
A Look at the Bitcoin Economy - icedicedavid
http://thegenesisblock.com/familiar-price-gains-updated-infrastructure-look-bitcoin-economy-part-2/
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gojomo
I find it interesting that the current value of all mined Bitcoins is
currently about $5.4B, per [http://blockchain.info/charts/market-
cap](http://blockchain.info/charts/market-cap). (I've seen this value
described as "one Nakamoto".)

And, the number of full peer nodes is about 130,000 – per the network scan
done by [http://getaddr.bitnodes.io/](http://getaddr.bitnodes.io/).

To an extent, the total value is an emergent property of all the nodes
together. But for grins we could distribute the value over them equally, to
discover each node's pro-rata contribution to the total value.

That number, $5.4B/130K, is $41,538/node.

So, fire up Bitcoin-QT! It's free open-source software that'll use about 15GB
of your hard drive space (<$2) and suck up some fraction of your cycles. Even
if your wallet is empty, your peer instance will be backing over $40K of
Bitcoin market capitalization!

~~~
Aldo_MX
I find surprising the fact that you say it uses about 15Gb, 6 months ago it
used around 10Gb and at this point I can imagine that around 2016 it will need
around 100Gb and the number will keep increasing...

~~~
gizmo686
Bitcoin was designed with a pruning ability, which can delete unnecessary data
from a local copy of the blockchain. Based on the Bitcoin website [1] the
blockchain as of 2012 is less than 100mb when pruned.

[1][https://en.bitcoin.it/wiki/Scalability](https://en.bitcoin.it/wiki/Scalability)

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jval
With respect, the press is regularly quoting how many places now 'accept
bitcoin' but it is all really a vanity metric. I know it is difficult to know
how much these merchant accounts get used without internal information from
the providers themselves, but from all internal accounts I have heard, the
usage is dismal. For no surprising reason customers are generally
disinterested in purchasing anything with Bitcoin that they can already
purchase with their credit card.

I think Bitcoin is going to be revolutionary but the application is lacking -
entrepreneurs really need to find a real world application where the use of
Bitcoin actually _improves_ the experience. Remittances and International
Money Transfers are the first legal industry I can think of where that will
work, but businesses in that area need time to grow and navigate the uncertain
regulatory environment before Bitcoin will actually see adoption that really
means something.

~~~
JohnDoe365
Usage will rise once the value starts to drop. Why would anybody spend on real
god as long as the value is soaring? This is of course only true for those
currently holding Bitcoins.

The current rise of Bitcoins' value is actually very unhealthy for the market.

~~~
BrokenPipe
Why would I spend bitcoin when the value is soaring? Because I have no
alternatives eventually.

See, let's say i start out with 5k worth of bitcoin and 5k worth of USD. The
bitcoin go up in value while the USD go down via QE.

As you suggested I avoid spending the 5k in BTC but thing is eventually I will
run out of USD and even if I don't because say I got a day job source of USD
income eventually I will want to buy something which is above my pay rate and
I will have to use my btc.

The same thing happens with gold or with an estate property, only thing,
bitcoin is more liquid than that and unlike gold or a house I can decide to
use a tiny part at anytime without selling or exchanging the whole cake.

And with BTC merchant can offer discounts which may encourage the use of btc.

Time will tell.

~~~
JohnDoe365
Your argumentation is valid yet I bet that you are very unlikely to invest all
your money in Bitcoins thus you will not run out of USDs or Euros, whatever.
Let's see.

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lumberjack
What is an example of a service* or product* that is served better with
cryptocoins than with cash, bank transfers or credit cards? What are people
spending bitcoins on and why?

That would be nice to know and definitely more informative than a graph of
daily activity within the blockchain.

* preferably something mundane and totally within the boundaries of the law

~~~
TomGullen
> Served better

From whos point of view?

As a merchant, I'd love it if our customers all paid in BTC as it would
eliminate all fraudulent/charge-backed transactions which cost us $15 each
time. (A nice little money earning industry for the CC companies btw!)

As a customer, I'd rather pay with my CC so I have some protection over my
payment.

If you're looking for something that's better from both points of view, then
drugs is the obvious one that springs to mind.

Consumer based foreign exchange (swapping my GBP for USD for my holiday to
USD) by using Bitcoin as an intermediary vehicle could save me a ton of money
as well, this isn't exactly possible yet but would be awesome if it could be
done one day. It's better for everyone except the rip off middle men who
charge horrible fees and rate spreads.

Another service that would be better with Bitcoin would be remittance. This
one is cited often, and should not be overlooked. Again, middle men banks and
rip off services are the only ones who would suffer. And it's a huge huge
market.

Take a look at the control large institutions have on the market as well to
see further benefit. Wikileaks for example endured a "banking blockade". The
banking industry stopped for a moment in time Wikileaks being able to accept
donations via Mastercard, Visa etc. With Bitcoin, no corporations can
interfere with fund raising.

What about charity?

> When you donate via credit card, the charity has to pay a transaction fee of
> 2-3% on the transaction. If you make a $100 donation, your charity only gets
> $97 of it. According to a Huffington Post article, banks and card networks
> make about $250 million a year off of charitable donations.
> [http://www.nerdwallet.com/blog/nonprofits/donate-
> charities-c...](http://www.nerdwallet.com/blog/nonprofits/donate-charities-
> corporations/)

Let's cut these middle men out of the equation, if I donate to charity 100% of
my Bitcoin are guaranteed to arrive in their control. It makes me feel sick
that when I donate to charity some credit company is taking their cut.

~~~
TylerE
> As a merchant, I'd love it if our customers all paid in BTC as it would
> eliminate all fraudulent/charge-backed transactions which cost us $15 each
> time.

As a customer I would never pay with BTC for exactly the same reason.

~~~
kissickas
It appears obi-nine is ghost-blocked or whatever it's called, which is
unfortunate because I have the same question.

Why wouldn't you, if you trust the merchant?

~~~
TylerE
Because I _don 't_ trust the merchant, at least not when I don't have to.

~~~
kissickas
So even if you go to the same restaurant twice a month, you would never pay
cash? I'm not sure we're understanding each other here.

~~~
TylerE
There's a big difference in a face to face transaction with cash, and online
with BTC, in that in the former case I have physical product in hand (or
services rendered) BEFORE I hand over a dime.

~~~
kissickas
BTC aren't only for the Internet. Until you said the word "online," the
thought didn't even cross my mind. Thanks for clarifying my confusion, you
have a valid point. I guess I never disagreed with you.

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industrialwaste
So, if I had invested when I planned to a couple of years ago (or actually
bought decent hardware to mine on) I would have made a decent return. But now
I'm curious if we're in a bubble that will decrease in popularity or if it's
still something that will continue to be on the rise.

Seems to me that all of the recent news has brought attention to bitcoin which
has helped with it's popularity. Is it something that will continue to rise or
will it fall once people aren't talking about it as much?

Can anyone weigh in with their opinions?

~~~
ra
The market price of BTC has grown fairly consistently on the logarithmic scale
for a couple of years now. There have been ups and downs, but the majority of
the price growth obviously comes from an increase in demand that isn't being
met by supply. Supply will not increase, but demand might.

What would further increase demand?

Well the status quo, i.e. BTC breaking new market highs, having crashes and
recovering, that's news and so increases the public awareness of BTC, and so
more people buy.

More companies accepting BTC will increase it's usefulness (therefor provide
some intrinsic value), more startups working to make transacting in BTC easier
will also help increase demand.

What would decrease demand in a meaningful way?

Unfavourable legislative changes. These are mitigated in that they have to
happen on a country by country basis, but generally countries follow the
leader on matters of new policy or policy related to new technology.

At the moment most BTC demand is for speculative hoarding by investors. Most
realise that it's a gamble where the downside is losing 100% of capital, but
the upside is potentially 1000% or more.

<opinion>There are undoubtedly future market rallys and crashes ahead, but I
think in the long run BTC has a long way to go. It's very difficult to "price"
BTC because it generates no return in it's own right, and has no intrinsic
commodity value. It's a gamble but the potential return seems worth the risk
of potentially losing 100% of your capital.</opinion>

It is important that you regard BTC as speculative - i.e. not an investment.

In the end the long term survival of BTC will depend on it's adoption. So if
you want to make money, horde some BTC and work on a project that makes uses
it to solve a real business problem for a meaningful market.

~~~
industrialwaste
I didn't expect such a great response. Thank you for this, I think this
answered all my questions and even more that I hadn't thought of asking yet.

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klochner
Is there really an exponential growth in transactions per day? The last I
heard it has been constant for months:

[https://blockchain.info/charts/n-transactions](https://blockchain.info/charts/n-transactions)

[edit] I see he's excluding the 100 most popular addresses. Is there any
justification for that? I'm sure he would have left them in if the chart
looked right.

~~~
jnbiche
>I'm sure he would have left them in if the chart looked right.

Really? You're sure? Actually, the top 100 addresses would almost certainly
have supported his thesis even more, since they include high-transaction rate
addresses from the exchanges, and the betting companies.

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joosters
How do (real world) shops accept bitcoin? I thought that it takes some time
for a transaction to be confirmed by the blockchain. Even if it is a matter of
minutes, you can't expect customers to wait by the checkout until their
payment is cleared. And yet without this confirmation, you are opening
yourself up to fraud.

~~~
mateuszf
Doing fraud is very unprofitable for amounts of money which are not huge.
Companies like BitPay take this risk as man in the middle.

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TwoFactor
This. There's been a lot metrics growing in bitcoin beyond the large price
increase and VC funding.

