The State Of Bitcoin - January 2015

This is a slideshare from Coindesk:

I think this slidedeck shows that 2014 was a tough year for bitcoin, something I mentioned in look back and look forward posts. This year has started off poorly with problems at Bitstamp and the price breaking below $300, probably in relation to the Bitstamp issues.

It’s tough times for the bitcoin sector but venture capitalists continue to make investments and transaction volumes continue to rise. I believe we are witnessing a transition from one phase (monetary and speculation driven) to another phase (new applications and bitcoin as a platform) and there will be a shakeout as the transition happens. I think we are well into that shakeout.

#hacking finance#Uncategorized

Comments (Archived):

  1. Steve

    lol good luck! Bitcoin is worthless.

    1. JamesHRH

      Your depth of knowledge and analytical prowess is too much for me Steve.Go a little slower so I can keep up.

      1. Jake Baker

        Flag on the play! Don’t feed the trolls! 😀

  2. JamesHRH

    I would begin the New Year, if I were you, with the following BitCoin Resolutions:1) Personally rebrand BitCoin to The Blockchain (sounds cool, sounds like a Tech platform): never use the BTC word again.2) Speak only of Apps built on the Blockchain (get this mining weirdness behind you)3) Find someone somewhere capable of whiteboarding how a BlockChain works. Video that person whiteboarding this topic and spread it far and near4) Fund someone with the killer app for the Blockchain (whatever that is).I wish you the best of luck, as you know, I am not a BlockHead 🙂

    1. fredwilson

      this is all great advice James. thanks

      1. Jake Baker

        As a “normal” this makes a lot of sense. The real value is not the currency, but the technical feats enabled by the blockchain. I am immediately more comfortable explaining The blockchain to people and showing why I think it has value.

    2. Sebastien Latapie

      The Blockchain rebrand makes a tremendous amount of sense. Anytime I speak to friends about BitCoin, they instantly get confused about what I’m talking about, and I have tremendous trouble clearly articulating it to them.

      1. tgodin

        I’m not certain that Blockchain is any less confusing.

        1. JamesHRH

          The Blockchain is a tech platform that lets people securely complete transactions without a middle man / broker.My Mom – who is 91 – gets what that is, conceptually.The thorny issue is the answer to the question that Steve Ballmer’s Mom is known to ask, ‘So, what would I use that for?”

          1. Robert Metcalf

            Right. Bitcoin’s relationship to the blockchain feels analogous to a website’s relationship to the web. It’s just one instance of the utility.When trying to share what the internet is, I don’t say “there’s this website called”.

    3. David Miller

      Agreed. I’ve been looking for someone working on a non-financial app that leverages a blockchain – whether Bitcoin, Ripple, Etherium, whatever – for a non-financial purpose. I haven’t found one yet.A big candidate is eshares. Why don’t they record ownership of shares on the blockchain and code securities as smart contracts?

      1. fredwilson

        we’ve been talking to them about thatthey built their system before the blockchain was really able to do that but clearly that is not the case now

        1. Henry Yates

          This would also be a great solution for managing Land Records (recording loan charges, transactions etc), although I can not see governments getting in on the act in a hurry!

        2. Ryan Singer

          I have a call scheduled with Henry next week. Domus would love to bring eShares on board as our first custodian. They can offer tradable, transferable crypto certificates this year with little change to their technology and in an environment regulated normally by the SEC. I am really excited about the future of securities on crypto ledgers.

      2. ZekeV

        There are hundreds of non-financial apps that use bitcoin to store information. Maybe one or two with promise. I’m personally excited about the potential for use in games, e.g., (bitcoin tags and objects) with deckbound (collectible card game, still in vaporware stage).

      3. Mauro

    4. awaldstein

      Gd points.Bitcoin by definition is about money and needs to be understand or trusted by the consumers who would use it. In app or not.Blockchain is not a consumer product by definition and with a developer target market, it becomes more tangible and honestly a whole lot easier to get the word out.

      1. Jason T

        Bitcoin was about disrupting financial services in general, and banking in particular. If we’re now talking about a developer toolkit, does the opportunity become less interesting to VCs? It’s an honest question. Im not a BTC expert, but my sense is that abandoning the “financial services disruption” story is a big problem.

        1. awaldstein

          Great question.My take is that blockchain is equally as disruptive as bitcoin and that investors invest in big change agents way before there is a market model for it.

        2. JamesHRH

          No. If you can own a dominant tech platform, as a VC, you are down with that plan.

      2. William Mougayar

        The blockchain is like plumbing. It’s represents a method for “decentralized consensus”, so for sure it’s not a consumer product. You’re correct Arnold.But apps built on the blockchain will be consumer facing for sure. Having a cryptocurrency wallet only scratches the surface of that.

        1. awaldstein

          Blockchain is pretty simple to understand for anyone who is in the business of build network applications. Huge group.People are using it now. In my circle I know of a number of people integrating blockchain into their solutions–from alternative currency infrastructures in Europe to media rights exchange.Apps may come. Pervasive use of the tech is not dependent on them.This is honestly not that hard. After you stop thinking it is the tail wagging the dog, it gets a lot easier.

    5. Guest

      Should we rebrand TCP/IP also, because some folks don’t understand it?

      1. JamesHRH

        TCP/IP did get rebranded – The Web / The Internet.

        1. Guest

          Just got built on top of – exactly as bitcoin is being built on top of now.

          1. JamesHRH

            Same diff or, as someone in these parts in prone to saying, “I agree with you more than you agree with yourself.”

          2. Guest

            😉 Exactly. So what you are saying is that what you suggested is already happening.

          3. JamesHRH

            Not quite, just to be precise.If you are a BlockHead, you should never ever again say the words Coin, BitCoin, Mining, Winklevii or MountGox.Blockchain. Apps. _________ .THIRD WORD NOT YET AVAILABLE AS NO ONE CAN WHITEBOARD THIS & TELL ME THE CORE BENEFIT.

          4. Guest

            The term bitcoin is likely with us eternally… and, as such, Winklevii as well. Though I’m happy to admit I could be wrong about that.Here is a good overview of how it all fits in:https://www.mauldineconomic

          5. xcsler

            The core benefit is freedom.

          6. JamesHRH

            And no assurance re: fraud.

          7. xcsler

            For merchants there is no risk of chargebacks with Bitcoin while consumers will have the option of using escrow services for fraud protection. Current payment systems do not appear to be doing a good job of limiting fraud and when fraud does occur the costs are socialized.

          8. JamesHRH

            That is not an economic concept.

          9. xcsler

            The freedom of market participants to pursue their own self interests is the most important ingredient for a robust and productive economy.

          10. Ryan Singer

            Real Time Gross Settlement of everything. No more waiting for any payment, transfer or contract to be confirmed or final.

          11. JamesHRH

            And no recourse for fraud.

          12. Ryan Singer

            The same level of recourse as wire transfers and cash payments.

          13. JamesHRH

            First time anyone has touched on the offline analogy.I pay my bank $40 to wire transfer large amounts, so that if there is a problem I can sue them.I pay cash to a limited # of suppliers who request it (babysitter, lawnmowers, etc).And tips.

          14. Ryan Singer

            You can’t really hold banks responsible for wire transfers. The reason you pay them $40 (Btw, you can get that down to $10 or so), is because a middle office employee has to type it in directly to the Fedwire Terminal. The bank has no way to recall the payment after it’s been sent, except for the beneficiary pushing a new opposite payment. Just because you are paying your bank doesn’t mean you are very protected.

    6. DeadPanFish

      I don’t think rebranding or explaining visually or otherwise, will help adoption.Massive adoption will really start when bitcoin/blockchain will become a real alternative for payments, transfers, investment, etc. My son’s grandparents have bank accounts (they get it), but not bitcoin, nor tools to use this new technology, and more importantly, no reason to use it => no reason to try to understand.Let’s make things easy to use, and then they’ll come 😉

      1. JamesHRH

        I am on record here that there is no market for Blockchain apps – that most perceived uses actually benefit from 3P Middleman assurance.It’s a great solution to a tough problem that no one actually has.Still, if I am wrong on that front ( what are the chances of that!), my resolutions for Fred are still the right marketing call.If you cannot whiteboard how it works, you will never get the clear, core benefit defined.

        1. ZekeV

          Nick Szabo wrote a great essay about trusted third parties. Often saying that you rely on a TTP is equivalent to saying you are vulnerable to a TTP (for example, a certificate authority). Unless you really do trust that person on a genuine level, which is rare. Bitcoin removes a vulnerability in the financial system. It’s not perfect of course. Ideally, we would only trust people who are trustworthy, and not be forced to make ourselves vulnerable to third parties whom we do not really trust.

          1. JamesHRH

            Most widely popular TTP have an interesting dilemma – if they are not inherently trustworthy, their businesses collapse.I would not own a VISA card if they did not back stop fraud. They do not have a choice about being trustworthy & I do not need to make a subjective value judgement on their trustworthiness.If they do not do the things that support their TTP value prop, they are toast.That’s why I am a BlockHead skeptic, despite my deep respect for people like @wmoug:disqus & @fredwilson:disqusAs an aside if you are not familiar with the thinking of Dee Hock or the history of VISA (or credit cards in general), there are a couple of great reads to be had out there.Credit cards in the late ’60’s looked like ride sharing last year – wild & wooly.

          2. ZekeV

            Yeah man! I did read Dee Hock’s book about the founding of Visa, and really enjoyed it. Fascinating company. I played a small role in the Visa IPO (basically, summarizing boxes and boxes of non-material legal documents until my hands were chapped and bleeding). But yes, very interesting man and company.

          3. Robert Metcalf

            “One from Many” was definitely an inspiring read for me.Seems like it would be to anyone in search of holistic solutions to big gnarly problems.

      2. LE

        I have several different reasons why I could use bitcoin but don’t because of potential friction of setting up and fully studying how it works (in business not a good idea to go off “half cocked” I have found) as well as educating and getting people on the other side of the transaction to feel comfortable with using bitcoin.Most importantly, as a general rule I don’t try to solve problems that I don’t have to solve. I’ve got enough to deal with. Aren’t most people like this?I had an issue collecting rent payment from someone who had no money and typically deposits the rent directly in the bank account # that I give them. (No check in the mail problem). They weren’t able to pay last month so I told them they could pay by paypal and added the paypal fee to the amount due which they had no problem with paying. In addition to the late fee. They then used a credit card to pay for their rent. My point is I had a problem to solve and was able to use paypal (and credit cards) to solve it.That said, I would definitely have used bitcoin but the problem is if they don’t have cash they can’t get bitcoin. Now if they can use a credit card to buy bitcoin that’s fine. But what does it get me to suggest that over paypal which most or a large number of people understand already? If I suggested that they would then take another day or two to stall me instead of just using paypal. Why take the chance, what do I gain?

        1. JamesHRH

          The Redditt tip post is a good scenario here LE.They might be onto something with small frictionless transactions to lightly connected 3P.You are right on PayPal IRW payments.

      3. JamesHRH

        People start with What, then ask How but rarely ask Why.If they cannot see Why for themselves, they don’t buy.Why drives the Buy.People spend most of their time talking about What & How but that does not make them more critical to adoption.

    7. William Mougayar

      Good questions James. Some answers:1/ The market is already shifting its attention to the blockchain. That’s already happening. There is a larger theme at play here. It’s probably a 10-year cycle.2/ That’s how it will shake-out. The market will grow with more blockchain apps. (arguably, Bitcoin proper is a currency app of the blockchain)3/ Not needed. For end-users like you and billions others, you just need to get into various apps as users. You may be using the blockchain, but you won’t know it, just like using TCP/IP or all that weird plumbing. Blockchain is plumbing. Leave it to the plumbers to understand it.4/ Companies who are developing decentralized apps and pegged services on the blockchain are getting funded, and you’ll start to see them emerge in 2015 for sure.[Read my last few blog posts, and you’ll understand more hopefully. I’m writing for the business user and average consumer.]

      1. dirk

        1)2)3)4)universally understood, same function. #unnecessarypunctuation

      2. JamesHRH

        William – I don’t really agree with you on 3 and on 4, well, what is the benefit of a decentralized app & what the heck is a pegged service?email was pretty easy to grok for a normal, as was web pages & it got really really obvious post-Google.What are the analogous Blockchain killer apps and, more importantly, what are the matching offline activities?I love you guys, but………

        1. William Mougayar

          James, 3&4 are related.Answering your question “what is the benefit of a decentralized app & what the heck is a pegged service” will be different, depending on the App in play.So, the benefits are going to vary depending on the type of App that emerges. They will explain it to you.You only need to understand or whiteboard the Blockchain if you’re a developer (or investor that cares).

          1. David Gobel

            The most powerful and efficient social, political and economic weapon available to the United States Govt (for instance) is the dollar/Fed/US Treasury Dept. Bitcoin is/as/when successful is destabilizing to nation state superpowers. What prevents them from making Bitcoin illegal (politically, not technically). Proprietary specie and control thereof is the essence of political power. The only future I can see for bitcoin is if it can be co-opted by and for the nation states – without this, for existential reasons, they simply MUST do all they can to kill it.Using the trivial example of how Uber is being stamped out and bent to the will of even tiny gov jurisdictions, why would bitcoin survive in its current/contemplated form against a concentrated multi-frontal attack? Looking for serious answers, because I would LIKE bitcoin to work.

          2. William Mougayar

            Bitcoin and cryptocurrencies will work, but not by mounting frontal attacks on the current financial system. Rather, it will happen by creating a parallel system that will get stronger on its own, over time. Value creation is better than value transfer.

          3. David Gobel

            Thanks, but it appears to me that you make a prediction, which is not an answer. I’ve worked in .gov, and contrary to the popular perception of many, there are incredibly intelligent people working for treasury and fed whose job it is to probe and affect futures to protect the dollar and .gov seniorage/priority/control. Also, frontal attacks have already happened, and .Fed has already counterattacked with complete success (pirate bay?). I predict/assert for your amusement that bitcoin is being watched carefully to see if/how it can be used/co-opted to benefit gov, and if it can’t it’ll follow the course of Gold in 1933. You can’t destroy it but you can eliminate it by law. Keep it if you want, but just try to use it…

          4. William Mougayar

            My prediction is an informed one, as I’m in the trenches of the cryptocurrency work that’s going on, and am seeing that its impact will be beyond the currency and financial markets angle. (I need to elaborate in a future blog post)

          5. David Gobel

            thanks, I agree that blockchain has great merit. It’s bitcoin I doubt.

          6. William Mougayar

            Well, the blockchain today is part of Bitcoin, but it’s also a concept that has been extended outside of Bitcoin proper. I think there’s room for both to be successful, as part of a holistic ecosystem.

    8. falicon

      Few quick responses:1.) I think BitCoin is a better, and more consumer friendly, name than Blockchain…Blockchain is techie/geeky and complex. BitCoin is clear and simple (digital money)…the trouble is just the stigma that BitCoin has because of the hype right now…but I *think* we’ll get over that before too long.2.) I agree with @wmoug:disqus here in that I don’t think it will/should matter that much to the end-user that an app is built on top of the Blockchain or not.Bitcoin the currency should matter to users because it’s a digital, global, currency not backed by a company, government, or military power…as the world moves to ‘one economy’ this is actually a *huge* deal.Blockchain should matter to techies because it allows for distributed trust…it’s a new, and fascinating, concept really…but we still have to figure out just how to properly take advantage of it (we haven’t yet).3.) Kahn academy has some videos on this stuff that is probably the best I’ve seen so far…but again, I don’t think ‘people’ really need to understand any of these technologies beyond what new freedom and powers they give them (and right now that’s fairly limited to ‘digital money’ with a globally agreed upon price by ‘the people’ — hopefully more will come soon though)4.) I think lots of investors are *trying* to do that…but the real key is to first define what these concepts and technologies are really game changers for…and then what can/should be built to actually change the game…I think we are still in day zero of this part of the conversation.Ultimately – I’m a bigger fan of BitCoin this year than I was a year ago…the idea of being able to transact with anyone in the world at any time on a one-to-one basis (and have a high level of trust around that transaction) has been a utopian dream I’ve been hearing about my whole life…Bitcoin is the 1st feasible/tangible step to actually achieving it.But the work is still just starting…

      1. JamesHRH

        The utopian dream thing is the red flag for me.Noone ever asked for Fords (just faster horses). No one ever asked for email or texting (just faster interoffice mail).But the offline behaviours & needs were there.You are saying that broker less transactions have been impossible to date. I am saying that no one wants them (or a much smaller group of people actually want them and that those groups are all middlemen or pros – bankers, basically).I do not see a pent up demand for digital money, so I am anti-BitCoin. The speculation & mysterious origin story are just added reasons to rebrand in a hurry. After all, credibility seems like an important thing to cultivate, in the broker less transaction space……..We shall see, which is part of the fun.

        1. falicon

          How do I help someone on a personal level in a ‘third world’ country right now? How do I buy something from them? How do I digitally pay someone for work ‘under the table’? How do I digitally tip someone in a frictionless way? How do I trust digital communication/transactions from unknown person? How do I determine if an online offer really is “too good to be true”?These are all things – on one level or another – that can start to be addressed with Bitcoin currency and Blockchain technologies.I know it doesn’t seem like it – but there actually are still a *massive* amount of offline things you do in your day-to-day interactions that are either impossible, cost-prohibitive, or just feel too ‘sketchy’ to pull off in the digital world right now…*that’s* why having a digital version of trust (Blockchain) is potentially important.The digital money part (Bitcoin) is really just about having a currency for the digital state (which we are still defining and building)…if you want to set up a truly global society that sits outside of existing political, religious, and economic control…having it’s own currency, with real and agreed upon value, is an important part…getting that requires having digital trust in place as well (but digital trust is also required for so much more than just the currency part).All that being said…I’m with you in that there isn’t a lot of meat to what we have right now…and there is a long way to go before this can be ‘mainstream’…but I do believe it’s here to stay…*finally* ready for the real work…and it’s time we get down to it…

          1. JamesHRH

            This I like – How do I digitally pay someone for work ‘under the table’?That at least fits with the anti-institutional themes of AirBnB & Uber, which I think are important boxes to hit on the Unicorn checklist.This I do not like so much: it instantly makes me think of black markets, the Mob, terrorist banking, etc.Again, I am a doubter, not a hater. Agnostic, not atheist maybe?

          2. falicon

            “With great power comes great responsibility” – some web sligner dude’s uncle.There is/will be a lot of mis-use and ‘bad’ stuff going on and it just might drown out all the good stuff that can/will be done as well…I don’t see a way around it either.If (big IF) we can get through and past that…the idea that digital money is a tool ‘of the people, by the people’ can really lower friction and open doors on so many things.Some more examples (of good):- donating a satoshi bit to the red cross person outside the grocery store- buying popcorn from your cub scout nephew across the country (without having to use a credit card or pay transaction fees)- to donating some satoishi bits to a starving family in Africa (and knowing they get 100% of what you donate *directly*)- to getting odd jobs done around the house and ‘off the books’- to keeping a public record of what property you own and what contracts you’ve agreed to- to a public record of your business reputation and transactions

          3. Ryan Singer

   is a bitcoin company that facilitates exchange between Amazon wishlists and Bitcoin. It makes it much easier for people to work for Amazon Turk, which has a hard time doing timely payouts to the 3rd world where the workers are.

          4. PhilipSugar

            You know most stuff that grows digitally is because it solves a need/want that is not considered moral. Think about pornography.

        2. Sebastian Wain

          > I do not see a pent up demand for digital money, so I am anti-BitCoin.I see cryptocurrencies as a standard bridge between the virtual and the real world (I mean money). This is working in an experimental stage right now. I receive bitcoin tips in Reddit that I can use for buying things but I never received a tip via PayPal… these tips are based on actions such as posts and comments that before were only rewarded by a virtual karma.It is not casual than Reddit is thinking hard about how to use cryptocurrencies within their site.

          1. JamesHRH

            As I understand it, Reddit is a huge online audience.I agree completely that they could make BitCoin a real thing. Reddit has poodles of excess credibility that BTC can bathe in & become legit.That’s a big deal.

        3. Ryan Singer

          Institutions can do transactions without brokers, called “Direct Market Access”. The average cost of a transaction from an institution through a broker is ~11 basis points(0.11%). When they use orders directly on trading platforms like IEX it goes down to about 1.5 BP, all things considered. If consumers could save 90% by going straight to the market, I’m sure many would.

    9. Robert Metcalf

      Really enjoyed the threads spun off by this comment. Thank you!

      1. JamesHRH

        Nice of you to say so.

  3. Andrew Kennedy

    Great deck. Thanks for sharing!

  4. Jake Baker

    Recognizing that you are obviously not a Bitcoin bear, Fred, I see only opportunity presented as a result of the “challenges” highlighted above. This is my take on the adoption narrative:- Bitcoin comes out of nowhere (for those of us who are somewhere between full tech/hacker native and normals)- We can see the interest and momentum and value it offers but it seems largely impenetrable to participate early on- The incredibly high pricing of last year made it much less desirable to buy in to test out the use cases and early apps were too impenetrable to casually utilize- The fall-off in pricing has actually made it much easier for the next wave of participants to buy-in and be willing to play with the various programs – if only from a psychological level- Emerging (somewhat) consumer friendly apps (Coinbase user here – allow for us to start testing on this and becoming the next wave of bitcoin advocates and early adopters- The standard normal/layperson is not going to be the first user of the apps built on top of the block chain- The super early adopter hackers building it are not enough volume to drive uptake- You need people like me to have enough connection to bitcoin and the emerging apps to act as the first wave of “normals” to use them and recommend them onwardsIn my opinion, the price decline is the best possible thing for bitcoin. It gets rid of some of the speculative chattering class not actually contributing. All of the true believers DO NOT care and are still building apps and new structures on the blockchain. AND it allows new entrants to buy-in because the psychology of the “cost to play” is so much more attractive for purposes of buying a bitcoin or two and testing various services out.

    1. fredwilson

      i agree completely

      1. Jake Baker

        Thank you!As an aside, I’m a long time lurker and only recently crossed the rubicon to commenting. AVC has been first on my daily list of reading for years – thank you for continuing to share your thoughts with us. You’ve inspired me to write daily as a resolution for the new year (holding strong since December 13th) and I aim to start putting my stuff out there publicly. Again – thank you for sharing and for the inspiration!

        1. fredwilson

          welcome to commenting

          1. Jake Baker

            Thank you – the bar has looked so inviting for so long I thought I’d finally step in and have a “drink”

      2. finway

        I disagree. Everyone who’s hodling bitcoins in their strong hands, are supporting the system. They are those who made every application possible..

    2. falicon


    3. finway

      I disagree. Everyone who’s hodling bitcoins in their strong hands, are supporting the system. They are those who made every application possible.

      1. Jake Baker

        Yes but it goes to zero unless it expands with the addition of normals using various apps which still don’t really exist yet. True believers may well have a very underpriced asset on the long term (5-20 years) but the froth getting washed out is useful to clear it up a bit and eliminate volatility.

  5. Twain Twain

    Slide 37 on Six Different Bitcoin Company Categories is missing a category. The universal bit should be a hexagon instead of a pentagon.The missing sphere is “Bitcoin Analytics” and it includes companies like BlockTrail, Coinalytics, MineCTRL and BlockCorp.

  6. pointsnfigures

    Cool with rough times. Great things weren’t built in a day and neither is the Bitcoin ecosystem. Hey, it’s less volatile than the Russian ruble. I think the drop in price is good generally as long as there are some real world apps that are developed-because it makes the entire concept more approachable.I encourage programmers to think about B2B businesses they can build on the block chain. Supply chain technology, risk management technology as it relates to supply chain. Two places to start. Get the business world to adopt it and the consumers will follow.Problem with B2B is it takes some local knowledge and experience with the pain point to design a fix using the Blockchain.

  7. Guest

    I’m most excited about the emergence of a decentralized exchange as that will be the foundation of all else. I highly recommend all try to understand the significance of having a decentralized exchange at the middle. Biggest benefits I see: reducing the opportunities for speculators to play arbitrage and such on disparities in price and removing the risk of exchanges disappearing with your coins. Bitshares team explains it in this video – perhaps a bit long-winded:

  8. William Mougayar

    If it’s about the Apps (and it is), then the # of Bitcoin users today may not really matter that much, because what will count is the # of users on these Apps. (furthermore, Bitcoin users aren’t very “active” if we are to use the DAU and WAU)Bitcoin the cryptocurrency is one App among many Blockchain apps.The Bitcoin blockchain will see a lot of Apps, and we will also see a lot of decentralized apps on other Blockchains as well. Networks effects work on Apps, not on the protocol only.

  9. michalisp

    Trough of sorrow ?

    1. michalisp

      Also, from a value investor point of view, maybe it’s time to buy low ?

    2. Brandon Burns

      interesting point of view.but does the trough of sorrow exist for entire categories? or just individual businesses (as the graph was originally intended)?

  10. Brandon Burns

    I don’t know enough about bitcoin to have an answer, but I have to wonder if the investor perspective of “bitcoin isn’t dead, it’s just transitioning” is an accurate depiction of reality, or if it’s a reflexive attempt to save face after heralding it as the next major technology revolution and seeing that’s not the case (at least yet).

    1. LE

      or if it’s a reflexive attempt to save faceI don’t believe it’s spin.I don’t think that investors are similar to people sitting around a bar telling war stories (to impress) and that they would really care that much about saving face. Does it really matter what you think? I don’t think so. Everybody already knows that potential failure and only a small amount of bets succeeding is part of the model.The bottom line: Do you make money or not. Have you made money or not? What someone thinks of you is probably low and certainly lower on the list of worries than an investment paying off.

      1. Brandon Burns

        Personally, I think there’s probably some truth and some spin.It’s human nature to not want to be wrong, and to save face when you are. While certain individuals fight against those urges, I don’t think investors (generally speaking) are immune to our hardwired biology.

        1. LE

          This doesn’t matter at all but since we are discussing my feeling is if Fred had “consciousness of guilt” (he doesn’t; no way) he would not have said this previously:8/ The horrible year that bitcoin had in 2014 will be a wakeup call for all stakeholders. Developers will turn their energy from creating the next bitcoin (all the alt stuff) to creating the stack on top of the bitcoin blockchain. Real decentralized applications will start to emerge as the platform matures and entrepreneurial energy is channeled in the right direction.Plus, attached below is his reply to “nothing about bitcoin?” from the “what just happened” post:Yeah. I answered that question below. 2014 was a bad year for bitcoin. I was focusing on the winners not the losers. Good critique

          1. Brandon Burns

            I agree with you re: Fred. This is not an attack on him.However, I think “bitcoin is having a bad year” is definitely tempered language. It leaves the door open for bitcoin to have a good year sometime in the future — whether it’s actually going to or not.I guess my questions is: will that good year ever come? Or is the whole thing dead and no one wants to outright admit it?Of course, no one really knows. But are folks being unreasonably hopeful? Is “I wasn’t 100% wrong about this, there’s still something there” thinking clouding judgement? Or is it actually reasonable to think bitcoin will again have its day in the sun?

          2. LE

            Or is the whole thing dead and no one wants to outright admit it?There is a saying something like “don’t throw out the old milk until you have the new milk”.There wouldn’t be any advantage at all to “admitting” that it’s dead. Until the fat lady sings a deal is not over. Why not keep your options open? [1][1] I’m juggling something right now where I know one part of the transaction is probably dead but I haven’t told the other part of the transaction what I know simply because I’m only 99% certain because the fat lady hasn’t sung yet. That way (and this is important) they don’t take the time to look for an alternative and I can possibly still do the deal with them because they will have run out of time (this is real estate if it matters). Now of course if I was 100% sure I wouldn’t do this but I’m not not making this stuff up, just sent off an email on it where I said “may not be able to” not “not be able to”.)

          3. Brandon Burns

            True. Very, very true.

  11. RichardF

    There just seems to be too much friction with bitcoin, I tried to buy some btc with coinbase when you posted about their $10 referral deal, the sign up process was tortuous (probably because of regulation I’m guessing).As James says we need the killer app, at the moment there is little incentive to bother

  12. jonathan hegranes

    How Bitcoin is changing for me…Two years ago I was buying and selling to make money on the asset.Yesterday I bought Bitcoin for purely transactional reasons.

  13. JimHirshfield

    Blockchain all the way. That’s my 2014 takeaway.I’d like to see an industry map…sector by sector…and how the blockchain could be used (to disrupt?) in those sectors. I’m thinking big picture…Medicine, Insurance, Media, Law, etc. How do all these change if an open distributed decentralized ledger is incorporated?

  14. Richard

    As an aside, whoever designed this deck must have gone to the Mary Meeker school of design.

  15. William Mougayar

    Bitcoin is the platform or the blockchain is the platform? That’s a key question.

  16. bzzl

    to my future descendants if you are finding this archive and it’s the year 2121 just know I was here lurking on this site in 2015 and enjoying the speculation about the development of transaction platforms. if you are looking for our old-fashioned definition from 2015, here it is: A block chain is a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of a currency’s block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history. (i found this on google, by the way, which will probably still be around in 2121)

  17. Sriram Yadavalli

    One key issue with moving internet applications to a distributed block chain architecture is: Why would current players agreed to do that? For eg, all transport cos like Uber, Lyft etc can transact via blockchain, but they wouldnt because its not in their interest. If drivers have lot more power, this could happen…but that doesnt seem likely. What would trigger the move to blockchain based internet applications?

  18. george

    I think mainstream adoption on this platform will take more patience and require building trust, which will essentially create needed stabilization. Conceptually, I’m an activist and hope this method of exchange really flourishes, but I do believe competition (Apple pay) has also added complexity and new challenges.

  19. Rococo

    James,I enjoy your posts but I’m going to have to disagree with a lot of what you’re saying.1) I think that continuing to build a feedback loop with bitcoins current users is a far superior strategy than a “rebranding”. Bitcoin early adopters have proven to be an incredibly loyal/engaged user base. They sing it’s praises at every opportunity and this is what great products are made of !2) I love the blockchain and think many great apps will be built on top of it but it’s killer app is bitcoin. My belief is that the world needs a global currency and btc is the front runner to become that. I highly recommend watching this talk by Wences Cesares: “getting to a billion user”…Bitcoins user base needs to grow 10x before a lot of the blockchain apps become viable. Also, more liquidity in the market opens the door for more use cases.As Marc said in one of his latest tweet storms: ONWARD !

    1. Rococo

      Another note on branding, this early in the game everything changes really quickly. This notion that the brand is tarnished is easily swept away by one uptick in price.

  20. IS

    As a real novice in Bitcoin, it seems to me that there are a few real challenges to overcome before Bitcoin takes off (in the mainstream adoption sense). This is anecdotal, so feel free to vehemently disagree.1) If you look at Bitcoin as a marketed service/platform/protocol, the messaging sucks. People shouldn’t have to learn entirely new vocabulary and concepts that have really good analogs in things they already do/use. People understand trust and verification. They understand transactions. They understand money. And they understand P2P transfer. These are all old concepts, and yet, it feels like one needs and engineering degree to understand it all. That’s not an insurmountable problem, but it’s a real problem currently. I know that my thinking about Bitcoin was limited entirely by all the arcana surrounding it. Which leads to2) People understand use cases. They’re keenly attuned to problems and frustrations they face. Where is Bitcoin supposed to fit? Why is it so potentially transformative — and not because the Blockchain is such an elegant engineering advancement? I know we’re still in early adopter and insanely geeky phase, but most people don’t care about how the sausage gets made. They just want to understand what the solution does, why its a preferable alternative to existing solutions, and that it’s easy for them to use.3) The past two days made me understand how important Bitcoin can be for trustless transactions. Closing on a house tomorrow, and in addition to the crazy expense associated with the privilege of escrow, it was an absolute nightmare to move our closing funds from our bank account into escrow. OUR money! In liquid form, ready to go, and took an amazing amount of stress and hand-wringing to get the bank to release the dough. Struck me that the pervasive problems rested with intermediaries, and I think Bitcoin has a lot to offer for this kind of transaction.I’m sure you’re all way ahead of me here, but it took a real pain in the ass for me to realize how Bitcoin could really transform complex (and I guess home buying isn’t even that complex) transactions. Explain Bitcoin (as platform and as specific solutions) from that perspective, and I think it’s a technology that a lot of people can get very enthusiastic about.

  21. Lenny Bean

    Decided. I’ve been looking for someone operating on a non-financial app that controls a blockchain – whether Bitcoin, Swell, Etherium, whatever – for a non-financial objective. I have not discovered one yet.Dukan Diät Plan

  22. disqus_igxgvwFK9C

    Fred are you still buying BTC? I recall your great timing in stepping in to buy google when it was down, and recently you said you were going long on BTC – but it’s fallen maybe 20% since then, so – are you still accumulating?

    1. fredwilson

      yeah, i buy a couple bitcoin every week. been doing that for months. i blogged about it here at AVC a while back

  23. BTC brainstorming

    DECENTRALIZED HEALTHCARE INSURANCE. Imagine buying BTC every month reedemable through your health provider. Imagine the “profits” of this company returned in different percentages to health operators. Health operators would be in charge of an opensource code which would detail the set of instructions for each health plan. Plans would improve through A/B testing based on new algorithms, new statistics and health research. Each improvement on the code would bring a better cheaper service to the insured, and the extra profits generated would go partially to the developer responsible for the last commit.

  24. leapy

    I work regularly with an oil and gas major. I am very interested to quantify the financial impact of the blockchain replacing the Chicago exchange for commodities. Peer-to-peer commodity transactions have to be one way forward. No?

  25. Political Vel Craft

    Appears they are preparing to utilize the offspring of Bitcoin’s developed highly secure Quark.