I'm involved with a VPS hosting company called ChunkHost, and we've accepted bitcoin for many years. We're not criminals, and we don't tolerate criminals on our network, and nonetheless bitcoin has served us well as a means of payment. We've written on our blog[1] about how bitcoin payments are 20-30% of our revenue.
Another interesting company is purse.io -- they let you get something like a 20% discount on your Amazon purchases by paying in bitcoin. coffee.foldapp.com lets you get 20% off your Starbucks purchases by paying with bitcoin. Again, this is not a scam -- I use it and it works. Don't you think this is a real benefit that real people could appreciate?
I'm curious how long you've been following bitcoin. I've been interested in it since 2009/2010, and have seen the goalposts move a great deal: every time a goal is reached, the critics change it so they can declare bitcoin a failure. First it was that "you can't buy anything for it," which was true until a pizza was sold for 10,000 bitcoins in mid-2010.
Then it was "no store accepts it" -- which was true until a few months later when you could buy things like web hosting from tiny bitcoin-only companies. Then it became "no large company will ever accept it." That remained true for a while, but eventually Wordpress became the first large company to do so. Others like Newegg, Overstock, and even Microsoft followed soon after. "Nobody will ever pay with it" was another one, and that was shattered once those companies started posting bitcoin revenue which, despite being a tiny share of their overall revenue, showed that people were consistently spending their coins.
I'm not saying that grandma will be buying gas with bitcoin anytime soon (or ever) -- just that there is substance there: merchants accepting it, consumers spending it, and interesting things like purse.io that couldn't exist without it.
The reason we first started really thinking seriously about bitcoin was because existing customers weren't able to get very many US dollars anymore due to economic restrictions in their home country, and without offering bitcoin they couldn't pay us. As long as these sorts of economic constraints exist, there will be a market for bitcoin.
https://en.wikipedia.org/wiki/Technology_adoption_lifecycle
Oversimplifying, the Innovators, a few percent of a market, will buy anything just because it's cool. An obvious example there is Google Glass. Or a personal example, I just bought an IR camera for my phone. [1] I have absolutely no practical use for this, but that stopped me for about three seconds before I clicked "buy".
The next group is the Early Adopters. They buy in because they have a significant need not addressed by existing technology and are willing to work hard and/or pay lots to solve the problem. Then after that, we have the Early Majority, the first half of mainstream purchasers.
Now the supposed market of Bitcoin is "people spending or transferring money", which is a large fraction of humanity. So my goalpost would be getting out of the 2.5% of the market that is Innovators and well into the Early Adopters. Let's say 10% of the total market. (I'd even be happy with 10% of some major submarket, but since the claim is that Bitcoin will change everything, I'm glad to run with 10% of everything.)
From that standard, the fact that somebody bought a pizza is not so interesting. Ditto your hosting company; what you folks take in via Bitcoin in a year is about 0.00015% what AWS takes in in fiat dollars, or about 47 seconds of their annual revenue.
Ditto the things you mention with purse.io. Either they are subsidizing that 20% Amazon discount or there are hidden fees; Amazon makes under 10% on what they sell. As we learned in Bubble 1.0, you can't evaluate a business by the amazing deals they are using to acquire customers.
My prediction is that Bitcoin will never get close to the goalpost of 10% of the market, because nobody has found a way to solve a significant problem. My current belief that Bitcoin is Segway for the wallet: a really cool technology that almost nobody actually needs.
At Purse, we use blockchain escrows to unlock value from Amazon gift card balances. This was previously impossible (gift card exchanges can't transact Amazon), and the liquidity premium powers the discount. Escrows and other complex transactions are difficult using traditional payment systems, and we believe that they can be applied more broadly to many other markets.
FoldApp seems to just be subsidizing purchases with VC money for adoption. It doesn't seem to be going well.
See also: Flooz, of which 20% of their transactions were fraudulent: https://en.wikipedia.org/wiki/Flooz.com
I do agree, though, that those very high discounts should be a red flag, if they're for any serious money. Stuff for $5 with a 50% discount is no big deal if someone just wants ot be rid of a card and doesn't mind losing a couple bux, which they'd end up paying in fees buying BTC anyway.
Obviously this is no proof that fraud is rampant, but I still lean toward thinking fraud is too likely for me to want to be involved with using purse.io, especially if I wanted a good deal (big discount = more likely it's a carder cashing out a stolen card.) If nothing else these stories show there's a small chance you might get burned pretty badly. Has anything significantly changed to remove or lessen the risk?
[1] https://www.reddit.com/r/Bitcoin/comments/2po40d/since_my_ho... [2] https://www.reddit.com/r/Bitcoin/comments/2eqcnv/do_not_purc...
Bitcoin is certainly growing. Consider that in 6 years: it went from zero to over 100 000 merchants accepting it (including big names like Microsoft, Dell, Expedia, Newegg, Overstock, etc), from zero to millions of users worldwide, from a market cap of zero to over $3 billion dollars, etc. If someone had predicted Bitcoin would reach these milestones within 6 years when the software was first released in 2009, you would have called that person a lunatic. Yet this happened. Reflect on this for a minute before saying you see nothing.
Bitcoin is a good example of a disruptive technology. If it succeeds, it will happen slowly over time (5, 10, 20 years...) and there will be no special "that's-the-day-bitcoin-won" moment. So don't hold your breath for one.
"the general population just has no use for it"
It has many real-world practical benefits: http://www.coindesk.com/information/why-use-bitcoin/ I would be curious to hear your counter-argument for each of these points.
For example a person in China can instantaneously send bitcoins to his relative living in the US, who can then spend them within minutes on electronics or house stuff on Newegg or Overstock. This is, in itself, incredible. This is fast, reliable, and avoids stupid limits or problems of legacy financial systems, like wire transfers taking days, China exerting capital controls, Paypal suddenly freezing your account because the large amount being transferred triggered a false fraud alert, etc.
Another example: I can't even pay my $2700 monthly rent to my landlord electronically even though we both have checking accounts at the same bank (Wells Fargo), because they limit internet transfers to $2000 a month due to a policy chosen by their fraud and risk analysts. How annoying! Bitcoin lets me pay my landlord without problems because no one is here to tell me how much of my own money I am allowed to spend.
I am not saying that I want to use Bitcoin for every single transaction, eg. paying my lunch at the restaurant, but for certain types of needs like the two examples above, Bitcoin is very useful.
> For example a person in China can instantaneously send bitcoins
Once they have bitcoins. Getting bitcoins without using local bitcoins requires use of the traditional financial system. It can also involve snake like middle men if the would be bitcoin user is not very savvy.
1. It's fast compared to international transfers, it's a little slow compared to using cash to buy things or bank transfers.
2. It's cheap - it's cheaper than western union, it's expensive when something goes wrong - you can't reverse/dispute transactions.
3. Central governments can’t take it away. Central governments have all the guns and can make up any laws provided they can be passed. Bitcoin is not a runaway success in Russia for example.
4. There are no chargebacks - this is a bug and a feature.
5. People can’t steal your payment information from merchants - they just go after the middle men - instead of TK Maxx getting hacked, one of the middle men will be. Or indeed the middle man runs away with the goods. That the middle men continue to exist points to inherent difficulties in managing your own wallet.
6. It isn’t inflationary - the number of bitcoins minted every year grows faster than inflation - ultimately it will stop. Then it will be deflationary because coins will be lost.
7. You don’t need to trust anyone else - au contraire - in every transaction you need trust, the same is true in bitcoin as any other system.
8. You own it - it works better as a transfer medium than a 'store of value' because the price fluctuates. In addition the network operators can decide to fork.
9. You can create your own money - sure, so can other people - yet somehow it's not inflationary.
But remember, a lot of things we use the internet and mobile phones for today were envisioned and promised in the late 90s but failed to materialize in a practical, mainstream way until very recently, over a decade later.
Who knows what cryptocurrencies, or the concepts behind them, will mean in another 5, 10, or 20 years. Maybe nothing, maybe a lot. It's still too early to tell.
(I'm skeptical myself, especially in actual currency applications, but open minded.)
Two more "idiots" who don't get Bitcoin are Warren Buffett and Charlie Munger. Munger says Bitcoins are "rat poison". It's possible they're just old fuddy duddies who "don't get it". It's also possible that, both being born during or before Herbert Hoover's presidency, that they've had decades of experience sniffing out what's valuable and what's not.
In my experience, the people who don't "get" it often don't distinguish between Bitcoin itself and the underlying technologies. It would be like identifying the internet in 1994 with one particular web browser, or web site, or startup. The transformative elements in this case are things like the distributed ledger for decentralised trust, the possibilities for automated micropayments by devices rather than people, and so on. For example, as per my other comment on this thread, most of the large finance companies which are investigating blockchain technologies are investigating private blockchains rather than the Bitcoin blockchain, but this distinction is often missed by the press in their reporting (indeed isn't an entirely clear distinction in this article).
You are not an idiot. You are just underestimating how large the "fraud" economy is, at a global scale. Think SilkRoad, Ponzi Schemes and Capital fleeing overseas.
Bitcoin can be huge in these industries and this can drive it to be huge overall and then it might become successful on the mainstream use.
Anyway, for me the biggest argument against bitcoin is that there is no way that its intentionally wasteful proof-of-work system can be actually cheaper and faster than the alternatives. Currently, this cost is hidden because blockchain maintenance is subsidized by newly-minted bitcoins being handed out to miners. If you take out this subsidy then each bitcoin transaction would actually cost around $10 worth of energy, which probably came from burning fossil fuels in China.
Bitcoin is growing 25% faster than the internet in its early years.
http://www.ibtimes.co.uk/bitcoin-growing-25-faster-internet-...
http://insidebitcoins.com/news/investment-dollars-bitcoin-to...
Raising more venture capital in non-inflation adjusted terms, is not the same as growing faster. Those are completely different concepts. Also, adjust that for almost 20 years of inflation, and it's half as much. Not to mention that figure only includes a portion of the total VC raised by Internet companies in 1996, it's intentionally misleading in just about every way possible.
Even comparing the VC raised, in inflation adjusted terms, would be comically simplistic. What were interest rates in 1996?
Beyond that, Bitcoin better grow drastically faster than the Web in 1996: bitcoin gets to ride on top of trillions in investment having already been made into infrastructure and computing. Even if it were true that it's only growing 25% faster than the Web in 1996, I'd say it's moving too slow by a factor of x200.
Imagine the laugh we'd be having, if you were to say that the iPhone today was only 25% larger than the Palm Pilot after seven years on the market, despite all the market / infrastructure / Internet advantages that the iPhone gets to enjoy today.
Now, in recent months, we're suddenly hit with a bevy of stories about big name financial brands and famous VCs pouring cash and research into the blockchain, and just like that, the goalposts have shifted. This is what we've all been waiting for; this is what will really bring bitcoin into the mainstream, there has to be something big here when you look at all the colossal mountains of cash that have been dumped into the bitcoinverse... yet somehow, we're still at a loss as to exactly how the "x but with blockchains" formula is meant to revolutionize everything. If the 100 million dollar investment into 21inc's vision of putting a bitcoin miner in every refrigerator is any indication of what we're to expect from all this investor cash, I think we can safely assume that what we're witnessing is simply the hyperbolic bitcoin hype machine functioning within normal parameters.
Of course, I'm probably just an idiot who doesn't "get" bitcoin, it's pretty difficult to understand, since even after all these years I just can't grasp the amazing potential of bitcoin. What other explanation could there be?