This is my first post so I can get white listed - I will try to make it useful.
A contrarian view has been posted
here, suggesting that Bitcoin is a speculative bubble. I think it's based on some flawed analysis so here's the comment I posted
in response:
This article is great for people who’ve not got any Bitcoins to feel better about themselves. Other than that it misses some pretty key points, and in some places is frankly misleading.
1. The number of transactions for practical use IS going up. About 300% this year. The top graph is misleading, as is the second… Comparing transactions to market capitalization in dollars, in a year where the value of BTC (in dollars) has gone through the roof, effectively provides an inverse of the price in dollars, but does little to prove or disprove use for practical transactions. Your graph makes it appear as if the number of transactions is going down, when this is factually not the case.
2. You say that the number of transactions have “mostly just bounced around”. This is simply not correct, assuming you are trying to establish its real world practical use for transactions. Understand that Bitcoin exchanges have to move substantial BTC between accounts (addresses) daily, for example in and out of cold storage. (This is akin to putting money in and out of a safe, but generates transactions on the public record all the same). Consequently,
this graph taken from the same source as your charts, and showing the number of Bitcoin transactions
while excluding transactions between popular addresses, is the most accurate view of practical use. Growth of 300% in a year is not bad and is certainly not ‘bouncing around’!
3. It’s usefulness for in person transactions such as at a physical store is, as many commenters say correctly, constrained by the
5-8 mins it takes to confirm a transaction, but this is not where the currency shines (and in fact is being solved anyway). This is old world thinking here… i.e. a dollar can be used in any circumstance – online, physical store, wire transfer. On the contrary, Bitcoin as a currency simply ‘has its place’. It works fine for online orders (I ordered a computer a couple of days ago and paid fine with Bitcoin), it also works great for wire style transfers between individuals and businesses, and in both cases has (effectively) zero transaction fees – in stark contrast to credit cards and regular wire transfers. Think of it this way… an online merchant could sell its products 2-3% cheaper tomorrow than its competitors, assuming it offers Bitcoin as a means of payment. Imagine if Amazon announced it was accepting Bitcoin next week… Would that change your view of Bitcoin being (not) a currency?
The simple fact is there are only a tiny number of places to spend Bitcoin at the moment, but that number is growing. It will accelerate in 2014 as API’s for online merchants mature, so that merchants can readily integrate Bitcoin into their shopping carts, which is not easy right now.
Bitpay is one example of a company offering this service.
It is certainly true that a large number of people are hoarding and many are hoarding for speculation purposes. But I agree with the commenter who says that many are also waiting simply for the opportunity to spend it.
Give it time!
