Bitcoin Forum

Received an email today from Dwolla, with them announcing they've passed $1m in daily transactions. They've got a nice infographic chart showing their growth since December. Now, of course, it is strikingly similar to the growth of interest in Bitcoin (starts jumping fast in May, right as Bitcoin started getting traction).

However, they're not mentioning Bitcoin AT ALL in either their email or graphic. It's understandable of course, but I found it amusing.  Am I wrong in speculating that a significant part of their growth is due directly to Bitcoin? My guess is that they have a love/hate relationship with Bitcoin, as it's bringing them massive business, but is also likely to make them obsolete before they ever truly succeed.

Thoughts?

http://www.dwolla.org/infographic/images/dwolla-growth.png

Yep. It's from bitcoin.

Never even heard of "dwolla" before I got into Bitcoin  ::). So that bump is an obvious bump related to Bitcoin...

yep it's pretty obvious

I never heard about dwolla too before bitcoins. So it can be an influence of their daily transactions.

It must be a very difficult issue for them. Bitcoin will replace the value proposition they offer - Dwolla is made redundant by Bitcoin's success. It's like they're helping to foster a child that will grow up to kill them! Strange relationship.

Yeah, if not for being the cheapest option to purchase BTC I would have never used Dwolla.

I would have never used dwolla if it were not related to bitcoin. Hell, I don't even have a facebook account.
We should tell them! email on the way!

I expect that Dwolla would be vastly more palatable to governments due to (what I am supposing without specific knowledge is) it's adherence to 'know-your-customer' procedures and non-P2P architecture.  I think it's safe to bet that if any 'legitimate' company operating in the US 'knows-its-customers', so to do a lot of government agencies, their friends, and their contractors.

So, I would suppose that governments would do what they can to foster Dwolla and it's cousins and deter Bitcoin (and it's possible cousins.)  I'm hopeful that Bitcoin will eventually strangle or starve out those in the other camp at an opportune time...at least I am currently and hope that nothing changes my mindset.  How this plays out will be very interesting.

That's why it's funny when people freak out over BTC prices. There are a ton of people buying and using bitcoins. These people aren't trying to make money off BTC, they aren't mining, they aren't "investing", they're using it for what it is, a currency. BTC has a strong future because of the people using it as a currency, not because of the miners, traders, investors. Those people are trying to make money off BTC. As long as people use it to exchange goods and services, which clearly it looks like they are, BTC is golden.

The price of BTC doesn't matter. $5 or $20 it really has no effect. People sell based on usd/euro etc... No one locks in prices at a set BTC. If you sell a $20 item for 1 BTC or 4 BTC it really doesn't change anything. The person buys the bitcoins, sends them, the seller cashes them out. At $5 and at $20 it's the same process. It's always been discussed that 50-80% of miners leaving wouldn't really change a thing. Day traders, investors, people playing the exchanges don't matter. All those people could fuck off right now and people would still be buying BTC, using BTC, and sellers selling the BTC.

Which is why there's no collapse. The people powering BTC, the people using BTC, don't give two shits about how much it's currently worth on the exchanges. There's APIs now that auto convert USD to current market value BTC. Does the API, buying, seller really care if it's $5 or $20? The API just converts it to the USD value and sells the item.

If anything BTC hitting $5 would get rid of the short term for profit miners who are drama queens every time the price fluctuates because they're in a panic to get their money back from their investment. It also gets rid of the people treating BTC like gold bullion.

BTC was never created to be a collectible. It's a virtual currency. Letting people can exchange goods and services. So Jimbo in Poland doesn't need a bank, visa, mastercard, or paypal to sell his homemade bellybutton lint sculptures. He can accept BTC from every corner of the planet. People seem to think that having people profit off of the investing, trading, mining is the core of BTC. It's not. People using BTC as a currency is the core of BTC, will always be the core of BTC, and those people don't give two shits what the current market value is.

They login, buy btc, spend them, get their shit. Whether it's $5 or $50 doesn't change anything. If all the people holding BTC like it's gold bullion cashed out, the people who are using the currency would still be using it the next day, the next week, the next month.

It's reasonable to assume that a substantial portion of that $1M/day is going into Bitcoin exchange accounts. This is an indication that their are more potential buyers to keep the price from dropping substantially and possibly drive the price up. 

I've funneled thousands through Dwolla and the only reason I've ever used it was to buy Bitcoin.

with out bitcoin Dwolla is Gonewolla I do believe!

Well we know from hacking history that mtgox is around 60,000 accounts. So assuming half of those people used dwolla instead of liberty reserve then thats about $300 a person per week. That sounds like a fairly reasonable assumption. Only mtgox really knows how much people deposit and withdraw per week i guess, but those numbers are logical.

We got in June a total of $6,824,168.53 of funds moving around (16640 transactions in both deposits and withdraws) over Dwolla, equivalent of $227,472.28 per day, or $1,592,305.99 per week. Should be noted that the site was closed on June 20th, so in reality amount per day/week is higher.

On their chart, Dwolla is claiming a million per week in June and a million per day in July. 

But the rally to $30 was in June, so either Dwolla has a substantial non-BTC customer base, or a lot of USD has moved to MtGox this month ;D

$6.8 million from Dwolla or from everywhere?

How much money is entering mtGox from Dwolla?

It's true that the price of BTC is irrelevant for trades where it's converted seamlessly at either end.. but in practice there is a fair overhead in both fees and time for conversion. (I'm sure it varies from country to country - but for me it's a couple of days + 5% or so)

Once there are significant number of merchants accepting BTC, it seems to me that ironically, the market value of BTC could go up if governments start to make difficulties for the exchange points.   The smoother the flow in and out of BTC - the less need to hold a fat wallet.

removing the stuff in parenthesis:


As far as how much was for incoming (deposits) versus outgoing (withdrawals) I don't know.

So if Dwolla in July is reaching $1m/day figures, then back in June according to their own chart it was, like, 1/3 of that... or roughly $200-$400k per day in June.

MagicalTux says that in June they were getting $227k per day on average.

In other words, the MAJORITY of Dwolla's business is directly related to Bitcoin, at least in June.

This is pretty fascinating actually! I wonder if they ever talk about it in the office... or if it's kinda a touchy subject that nobody wants to bring up  ;)

what kind of a business thinks its majority income is a touchy subject?

One where the majority of their business exists simply to facilitate a competitor.

The fee's don't really change. The fee's are based on USD not on BTC. If you're buying $50 worth of Bitcoins, it doesn't matter if you get 25 bitcoins back or 2 bitcoins back. You then go send those 25 or 2 bitcoins to the seller, get your stuff, the fee's are the same. The seller sells 25 bitcoins or 2 bitcoins for $50, the fee's are the same. The core transactions of BTC don't rely on BTC sustaining a magic value. People used BTC to buy stuff when it was $2 and they did the same at $20. If BTC was 50 cents, you'd still load $50 and buy 100 BTC. Then you send the BTC and the seller sells his 100 BTC for $50.  

Miners would revolt, but even that doesn't change much. We've seen a mass exodus of miners already in Namecoin. Difficulty was way too high, the guys left worked through it, it adjusted, namecoin is running fine. BTC has gotten big enough any mining exodus would take weeks and the difficulty would keep adjusting as it happened. The network works just fine at 1,500 ghash as it does at 15,000 ghash.

As long as people use BTC as a currency (which is seems lots of people are) then it will remain very strong. The market, traders, investors, miners, they're all leeching the system trying to make money for themselves and really have little effect on the future of BTC. The importance of the network remaining "profitable" for those people is a joke. The grass roots (no pun intended lol) buyers and sellers run the show.

One that doesn't even mention the source of their majority income in their literature.

This is amazing information - thank you for sharing, Mark.  Based on our conversations with Dwolla, we knew Bitcoin is big for them. Now we have the numbers about exactly how big it is.

We should work with Dwolla to lobby for Bitcoin.  Sooner or later we are going need a lobbyist in Washington DC, and Dwolla along with exchanges/platforms can be a major contributor towards this effort.

     - Keyur

hopefully later.

plus, don't you think they have enough stuff on their plate at the moment?

You mean like cutting costs? For a relatively small investment (some compute time on existing hardware) they could invest in American bitcoin companies and embrace it, or at least give it a chance to grow.  If it works out, it could dramatically reduce the cost of doing business, leaving more for the money grubbers in DC.  Not to mention it's usefulness in collecting campaign donations.

My hope is that Bitcoin attains legitimacy in Washington after every possible avenue of opposition has been tried and failed.  Bill Gate's "embrace and extend" strategy for destroying open source competitors was shockingly effective for killing java. The Federal government could do more harm to bitcoin by regulating it than by banning it altogether.  

maybe not exactly, error:


[emphasis mine]

http://www.bitcoinmoney.com/post/7895143775/dwolla-milestone-one-million-a-day

what if dwolla didn't compete?  what if they... oh, i dunno... facilitated?  merged?  bet on Bitcoin in a big way?  i mean, they know where their money's coming from, right?

it's a very interesting quote.

Robbery, politics, involuntary prostitution, banking and other forms of business where the pure consent of the customer is not acquired.

I sent an email thanking Dwolla for providing a bridge for people to buy bitcoins. I can be cruel at times. ;D

Think their primarily goal would be to establish themselves as the payment solution for mobile devices, not necessary based around bitcoin. That's where they are headed I think with such small transaction fees.

Dwolla should perhaps set up a USD<->BTC exchange within their own site... bam! That would be successful me thinks.

It's definitely BitCoin.  It seems most of the exchanges use Dwolla for transactions.  Because, seriously, who would use Dwolla if it wasn't used for getting BitCoins?

Good idea.  You should contact Dwolla about doing this.

yea, give it to them as a survival strategy,
that way bicoin will no longer be a threat to them.

only good things can come out of that symbiosis

I've heard speculation that the opposite will happen - that Bitcoin will fail but Dwolla will be the big winner in the end. Certainly right now they offer better value; if both you and the person you're sending to are using Dwolla, you can pay MtGox's 0.6% fee to convert to Bitcoins, plus any Bitcoin transaction fees, and then they can pay another 0.6% MtGox fee, or you can just skip Bitcoin and the associated fees and exchange rate risk and use Dwolla directly. (When MtGox's fees return to normal it'll be even more.)

You're just making the argument for widespread adoption of Bitcoin. :)

It will be hard for Dwolla to be "the big winner in the end" when they are just transferring worthless green toilet paper. Bitcoin is a different currency entirely, and you can bet that the open-source enthusiast community of Bitcoin will develop effective, efficient tools faster than Dwolla could ever hope to do.

But regardless, Dwolla and Bitcoin have been very helpful for each other thus far.

Yes, I'm an admitted conspiracy theorist, but...

I believe that there is a huge value in understanding the relationships between individuals, and that is the reason for the extreme interest in social networks these days.  Just ask Mubarak how much he wished he had had actionable information about this in a timely manner.

This is at least part of the reason I have avoided Facebook, Twitter, etc, etc, and why I will probably avoid Dwolla.

I expect that Dwolla will do fine if it can position itself out in front of it's like competition, though it probably never will make a profit on it's exchange and payment business and probably won't really care that much.

Bitcoin also provides a rich tapestry of relationship information.  The difference that I can see, to the extent that I understand it, is that it is much more possible to work around the edges if one cares to, and it would be much more difficult for the authorities to manage should enough people take and interest in and succeed in doing so.


And I, for one, hope it continues for as long as it's mutually beneficial.  Or actually, I should say for the sake of honesty, for as long as it is beneficial to Bitcoin.

So now that dwolla reverses transactions, when do they send out the email about their spiral into obscurity now that noone uses it with bitcoin exchanging anymore?

+1

Well this Dwolla story gets more interesting!  TradeHill released a PR today on their site regarding the issue, and I found this:

From Jared Kenna of TradeHill:

I think we can assume that MtGox is thus Dwolla's largest customer, right? So the two top customers of Dwolla's growth are both Bitcoin exchanges. My original suspicion seems incontrovertible now - Dwolla's celebration of growth in their recent announcement is really a celebration of Bitcoin's success, not exactly theirs.

I believe Magical Tux said roughly 6 million so far with Dwolla. We did 1.2 million (roughly) in June (started June 8th). I would imagine this is most of Dwollas June volume.
At this point they have probably grown enough off Bitcoin that they can continue to grow through other means. To say Bitcoin didn't give them a huge push seems to be an understatement.
They can probably lose Bitcoin at this point and continue to grow. Hopefully they prefer to make things right and clear the air on this issue.

Jered

I don't know if they really "know" they are their second largest customer...

If not currently we were. Dwolla released data on how many transactions they had done, we compared that to our data and Gox's data and found that combined we made up almost all of their volume.
They have more non Bitcoin related transfers now though. They seem to be growing fast, I hope they thank Bitcoin for the bump.

Jered

Dwolla's model makes sense.  $0.25 for a $100 transfer is much less than the $3.20 that PayPal charges.  I've already had it happen where someone I've sent money to previously has now asked for the payment to be sent with Dwolla instead (to minimize the transaction costs).  Of course,Bitcoin was the only reason that person had already signed up with Dwolla but kudos to Dwolla for being in the right place at the right time.

One of the worries that I had was that if Bitcoin were to start to take market share from the payment networks, would they simply lower their fees to lessen the cost advantage that Bitcoin offers?

Then I realized that Dwolla can actually take away some of the profitable business away from Visa/MC.  The remaining business for Visa/MC will be the more problematic, less profitable transactions (merchants with a higher rate of chargebacks, customers who are paying with credit because they don't have the cash and thus might default at higher rates, etc.)

So Dwolla succeeding fantastically at the expense of the legacy payment networks will actually be something to look foward to.  Going from one payment method (payment card only) to two methods (payment card or Dwolla) is much harder than going from two methods to three (payment card or Dwolla or Bitcoin).  Dwolla can do a little trail blazing for Bitcoin.