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Bitcoin Price $898.61 Hash rate 2.83 Exahash


Don’t Strangle the Bitcoin Golden Goose: Spend Them

Don’t Strangle the Bitcoin Golden Goose: Spend Them

It seems that there may be too much focus on the price of bitcoin as its only attribute. Many have indicated on various forums that one would have to pry their bitcoin from their cold dead virtual fingers or something to that effect. They hold deeply held expectations that their precious invisible currency will reach prices measured in six figures one day. Does having tens of thousands of misers help their cause? When bitcoin was owned by less than 100 people, would this ever work? Could it be valuable if only 1,000 people in the world owned any? What about 100,000 or only one million? For all the promises about the abilities of bitcoin, the dichotomy is it will only become more valuable if you spend it and spread the wealth and ownership. You can’t have your cake and eat it too. However, unique to the cause of bitcoin this might be somewhat possible, at least for a while, if you buy more as soon as you’ve spent it.

One of the biggest knocks on bitcoin is the transaction volume. A glance at the transaction volume report on the website blockchain.info shows the average rate of transactions is decreasing. Other than a few temporary spikes, the volume has actually gone down over the last two years despite a huge increase in wallets and presumably the number of people owning bitcoin. Bitstamp and Coinbase are signing up new merchants at record pace, yet transaction volume stays the same? What’s in your wallet?transaction volumeThe bitcoin network is currently throttled at about seven transactions per second. That’s 420 per minute, about 25,000 per hour and over 600,000 transactions possible per day. Today’s volume is about 15% of the peak. The artificial throttle in the bitcoin code is pegged at seven transactions to limit the blockchain size, but could be made much higher if there were demand. Visa’s typical transaction volume does this every few seconds. Many of these transactions in bitcoin are simply balance transfers from one to another without actually changing ownership as opposed to Visa which likely does relatively little volume of balance transfers. If only a small portion is actually passing through merchants, why should merchants be compelled to sign up when they see little demand?Many Bitcoiners believe that eventually, the technology will be the obvious preferred payment mechanism for most merchants because of the intrinsic protection against identity fraud. Perhaps the IT security folks at Home Depot will be embarrassed enough to reconsider. They lost control of the ID protection of 56 million customer accounts since April. Will this finally motivate them to find another solution? For the record, this author predicted and warned of these events in an article for Bitcoin Magazine about the same time this Home Depot hack attack was reported to have begun. In addition, more articles were written regarding this problem in March and January as well. Anybody still running Windows XP anywhere on their network after April 8, 2014, which was Microsoft’s cut-off date for Windows XP support. Unpatched and unsupported, XP in now the Swiss Cheese of operating systems and hackers are actively exploring every one of them. A unsupported Windows XP machine sitting on a network?  You might as well put out the welcome mat.And yet, thousands of merchants are likely having their networks raided today for even more credit card hacking that you might not learn of for several more months unless you see it on your own bank records first. It is known that many companies now buy back their own secrets on the black market to keep it quiet. How often are banks going to reissue credit cards during the next several months before they start to wonder if there might be a better way? Albert Einstein was credited for describing insanity as “doing the same thing over and over and expecting different results.”What merchants need is the good old fashioned “carrot and a stick” approach. They have the stick of punishment continuing to hit their backside from hackers. This makes CEO meetings with investors uncomfortable, while the CEO still has a job that is. We said goodbye to Target’s previous CEO Gregg Steinhafel after the Target hack attack. Will Supervalu's CEO Sam Duncan claim his $500,000 bonus when he walks out the door? Will Cerberus Capital Management,  the huge multinational conglomerate owners of the effected Albertson's grocery store chain allow it?   It probably will be no surprise to learn Home Depot CEO Frank Blake “coincidently” picked a good time to bolt for the back door about the same time they discovered their own compromised credit card security. Have the constant reports of major hacking theft rings become so commonplace it has become white noise for the public? Should one expect to see replacement credit cards in the mail each month? Each time they resend credit cards they are simply plugging the leaking dike with more fingers, yet the dam continues to crumble before them.Bitcoiners, what they need is a carrot; also known as the rewards. You own the carrot. Lead them to the promised land of bitcoin. When they see transaction volume rising, it will give them faith in the network. The public and CEOs of most big retailers will only believe what they can see – and they will see the power in the form of transaction volume. Those Bitcoiners sitting greedily on their bitcoins are only strangling the life out what could be thought of as a golden goose. The community will have to actually spend their bitcoin so that the currency flywheel can get spinning. Once it is spent, if you don’t have a big nest egg - just buy more bitcoin, right then. This action greases the wheels in the payment network by letting bitcoin run through your wallets and on to the merchants which will then sell it back to the payment processors where you buy it again. Replace what you’ve just spent and yes you’ve paid a small fee for your trouble (unless the retailer has given you a discount for your trouble). If we all do a little the cumulative effect will do a lot. Rinse and repeat. Support bitcoin businesses every chance you get if you want your net holdings to increase in value. For those Bitcoiners sitting on large stockpiles, consider that you will eventually need to spread that wealth so it can become popular. The math on 7 billion people owning 21 million bitcoin shows equal distribution to be .003 bitcoin each.The value of bitcoin is going to be derived from its use as a payment network first. It will have to gain legitimacy here as a tool. Its inherent value must be recognized and utilized. Only when the system is flooded with transactions and needs more bandwidth will the speculation phase of bitcoin’s value end. Its utility value will then be recognized. That’s where amazing things will begin to happen. Look to Overstock.com before Amazon. Give businesses accepting bitcoin your business as a first priority. If we all do a little, we can get the needle moving for the transaction volume on the blockchain.info chart. Make the bitcoin pioneers in retail proud to be the trailblazers.If you need a refresher course on why you are actually HURTING BITCOIN by not spending them, it may be a good time to refresh the lesson of Aesop’s fable, “The Goose that Laid the Golden Egg”. In this story, a lazy man living on a farm several hundred years ago inherited much land. Rather than working, he sold off pieces of land to pay for his lifestyle of temporary trivial riches until one day he found he had no property or items left to sell. One of the only items remaining was his pet goose. Before he took it to slaughter he found one morning that it had laid an egg made of pure gold. He quickly sold the egg to buy food and clothing to take care of his immediate needs. But the next day he found another golden egg which he used to buy a carriage and horses. The next day yet again another golden egg provided him wealth for a newer fancier home. This went on for some time before the man became greedy. He wanted all the eggs possible without waiting. He cut open the goose but found nothing. He never received another golden egg. His own greed ruined the ability for him to sustain his life. And soon enough his laziness and spending returned him to poverty.This life lesson is included with an entire collection of important life-lessons in Aesop’s fables including the “Boy Who Cried Wolf” and the “Tortoise and the Hare”. In an effort to show you’ve learned the lessons of the Goose and the Golden Egg, consider spending some bitcoin to order the entire collection of the classic Aesop’s Fables in hardback book form. One place to exercise this option is from Overstock.com and the order page for the book is found here.Then buy more bitcoin.Author’s note: The author is not endorsing the purchase of any product from any retailer specifically. The recommendation is to utilize the bitcoin market and the practice of using the payment network in general. Aesop’s Fables book will likely be found for sale at several bitcoin accepting merchants. Overstock.com was illustrated for example only.   

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