think we would expect to see off-blockchain value transfer manifest itself on-blockchain, in much the same way that buy and sell pressure at a single off-blockchain service flows throughout the entire ecosystem. If an off-blockchain service did somehow manage to become an “island” and transact increasing amounts of value without any of the growth showing up on-blockchain… it would be bad for bitcoin on a number of levels. -- the rise of cloud players like Coinbase means that a lot (and I'd think probably most) of the Bitcoin transactions taking place these days are off-chain. It's ironic that you so often see these comments forecasting how in the future most bitcoin activity will occur in these single authority corrals, or 'cloud players' as you call them. It's really no different from saying "Most people using bitcoin in the future, won't actually be using bitcoin." So it raises the question of, if the future of using bitcoin is not actually using bitcoin, what is the future of bitcoin?
cgjaro 12y ago
Fred Wilson posted better adoption metrics which are a more accurate (and more impressive) record of how Bitcoin is doing: http://avc.com/2014/10/bitcoin-adoption-metrics/ http://avc.com/2014/10/bitcoin-adoption-metrics/ It is smarter to look at these than at merely the number of transactions.
- sanswork 12y ago
  So many vanity metrics though. Coinbase and blockchain publish wallet numbers which is used here and is another useless. When they start publishing MAU I'll be impressed until then I'll just see wallets as a vanity number that is always going up. Number of uniquely used addresses is being inflated by actions like the one I post about above. Merchants and Merchants annual revenue are again vanity metrics. Merchants like wallets above does not accurately reflect current demand(go look up every story of people trying to travel using coinmap and finding almost all the merchants listed no longer accept bitcoin). Merchants annual revenue inflates the importance of companies like Overstock and Dish. If VC investment was a good metric to follow we'd all be using Flooz and Beenz. Hashrate has more to do with the improvements in ASIC miners than growth in usage/adoption. And number of bitcoin repos is silly since everyone in the bitcoin space wants to be a bitcoin developer so the number of vanity repos is astounding.
  - cgjaro 12y ago
    Are you denying all these metrics as a whole, and implying that Bitcoin's usage is either stagnating or declining?? You can't be serious, can you?
    - sanswork 12y ago
      >Are you denying all these metrics as a whole I'm denying the ones I've commented on are important. >implying that Bitcoin's usage is either stagnating or declining I think it is but thats not what I'm implying. I'm implying that people heavily invested in bitcoin tend to use vanity metrics like this. That said the things I look at that make me believe bitcoin is stagnating/declining are things like the continued slide of the price over the year, Bitcoin Black Friday 2014 being a huge failure, Overstock missing their bitcoin sales expectations by 17 million dollars. Basically every vendor I've seen comment on sales has said there have been pretty much none this year. The fact that 2014 was meant to be the year of bitcoin and there has been no breakout in the general public. Everyone seems vaguely aware of bitcoin but no one is investing any time in learning anything about it because it solves problems that most people don't care about(freedom) and creates problems they do(security). Now I just see people in the community rallying around remittance and the killer app that will save bitcoin but the actual transfer of funds isn't the expensive part of remittance the compliance around the transfer of funds is and the existing services that do remittance cheaper using bitcoin only work now because they are ignoring compliance completely. They will either get more expensive or be shut down in the near future.
qznc 12y ago
If Reddit decides to use Bitcoin sidechains for its Reddit Notes, it might give Bitcoin adoption a push.
ps4fanboy 12y ago
Every new announcement for bitcoin is about how its easier to spend but never any real announcements about making it easier to buy, the fees are high, the waits can be lengthy, and limits on amounts are low. Until this changes I dont see much else changing.
- ssharp 12y ago
  I bought some bitcoins in early 2013 and then tried to buy some a few months ago. It's more painful to do now and I lost interest in having to tie to a real bank account, ID verification, etc. I realize that a lot of crackdowns have been made to make BitCoins less anonymous and prevent laundering, but it ultimately hurts the UX and the utility I get from owning BitCoins isn't enough to make me want to jump through banking hoops.
ZenoArrow 12y ago
From the article... "Taking these three charts together, the relatively static USD transaction value per day metric in 2014 appears to be the result of the falling market price of bitcoin being offset by increased transaction volume." ...and then... "Perhaps this is all just a coincidence, but it appears that 2014 was a year of relatively static demand for transacting value through bitcoin. Static demand implies that either 1) the number of people using bitcoin to transact value has been relatively stable, or 2) the number of people in the ecosystem using bitcoin to transact value is growing but offset by churn/decreased usage by other participants." Am I being slow here? The graph showed the number of daily transactions was increasing over 2014, yet the conclusion being reached is that the demand for usage of Bitcoin is static. Perhaps I'm reading it wrong, but from where I'm currently standing it doesn't make sense. One thing that needs to be understood about Bitcoin usage is that the transactions are not always for whole Bitcoins, it's increasingly common to see trades for fractions of a Bitcoin. The protocol explicitly allows this... https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F If trades of fractions of a Bitcoin are being made frequently, then it does not mean there is a demand problem, but rather that prices are readjusting.
- debacle 12y ago
  The transaction volume has gone up, but the value of a bitcoin (in USD) has gone down, so the total volume (not in bitcoin but in USD) is about the same.
  - ZenoArrow 12y ago
    Yes, I understand that, my issue is with the term "static demand". To me static demand implies that there is not growth in usage if Bitcoin as a currency, yet the opposite is true. Its price compared to USD is immaterial. Imagine a well used traditional state-led currency, traded with increased fluidity within that country, despite being devalued on currency exchanges. The internal demand has gone up, foreign exchange is of secondary concern, prices will continue to fluctuate as the market matures.
markkat 12y ago
If you look at the all-time USD transaction volume, it seems pretty clear that it is growing: https://blockchain.info/charts/estimated-transaction-volume-usd?showDataPoints=false&timespan=all&show_header=true&daysAverageString=7&scale=0&address= https://blockchain.info/charts/estimated-transaction-volume-... Using the same slope, I'd expect about $110M USD/day this time next year (from about $70M now). As bitcoin's usefulness is tied to the number of people using it (like email), it would be strange to see explosive transaction growth so early on. Looking at all-time number of transactions, it's difficult to make the case that adoption is static: https://blockchain.info/charts/n-transactions?timespan=all&showDataPoints=false&daysAverageString=7&show_header=true&scale=0&address= https://blockchain.info/charts/n-transactions?timespan=all&s...

88 points by dalton 12y ago

Taking these three charts together, the relatively static USD transaction value per day metric in 2014 appears to be the result of the falling market price of bitcoin being offset by increased transaction volume. This touches dangerously on correlation-implying-causation.

jrochkind1 12y ago
Read it again, I think it's just math. If there is a certain amount of transaction volume, at a certain bitcoin value in USD, that just adds up to a certain USD transaction value per day, right?
- logicallee 12y ago
  At first I agreed with you, and thought the author only wrote 'appears to be' to hedge their sentence, because they didn't think it through 100% to be sure of their reasoning. But consider: does the sentence read exactly the same if we rewrite it as, >Taking these three charts together, the relatively static USD transaction value per day metric in 2014 appears to be the result of the increase in transaction volume being offset by a falling market price of bitcoin. Not at all!! So the author really is saying something that implies a causative effect: the price is falling, so people how need a certain transaction amount (in real terms) will transfer more. This makes perfect sense when you consider the authors follow-on sentences. So absolutely, the author is making a causal relationship. The author even justifies it (pretty well in my opinion.)
CompelTechnic 12y ago
Economics has a lot of feedback loops, and separating out cause and effect is near impossible.
- kordless 12y ago
  There was as story yesterday on here about how they have maybe figured out how to detect causality in a system.
  - ars 12y ago
    That method would not work for a loop - only for a line.
    - kordless 12y ago
      Ohm.

sanswork 12y ago

https://blockchain.info/address/1ABn5L14hXXJ9RowWEpUcsDc8HXqHXFre6 https://blockchain.info/address/1ABn5L14hXXJ9RowWEpUcsDc8HXq... If you look at that and click on the destination, then do the same again you'll see someone pushing out 10s of thousands of very small transactions per day across the network. They do the same thing pretty much every day I've checked(the above is an old link since its the only one I had handy). The days I've checked though these sorts of things have accounted for 30-50% of transaction volume. They are odd not just because of the volume of transactions but the size of them and the fact that they pay a fee for every one. Ideally for the amounts and frequency they would be grouping many outputs into a single transaction to save on fees. I think its safe you ignore transaction volume for the near future and recent past while this is going on unless you start accounting for it.

dalton 12y ago
somewhat related: someone on facebook pointed out that XCP is pushing a lot of small transactions on the network and pointed me to this link: https://www.blockscan.com/charts_transaction_all https://www.blockscan.com/charts_transaction_all
deleted 12y ago
[deleted]
qnr 12y ago
A few weeks ago I made a script to look for transaction chains like this in the blockchain, and it turned out they have been going on every day since mid-2010. Currently they account for 20-25% of tx volume but the percentage was much higher in the past (up to 50-60% for some days in 2012). For most of 2014 it was about 15%. I'm not sure what the sender of these transactions is doing (trying to inflate tx volume? some badly written software?strange mixing algorithm?) though even if you discard those transactions from analysis it doesn't change the overall picture much.
- sanswork 12y ago
  It'd be great if you could post the data somewhere. I wanted to do a script to go through them but just haven't had the free time.

ars 12y ago

Not sure how I'm supposed to take this seriously when the author doesn't use logarithmic graphs. If you look at a non-logarithmic graph of money and try to draw conclusions from it you will draw the wrong conclusions. It's inevitable, it's just how humans perceive graphs. If you want to avoid this common error, use a logarithmic graph. The fact that the author did not points to a lacuna in his knowledge, and such a lack makes me wonder about the rest of his writing. It's just such a basic error.

jasonisalive 12y ago
I'm not sure I follow. Isn't one supposed to select a scale which allows the compiled data to be clearly and informatively expressed? And doesn't the data compiled so far fit comfortably on a linear scale? Would you recommend using a logarithmic graph because you expect Bitcoin use to increase exponentially? In that case, wouldn't the use of a logarithmic scale at this point imply a direct belief in the future of Bitcoin use?
- mpyne 12y ago
  > Would you recommend using a logarithmic graph because you expect Bitcoin use to increase exponentially? In that case, wouldn't the use of a logarithmic scale at this point imply a direct belief in the future of Bitcoin use? This is pretty much it exactly, and why the whole "OMG log graphs!!!" thing pops up in finance only when you're talking about Bitcoin and its alts. Though even then I can't figure out why, you only would want log graphs for exponential growth or decay, which isn't something we're seeing out of Bitcoin except for a brief period of tulipmania.
  - ars 12y ago
    No, that's not correct in the slightest. > pops up in finance only when you're talking about Bitcoin If you are looking at linear stock value graphs you are being mislead. If you want to make correct decisions based on graphs they must be logarithmic (except percent graphs). Any stock trader that uses linear graphs will lose his shirt. (And I am well aware that the default stock graphs are all linear.) > you only would want log graphs for exponential growth or decay No, that's not correct (for the common meaning of exponential meaning "huge"). You want a logarithmic graph anytime the future value of something depends on the present value (i.e. the mathematical meaning). Which is most of the time. Most things in the world, the amount you have today influences how much you will have tomorrow. It's actually rare to want a linear graph. You only want that when how much you have tomorrow has nothing to do with today. So population should be logarithmic (the more people you have the more will be born), but infant mortality per capita should be linear (future levels of infant mortality do not depend on how many died in the past).

jval 12y ago

The problem with all of these graphs is that the rise of cloud players like Coinbase means that a lot (and I'd think probably most) of the Bitcoin transactions taking place these days are off-chain. Coinbase can settle most trades internally and push out any 'interbank trades' onto the chain. Some of the patterns others have noticed could be them settling internal accounts, not sure though.

cb18 12y ago
Did you read the words too? What did you think about this part? Regarding the prospect of growth in value exchange occurring via off-blockchain services: I still think we would expect to see off-blockchain value transfer manifest itself on-blockchain, in much the same way that buy and sell pressure at a single off-blockchain service flows throughout the entire ecosystem. If an off-blockchain service did somehow manage to become an “island” and transact increasing amounts of value without any of the growth showing up on-blockchain… it would be bad for bitcoin on a number of levels. -- the rise of cloud players like Coinbase means that a lot (and I'd think probably most) of the Bitcoin transactions taking place these days are off-chain. It's ironic that you so often see these comments forecasting how in the future most bitcoin activity will occur in these single authority corrals, or 'cloud players' as you call them. It's really no different from saying "Most people using bitcoin in the future, won't actually be using bitcoin." So it raises the question of, if the future of using bitcoin is not actually using bitcoin, what is the future of bitcoin?

cgjaro 12y ago

Fred Wilson posted better adoption metrics which are a more accurate (and more impressive) record of how Bitcoin is doing: http://avc.com/2014/10/bitcoin-adoption-metrics/ http://avc.com/2014/10/bitcoin-adoption-metrics/ It is smarter to look at these than at merely the number of transactions.

sanswork 12y ago
So many vanity metrics though. Coinbase and blockchain publish wallet numbers which is used here and is another useless. When they start publishing MAU I'll be impressed until then I'll just see wallets as a vanity number that is always going up. Number of uniquely used addresses is being inflated by actions like the one I post about above. Merchants and Merchants annual revenue are again vanity metrics. Merchants like wallets above does not accurately reflect current demand(go look up every story of people trying to travel using coinmap and finding almost all the merchants listed no longer accept bitcoin). Merchants annual revenue inflates the importance of companies like Overstock and Dish. If VC investment was a good metric to follow we'd all be using Flooz and Beenz. Hashrate has more to do with the improvements in ASIC miners than growth in usage/adoption. And number of bitcoin repos is silly since everyone in the bitcoin space wants to be a bitcoin developer so the number of vanity repos is astounding.
- cgjaro 12y ago
  Are you denying all these metrics as a whole, and implying that Bitcoin's usage is either stagnating or declining?? You can't be serious, can you?
  - sanswork 12y ago
    >Are you denying all these metrics as a whole I'm denying the ones I've commented on are important. >implying that Bitcoin's usage is either stagnating or declining I think it is but thats not what I'm implying. I'm implying that people heavily invested in bitcoin tend to use vanity metrics like this. That said the things I look at that make me believe bitcoin is stagnating/declining are things like the continued slide of the price over the year, Bitcoin Black Friday 2014 being a huge failure, Overstock missing their bitcoin sales expectations by 17 million dollars. Basically every vendor I've seen comment on sales has said there have been pretty much none this year. The fact that 2014 was meant to be the year of bitcoin and there has been no breakout in the general public. Everyone seems vaguely aware of bitcoin but no one is investing any time in learning anything about it because it solves problems that most people don't care about(freedom) and creates problems they do(security). Now I just see people in the community rallying around remittance and the killer app that will save bitcoin but the actual transfer of funds isn't the expensive part of remittance the compliance around the transfer of funds is and the existing services that do remittance cheaper using bitcoin only work now because they are ignoring compliance completely. They will either get more expensive or be shut down in the near future.

qznc 12y ago

If Reddit decides to use Bitcoin sidechains for its Reddit Notes, it might give Bitcoin adoption a push.

ps4fanboy 12y ago

Every new announcement for bitcoin is about how its easier to spend but never any real announcements about making it easier to buy, the fees are high, the waits can be lengthy, and limits on amounts are low. Until this changes I dont see much else changing.

ssharp 12y ago
I bought some bitcoins in early 2013 and then tried to buy some a few months ago. It's more painful to do now and I lost interest in having to tie to a real bank account, ID verification, etc. I realize that a lot of crackdowns have been made to make BitCoins less anonymous and prevent laundering, but it ultimately hurts the UX and the utility I get from owning BitCoins isn't enough to make me want to jump through banking hoops.

ZenoArrow 12y ago

From the article... "Taking these three charts together, the relatively static USD transaction value per day metric in 2014 appears to be the result of the falling market price of bitcoin being offset by increased transaction volume." ...and then... "Perhaps this is all just a coincidence, but it appears that 2014 was a year of relatively static demand for transacting value through bitcoin. Static demand implies that either 1) the number of people using bitcoin to transact value has been relatively stable, or 2) the number of people in the ecosystem using bitcoin to transact value is growing but offset by churn/decreased usage by other participants." Am I being slow here? The graph showed the number of daily transactions was increasing over 2014, yet the conclusion being reached is that the demand for usage of Bitcoin is static. Perhaps I'm reading it wrong, but from where I'm currently standing it doesn't make sense. One thing that needs to be understood about Bitcoin usage is that the transactions are not always for whole Bitcoins, it's increasingly common to see trades for fractions of a Bitcoin. The protocol explicitly allows this... https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F If trades of fractions of a Bitcoin are being made frequently, then it does not mean there is a demand problem, but rather that prices are readjusting.

debacle 12y ago
The transaction volume has gone up, but the value of a bitcoin (in USD) has gone down, so the total volume (not in bitcoin but in USD) is about the same.
- ZenoArrow 12y ago
  Yes, I understand that, my issue is with the term "static demand". To me static demand implies that there is not growth in usage if Bitcoin as a currency, yet the opposite is true. Its price compared to USD is immaterial. Imagine a well used traditional state-led currency, traded with increased fluidity within that country, despite being devalued on currency exchanges. The internal demand has gone up, foreign exchange is of secondary concern, prices will continue to fluctuate as the market matures.

markkat 12y ago

If you look at the all-time USD transaction volume, it seems pretty clear that it is growing: https://blockchain.info/charts/estimated-transaction-volume-usd?showDataPoints=false&timespan=all&show_header=true&daysAverageString=7&scale=0&address= https://blockchain.info/charts/estimated-transaction-volume-... Using the same slope, I'd expect about $110M USD/day this time next year (from about $70M now). As bitcoin's usefulness is tied to the number of people using it (like email), it would be strange to see explosive transaction growth so early on. Looking at all-time number of transactions, it's difficult to make the case that adoption is static: https://blockchain.info/charts/n-transactions?timespan=all&showDataPoints=false&daysAverageString=7&show_header=true&scale=0&address= https://blockchain.info/charts/n-transactions?timespan=all&s...