If Bitcoin is an experiment,...

[Phinnaeus Gage]

What is your definition of "truly mainstream" ?

If 1% of the world uses Bitcoin for 1% of their transactions, then I'd still consider it a huge success. I think there's a good chance that happens, but that doesn't fit my definition of 'mainstream.'

I think there is small possibility Bitcoin proper is used by a majority of people in some country somewhere in the world use it at least once a week to pay for things. I'd consider that mainstream success.

I think there's a tiny possibility Bitcoin will eventually become as popular as the dollar.

But I'm not very good at predicting the future, so you might want to consult you local fortune teller.

Let's consider what Gavin is saying here for a moment. 1% of world txns is pretty enormous. Let's say there are only two future possibilities:
1) Gavin's dream comes true (Bitcoin accounts for 1% of world txns)
2) Bitcoin fails and value decreases to 0.

The current bitcoin price indicates a guess about the probability of the two scenarios. What is this guess? Let's refer to a back-of-the-envelope calculation

Japan accounts for about 7% of world economic activity, that is 7% of world txns. The Japanese narrowly-defined money supply (M1) was about 9 trillion USD in 2009. Therefore we might expect bitcoin market cap under possibility (1) to be about 1/7 of this. That is under scenario 1, bitcoin market cap should grow to about 1.25 trillion USD. Dividing this by the 21 million bitcoins in existence, each bitcoin should be worth about 60,000 USD.

Right now bitcoin sells for about 5 USD. Let's consider the two future scenarios again.
1) Each bitcion worth US$60k each in future
2) Each bitcion worth US$0 in future.

What probability is the market putting on scenario 1? If bitcoin has a 1 in 12000 chance of growing in value to 60k and a 11999 in 12000 chance of falling in value to 0, then a price of 5 USD implies a fair gamble. Thus the implied probability is 1 in 12000.

I am not opposed to putting some money down on a 1 in 12000 chance. It is reasonable to gamble away small amounts. However, I am opposed to describing this as a "good chance." Without any further details, your audience will likely get confused about their odds.
 
Note: it's worth noting that introducing additional, intermediate scenarios will decrease the chance below 1 in 12000. We can think of 1 in 12000 as an upper bound on the market-implied probability that Gavin's dream will come to pass.
 

Them damn good odds! Isn't there a mega lotto that currently has a record jackpot with odds a hell of a lot worse than this, yet people are standing in line to buy their losing ticket? The person who figures out a way to market Bitcoin to the buyers of said lotto would profit handsomely.

~Bruno~

[1714158457]

1714158457

[bitcool]

Let's consider what Gavin is saying here for a moment. 1% of world txns is pretty enormous. Let's say there are only two future possibilities:
1) Gavin's dream comes true (Bitcoin accounts for 1% of world txns)
2) Bitcoin fails and value decreases to 0.

The current bitcoin price indicates a guess about the probability of the two scenarios. What is this guess? Let's refer to a back-of-the-envelope calculation

Japan accounts for about 7% of world economic activity, that is 7% of world txns. The Japanese narrowly-defined money supply (M1) was about 9 trillion USD in 2009. Therefore we might expect bitcoin market cap under possibility (1) to be about 1/7 of this. That is under scenario 1, bitcoin market cap should grow to about 1.25 trillion USD. Dividing this by the 21 million bitcoins in existence, each bitcoin should be worth about 60,000 USD.

Right now bitcoin sells for about 5 USD. Let's consider the two future scenarios again.
1) Each bitcion worth US$60k each in future
2) Each bitcion worth US$0 in future.

What probability is the market putting on scenario 1? If bitcoin has a 1 in 12000 chance of growing in value to 60k and a 11999 in 12000 chance of falling in value to 0, then a price of 5 USD implies a fair gamble. Thus the implied probability is 1 in 12000.

I am not opposed to putting some money down on a 1 in 12000 chance. It is reasonable to gamble away small amounts. However, I am opposed to describing this as a "good chance." Without any further details, your audience will likely get confused about their odds.
 
Note: it's worth noting that introducing additional, intermediate scenarios will decrease the chance below 1 in 12000. We can think of 1 in 12000 as an upper bound on the market-implied probability that Gavin's dream will come to pass.
 

1% is a pretty arbitrary number, IF it can assume international currency role, there's little reason for other value measuring unit to exist. Just like (almost) everyone  is using meters, grams, seconds etc.

It should count 50%~100% of global transactions. Then the implied probability now is 1 in 600K to 1 in 1.2 million.

[fivemileshigh]

It will be tough to tell when btc will get to 1%, except long after the fact, and with a very large margin of error. There is no reliable way to measure it's use in actual real life trade, except by relying on voluntary user reports. I think when bitcoin gets big, it will do so fairly stealthily.

[memvola]

What is your definition of "truly mainstream" ?

If 1% of the world uses Bitcoin for 1% of their transactions, then I'd still consider it a huge success. I think there's a good chance that happens, but that doesn't fit my definition of 'mainstream.'

I think there is small possibility Bitcoin proper is used by a majority of people in some country somewhere in the world use it at least once a week to pay for things. I'd consider that mainstream success.

I think there's a tiny possibility Bitcoin will eventually become as popular as the dollar.

But I'm not very good at predicting the future, so you might want to consult you local fortune teller.

Let's consider what Gavin is saying here for a moment. 1% of world txns is pretty enormous.

He's clearly saying 0.01%, not 1%.

[cunicula]

Sorry missed that. Reading comprehension fail. Should then be 1 in 120 then with a $600 valuation per coin. Comment about "good chance" being misleading still applies.

[Gavin Andresen]

Sorry missed that. Reading comprehension fail. Should then be 1 in 120 then with a $600 valuation per coin. Comment about "good chance" being misleading still applies.

I don't know nuthin about pricing risk, which is why I tell all of my relatives I have absolutely no idea whether or not they should buy Bitcoins.

But: it seems to me you're assuming that the entire $5 current price of Bitcoin is pure speculation, and ignoring that they ARE functioning as money in some fledgling markets. And don't you have to factor in time value of money into the calculation?  I'll pay a lot more for bitcoin today if I think there's a 30% chance it will be worth $600 in a year than if I think there is a 30% chance in 100 years.

You're also assuming that the velocity of bitcoin will be approximately equal to the velocity of traditional currencies. I could image it being much higher (less friction in transactions, so more transactions) or much lower (maybe bitcoin will be used mostly as a long-term store of value, with infrequent transactions; what is the velocity of an gram of gold compared to dollars?).

[blablahblah]

Fractional reserve banking sounds like an even bigger experiment to me.

In addition, does anyone know how this works?:
Amount x in currency X buys 1 pizza.
Amount y in currency Y buys 1 pizza.
The pizzas represent a comparable broad basket of goods that are locally available in the respective jurisdiction of each currency.
However, when exchanging the two currencies, 1x buys 5y.
Why? Because one country has a more effective tourism marketing strategy than the another? It seems one possible answer is that one country stealthily inflates their currency with various trading instruments, and is temporarily able to con the other country by restricting their access to those instruments.

[cunicula]

Sorry missed that. Reading comprehension fail. Should then be 1 in 120 then with a $600 valuation per coin. Comment about "good chance" being misleading still applies.

I don't know nuthin about pricing risk, which is why I tell all of my relatives I have absolutely no idea whether or not they should buy Bitcoins.

But: it seems to me you're assuming that the entire $5 current price of Bitcoin is pure speculation, and ignoring that they ARE functioning as money in some fledgling markets. And don't you have to factor in time value of money into the calculation?  I'll pay a lot more for bitcoin today if I think there's a 30% chance it will be worth $600 in a year than if I think there is a 30% chance in 100 years.

You're also assuming that the velocity of bitcoin will be approximately equal to the velocity of traditional currencies. I could image it being much higher (less friction in transactions, so more transactions) or much lower (maybe bitcoin will be used mostly as a long-term store of value, with infrequent transactions; what is the velocity of an gram of gold compared to dollars?).

It is a back of the envelope calculation. You are right that there are many factors involved which will skew the numbers in one direction or the other. Nevertheless, I'm pretty sure that the implied probability is correct at minimum within an order of magnitude (i.e. should be between 1 in 12 and 1 in 1200).  

If you want to specify some detailed scenario (i.e. assume that it has a velocity similar to gold [implied probability will go way down (not sure about velocity of gold)], and develops to its full extent in 20 years [implied probability will increase by about a factor of 2.5], and has a current use value of $1 [probability will go down by a factor of 4/5]), then I would be happy to investigate the implied probabilities. There is no way of justifying what the right scenario to look at is.

The only thing that would likely lead to a substantial increase in probability is much higher velocity than other currencies. I'm not sure if I'm buying this though. If the currency is intentionally deflationary (like gold), its velocity is likely to be lower, not higher.

Finally, more or less, none of this stuff matters for the design of bitcoin. It is just about interpretation of its success probability. Don't be over optimistic.

[hazek]

I can't imagine you pulling the probability of a technology "succeeding" based on the current price of one of it's units out of your ass and at the same time anyone taking you seriously, I certainly don't.


I think it's practically impossible to quantify Bitcoin's chances of how Gavin described reaching it's success are because it depends on oh so much more than merely it's current price of a unit, market velocity or transaction volume. It's a technology after all. You can't predict how it will behave in all environments you can't predict all the breakthroughs, you can't predict all the problems, you can't predict all the sentiment changes of it's users. You just can't predict how the world using Bitcoin will look like. All you can do is guess. And when it comes to guesses, your's is as good as mine.

As far as I'm concerned people paying $5 to own a digital key that has the number 1 associated with it in a publicly shared copy of a ledger is already a huge success.

[lonelyminer (Peter Šurda)]

You're also assuming that the velocity of bitcoin will be approximately equal to the velocity of traditional currencies. I could image it being much higher (less friction in transactions, so more transactions) or much lower (maybe bitcoin will be used mostly as a long-term store of value, with infrequent transactions; what is the velocity of an gram of gold compared to dollars?).

Empirical data suggests that Bitcoin currently has a lower velocity than "normal" money. Economic theories about money usually assume a single currency, or at least a territorial monopoly, so you're right, their usability is limited. Good point on the gold.

[Saturn7]

Just out of curiosity how many BTC do you need to be part of the 1% of the BTC market?

[blablahblah]

Just out of curiosity how many BTC do you need to be part of the 1% of the BTC market?

Does not compute. According to Wall St accounting (sic) principles (sic), all bitcoins in existence are a liability.

[Graet]

call me crazy but when 1 Australian dollar = 1.0358 U.S. dollars
and 1 Bitcoin = ~$4.9 U.S. dollars

I think BTC are doing fine

[Phinnaeus Gage]

call me crazy but when 1 Australian dollar = 1.0358 U.S. dollars
and 1 Bitcoin = ~$4.9 U.S. dollars

I think BTC are doing fine

Now this is a powerful post!

May I suggest expanding this list to show...

1 Canadian dollar = X USD
1 Antigua and Barbuda = X USD
1 Bahamian dollar = X USD
1 Barbadian dollar = X USD

etc., doing only the "dollar" currencies. Use this link to view the rest: http://en.wikipedia.org/wiki/List_of_circulating_currencies.

Picture this generated list on a shirt, with Bitcoin (in slightly larger font) on the bottom. Wear the shirt at all major conventions where Bitcoin could be considered a concern.

~Bruno~

[cunicula]

The question was not the probability of it "succeeding", but the probability of it accounting for 1% of txns carried out by 1% of people (weighted according to their income). This is easily calculated and the robustness of the calculation can be tested by exploring different scenarios which alter the math. If you don't believe in standard economics (which these calculations are), fine, then we won't have any language to communicate with each other in. Best just to flip the ignore button.

I can't imagine you pulling the probability of a technology "succeeding" based on the current price of one of it's units out of your ass and at the same time anyone taking you seriously, I certainly don't.


I think it's practically impossible to quantify Bitcoin's chances of how Gavin described reaching it's success are because it depends on oh so much more than merely it's current price of a unit, market velocity or transaction volume. It's a technology after all. You can't predict how it will behave in all environments you can't predict all the breakthroughs, you can't predict all the problems, you can't predict all the sentiment changes of it's users. You just can't predict how the world using Bitcoin will look like. All you can do is guess. And when it comes to guesses, your's is as good as mine.

As far as I'm concerned people paying $5 to own a digital key that has the number 1 associated with it in a publicly shared copy of a ledger is already a huge success.

[Tuxavant]

If space travel becomes possible, bitcoin will likely become obsolete. The protocol assumes that every node has a latency of less than 10 minutes (2 minutes if TCP is used). This can be violated on Earth as well if your Internet is cut off by the govenrment (or your ISP) and data must be smuggled out on foot. For the largest "island" of processing power, this is not a big problem. However, smaller islands of processing power face having their blockchain history re-written by malicous entites on the larger processing island.

Not at all.. There will just be realms of crypto-currencies: here on earth and there out there. And exchanges for entities to trade between, perhaps facilitated with Open Transactions and RipplePay technologies.

[legolouman]

Bitcoin is an experiment because there was nothing like it at the time of the release. Bitcoin is all types of experiments, it is a social experiment, an economic experiment, and a technological experiment.

• Social Experiment - By introducing a new currency, and the community around the currency, people need to adopt it. Bitcoin is an experiment in this sense because people had to adopt an entirely new idea, and build an economy and community around it. I often wonder, how Bitcoin as a whole would survive without the forum. Without the forum, how would Ideas spread? Or thoughts be shared? What about speculation?
• Economic Experiment - Much like the social factors of Bitcoin, people need to adopt the Bitcoin currency. Even if one Bitcoin were worth 1Billion USD, if there were no ways to spend it, then why own any?*
• Technological Experiment - Bitcoin is obviously a technological experiment because of all of the computers, programming, and other tech associated with it. Cracking that SHA256 isn't as easy as a gpu makes it in the micronanosecond it takes.**

Yeah, my .02BTC

* - Figurative. Obviously 1 BTC wouldn't be worth a $billion if you couldn't use it.
** - Speaking in terms of a single hash.

[cbeast]

American Democracy is an experiment created by an algorithm called the Constitution. It requires constant attention, participation, and minor tweaking along the way whenever someone discovers exploits. I could go on about the analogy between cryptocurrency and democracy, but the point is that I feel that Bitcoin is the key to spreading freedom and democracy everywhere. Maybe freedom based democracy is not the best form of government, but I've never heard of anything better. The same goes for Bitcoin.

[Tuxavant]

I could go on about the analogy between cryptocurrency and democracy, but the point is that I feel that Bitcoin is the key to spreading freedom and democracy everywhere. Maybe freedom based democracy is not the best form of government, but I've never heard of anything better. The same goes for Bitcoin.

THIS. all day long. +1

[hazek]

American Democracy is an experiment created by an algorithm called the Constitution. It requires constant attention, participation, and minor tweaking along the way whenever someone discovers exploits. I could go on about the analogy between cryptocurrency and democracy, but the point is that I feel that Bitcoin is the key to spreading freedom and democracy everywhere. Maybe freedom based democracy is not the best form of government, but I've never heard of anything better. The same goes for Bitcoin.

Sir, please get your facts straight. Although I'm not a believer in minarchism (limited government), I actually despise democracy and think anarcho capitalism is the best way to structure a society, but I still have to correct you when you make a grave mistake like you just did.

The word democracy does not once appear in the U.S. Constitution. Not even once. That "algorithm" was suppose to create a republic, not a democracy but people didn't, as you correctly put it, give it enough constant attention, participation or guarding so through time it's interpretation by people in power changed where today they practically already scrapped the whole thing.

Another thing I have to correct you is thinking that freedom and democracy can possibly go hand in hand or be synonymous. Fact is democracy is majority rule, the direct opposite of freedom and actually actively working against it. (I cannot express how much I hate democracy.)

And finally Bitcoin has no similarity with a democracy. None. There is no majority rule. There is only the rule of the algorithm everyone voluntarily agreed upon using. Even if miners start using another algorithm, even if the majority of it's users start using a client with another algorithm, no one is forced to use it. Which is something that will get you imprisoned or killed in a democracy. (don't believe me? try calling your precious government and ask if you can renounce your citizenship without taking on another and see what happens)


I suggest you start learning the ugly truth about democracy and perhaps research the idea of a peaceful society living in spontaneous order and of which membership is voluntary but requires following a few mandatory but consistent rules if you really want freedom, peace and prosperity.