Are Bitcoiners Their Own Worst Enemy?

P. H. Madore @bitillionaire
March 27, 2015

Tim Swanson, one of the preeminent talking heads on Bitcoin, appeared on the deBitcoin video podcast recently and talked about mining among other things. He pointed out that only irrational people will try to solo mine anymore:

“It’s rational to pool, because it lowers the risk, lowers the variance. That’s something that won’t be removed anytime soon.”

“I Was Pretty Bullish a Couple of Years Ago”

Swanson says that he is sometimes cast as a bad guy in the minds of Bitcoiners, but he didn’t always have negative or pseudo-negative views of Bitcoin. He says that last year’s major gains in retail acceptance and how it did not coincide with an increase in spending of bitcoins.

“Some people like to call me like anti-Bitcoin or a skeptic. Look, I was pretty bullish a couple years ago. I’m sure we could dig up old e-mails or something if you wanted to. I think the thing that turned me around with that was transaction volumes, was the biggest ones. We had a quintupling of merchants that were on-boarded last year, but we did not have a quintupling of transaction volume, in fact we had almost no real transaction volume in terms of retail change.”

He feels that the demographics of Bitcoin users are, by and large, not the kind that will necessarily create a vibrant economy. For evidence, he pointed to documents leaked about Coinbase’s demographics: predominantly people under 35, males who live in Europe or the United States. Essentially, people who already have access to plenty of banking services.

“You’re Going to Use Bitcoins for Things You Couldn’t Use Credit Cards For”

“And if you have access to say, credit cards that you give cash back rewards of 2%, there’s really no incentive for you to use bitcoins as it were, to use it for actual retail payment. So, what do you use it for then? You use it for two reasons. You use it as an investment vehicle. And if you’re using it as an investment vehicle, you’re going to hold on to it with the expectation that it appreciates in the future. That’s a rational activity.

And then the other thing is you’re going to use it for things you couldn’t use credit cards for. So illicit trade. You see that with, first of all, SatoshiDice. When SatoshiDice went online in May of 2012, you see the TX line just shot up. And then when they blocked US IPs, it actually decreased. Their actual traffic plummeted to almost zero.”

The point he made here was that European gamblers have plenty of normal methods to gamble with, and don’t have to “resort”t to something like purchasing Bitcoin just to gamble online. His contention here might be viewed as flawed by many: that Bitcoin’s most useful purpose is to get around governmental blockades not otherwise surmountable.

But if the facts and figures aren’t disagreeing with him, it’s worth it for the community to have a look at why this might be. A big reason for people not using bitcoins in their everyday life is ease of use. Even with Coinbase and Circle and others making the acquisition of bitcoins so simple and easy, every day you hear cases of where their hyperactive fraud prevention programs are blocking new users who are, in fact, legitimate.

“Bitcoiners Are Their Own Worst Enemy”

“I think the biggest issue is people in this space, the community, believe that Bitcoin will be something that it probably won’t be, in actual practice. So they become kind of like their own worst enemies because they over-hype the ability for it to destroy current payment processors and stuff like it. So I think the community is its own worst enemy right now.”

Images from Shutterstock.

What do you think? Is Bitcoin adoption at a retail level the only best way forward? Do Bitcoiners have an overwhelming tendency to over-hype its benefits to retailers? Comment below!

Last modified (UTC): March 28, 2015 19:24

Tags: Tim Swanson
P. H. Madore @bitillionaire

P. H. Madore has written for CCN since 2014. Please send breaking news tips or requests for investigation to He lives in Maine, USA. A single father of four young children, he does not discourage financial donations, provided they do not come with strings attached.