Bitcoin: things only grow this fast when something important is happening

Coindesk just published their quarterly ‘State of Bitcoin‘ presentation. This slide stood out for me:

Screen Shot 2014-07-14 at 20.42.32

Looking at the massive year on year increases in most of these metrics I’m reminded of some wise words from Jeff Bezos. In around 2002 I was stuck in my hotel room in Egypt due to food poisoning and the only English TV available was an American business channel. I forget which it was. In fact the only thing I can remember from 48 hours of television is an interview with Jeff Bezos. When asked why he founded Amazon he said that he was working on Wall Street in the early 1990s when someone showed him how fast the internet was growing he knew that something very important was happening. Otherwise you just don’t get growth like that.

You can see from the chart below that the number of internet hosts grew 10x from 1989 to 1993 – that’s roughly 2x a year. Bezos founded Amazon in 1994, so this was the data he was looking at. You can see from the table above that Bitcoin adoption is growing faster than that – 3x to 685x depending on which measure you choose. As with the internet back then major use cases are still unclear, but as with the internet they will come.

600px-Internet_host_count_1988-2012_log_scale

  • William Holley

    Your commentary lacks resolve, suffering from appearance of Association fallacy. A hardware-architecture digital-wallet integrated on mobile devices would increase Bitcoin’s clout, but reluctant consumer adaptation will result in an extended time before competition with physical currencies.

  • http://www.theequitykicker.com brisbourne

    The interesting thing for me is that despite repeated setbacks Bitcoin keeps growing fast, and I think there is a chance it could be as fundamental as the web.

    That said, you are right that I’m making an association without saying why, which isn’t very clever. Thanks for the comment.

  • Dan Field

    It’s interesting, but…

    Lot’s of buzz… lot’s of money going in… but I’m not quite sure anyone quite knows where it’s going yet.

    It has managed to survive quite a few shocks (Mt. Gox amongst overs) so maybe it’ll hang in there. I’m not sure! My gut feeling is it’s too early, will crash out and a next wave will come along in a year or so… something a bit more consumer friendly.

  • Marcin

    Dan, do you consider that rather than being a consumer technology, Bitcoins act more like gold and become an apolitical measure of value for the internet?

  • http://www.theequitykicker.com brisbourne

    That sounds like the internet in 1993…

  • Dan McArdle

    Agreed. Bitcoin is at that point where it’s clear that it fundamentally enables a new type of interaction that has been sought after for some time. Remember that true digital-cash has been theorized for decades; it’s just that no one figured out to sufficiently solve distributed global consensus to make it all work…until the bitcoin whitepaper solved it. Now the core infrastructure is being built around that, and we suspect that myriad applications will eventually emerge. Bitcoin is secure, decentralized/open, and programmable; that’s never happened before with money and value-transfer.

    But even if the fancy >=Bitcoin2.0 consumer apps never emerge because it turns out bitcoin is only great at being money, bitcoin can be extremely successful in its role as “Gold2.0”. While it’s less hip to discuss in tech circles, bitcoin’s role as an inflation-hedge in people’s portfolios increasingly makes sense alongside or in-place-of gold, as bitcoin obviously has direct economic transactional utility (which gold lost 100+ years ago). Many are searching for a real uncorrelated asset class. Gold kinda fits the bill, but to this next generation of tech-savvy internet-dwellers, it looks more and more inelegant. Physicality is a bug, not a feature. Bitcoin doesn’t have that bug.

    The other point is that this crazy value explosion needs to happen in order for the other stuff to bootstrap. Bitcoin is actually a store of value *first*, before it becomes a day-to-day unit of account (stuff priced in btc). The naysayers scream “volatility”, but the fact remains that bitcoin is *still* undervalued by a couple orders of magnitude if it does manage to cross the chasm, which is what the speculators have realized. Thus, for those with high risk tolerance, bitcoin has begun to function as a store of value already, and with that monetization and liquidity, the transactional economy can grow, followed by whatever else is dreamed up upon humanity’s first open platform for trustlessly transferring digital value.

  • http://www.theequitykicker.com brisbourne

    Great points. Thanks Dan.

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  • vinaeco

    “Physicality is a bug, not a feature.” … trademark that

  • http://www.theequitykicker.com brisbourne

    Like it!

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