Tuesday, January 21, 2014

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Marc Andreessen Thinks Bitcoin is Gaining Adoption Even Without User Growth - We Once Said That of Second Life Too

Marc Andreessen Bitcoin Second Life

I just got into an interesting Twitter conversation with Marc Andreessen, who wrote a New York Times essay on why Bitcoin is so important to the future of the Internet, because I disagreed on one point he made there:

Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage. Every day, more and more consumers and merchants are buying, using and selling Bitcoin, all around the world. The overall numbers are still small, but they are growing quickly.

But this is provably wrong, as I pointed out to Andreessen on Twitter: This chart of Bitcoin transactions is not only not growing, it's currently smaller than it was last year. Andreessen's reply to my point (captured above):

"I have broader definition of adoption, including new merchants, new developers, new entrepreneurs, etc."

And he is right that Bitcoin is starting to gain more and more of those things. But as I replied (and explained in detail here), this argument was also made by many Second Life boosters during SL's hype wave, when critics began pointing out SL's low user numbers. Because while Second Life usage was relatively small in contrast to the "It's the next generation of the Internet" rhetoric driving the hype, Second Life at that time also had new merchants, new developers, new entrepreneurs, etc.

Here's just a few headlines from that period (roughly 2006-2009):

And you can go through the tech news from that period, and find many many more headlines along those lines. And we all know where that went -- or rather, didn't. So again, with respect to the man who did so much to launch the world wide web, I prefer to be skeptical about Bitcoin until I see real growth in actual user numbers.

Speaking of which, Andreessen also told me that criticizing Bitcoin adoption rates is "[l]ike trying to measure web adoption rates in early '93. HTTP requests not only metric then either."

That may be. But two years later, in 1995, in great part as a result of massive growth in web usage, Andreessen's company Netscape had an epic IPO. Bitcoin, by contrast, has been around for about 4 years, and still has less users than... Second Life's Linden Dollars.

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I think it's great you're exploring these parallels between the evolution of SL and BTC. Thanks for reminding us that future events often cast their shadows before.

I've been dabbling in cryptocurrency a lot lately (trading, mining, etc.) Fascinating stuff across economic, political and technical perspectives. One great thing is the existence of the BTC blockchain, a public ledger of all balances and transactions across the Bitcoin network since day 1. That means everyone has full access to a great supply of hard data to analyze exactly what the heck is going on. While I remain guardedly optimistic about the future of Bitcoin, I must say this particular analysis of data from the blockchain rings true to me in many ways: http://ordinary-gentlemen.com/blog/2013/12/12/these-three-graphs-prove-that-bitcoin-is-a-speculative-bubble

It's also amazing (and a bit hilarious) to see all the other cryptocurrencies popping up. The vast majority of them are going to go nowhere, but some of them bring some very interesting "cryptocurrency 2.0" ideas to the table (NextCoin in particular, in my opinion...)

The Big Question: As a first-mover, will Bitcoin be the MySpace or Amazon of cryptocurrencies? Only time will tell.

Bartholomew Gallacher

First you need to keep in mind, that Bitcoin really is two things rolled into one program, namely: a cryptocurrency and a distributed financial transaction protocol.

The number of total Bitcoins is limited, meaning that early adopters had it easy to gain a nice amount and can now sell it like crazy.

Bitcoins can be lost irretrievably. If your hard disk crashs and you got no backup of your Wallet, they are gone for good, never to return.

Bitcoin shows, that there's a certain place and niche for a transaction protocol.

It also shows, that Bitcoin as a currency is a nice thing, getting the early adopters rich. It is a ponzi scheme.

And nearly no one uses Bitcoins as what it was meant to be, a currency at all. Most people use it as a speculating object, nothing more, nothing less.

It is a nice experiment and it was the first "currency" to get wide spread adoption, but that's about it.

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