Merchant adoption is happening top-down
Last year, someone who predicted that Wal-Mart would be accepting bitcoins in two years would have been looked at as insane. Now, some people view that scenario as inevitable.
The important part of merchant adoption isn't the people paying in bitcoins; it's that there is another place for businesses to spend bitcoins. The more the space develops, the more likely it looks that the first people to use bitcoins for common purchases will be business to business transactions. If you have lots of bitcoins from customers, and your supplier also accepts bitcoins from customers, then there is no reason to pay Coinbase a fee to cash out your bitcoins and then pay bank fees to pay the supplier.
Some businesses have a model where the same goods are purchased every day, and these businesses are perfect for the beginnings of this. For example, Subway needs to buy huge numbers of fresh tomatoes every day for its stores. If Subway accepted bitcoins, it makes more sense for them to just send their bitcoins immediately to the tomato supplier. That way, they are shielded from volatility and they don't have to pay fees.
Bitcoin as a big-money transfer network
Everything is pointing towards bitcoin, for the foreseeable future, becoming a network for business-to-business transfers. Seeing as how it is taking a while for people to add wallets to their phones, the logical first users are businesses.
Businesses are also largely unaffected by the 1MB transaction limit, because transaction fees are constant. For them, if you need to buy $1m in tomatoes, $0.50 will get you into the next block easily. I've said in the past that bitcoin could become a clearinghouse between banks. The factors are lining up that non-financial business-to-business transactions could be coming first, followed by transfers between banks.
Sentiment in /r/bitcoin
One way to judge upcoming price movements is to look at sentiment in /r/bitcoin. I don't think there's a negative article posted there today.
/r/bitcoinmarkets continues to criticize people
Unfortunately, it looks like people are back at it in /r/bitcoinmarkets again, and it disappoints me to see that. This time, someone is being personally attacked in a hugely out of proportion thread where some users have alleged that he has some "motive" to influence the price of bitcoins.
I can't ever get into someone's head to see what he is thinking. Just using the logic of math, there are so many possible thoughts a person can have that the odds of me coming upon the correct one by chance are astronomically small. Therefore, it would be inappropriate of me to accuse people of thinking something when my accusation is almost guaranteed to be false.
The other issue with accusing people of "motives" is that they really aren't relevant. Talk is cheap, but actions are relevant. This is why laws specifying greater penalties for "hate crimes" should be eliminated. If you rob someone and kill him, then you took someone's life unnecessarily regardless of whether you drew a swastika on the door on the way out.
I strongly disapprove of anyone who attempts to attach "motives" to people who are posting on the Internet. There aren't many blows cheaper than that. If you disagree with someone, then say so, and if you think that a person's posts are not contributing to the discussion, then say that or report them to the moderators.
*Note: I edited this post after someone mentioned to me that it isn't illegal to post a swastika on a door without committing a murder. So if I painted the symbol on my door, there would be no penalty for that act, but if I killed someone on my porch and then painted the symbol on my door, the penalty for that act would be several additional years in prison, even though I did the same thing both times.
Follow the money
To figure out what's really happening with anything in life, follow the money. My dad yesterday called me and was wondering if he should sell. Selling certainly wouldn't be a bad idea, given that I told him to buy at $68. He had watched one of those YouTube videos where people were talking about the invention of bitcoin and its significance.
In the video, a guy was arguing that the blockchain technology was going to bring a lot of changes, but that bitcoin itself might fail. I simply don't comprehend this argument. Money is the simplest, most logical, most useful, and most necessary of all the applications for which the blockchain can be used. If you don't use a blockchain of money, then how do you have a distributed stock exchange?
What surprises me, but which confirms my argument, is that almost all of the $130m in venture capital that went into bitcoins this year is going into services based on accepting and processing bitcoins, with the largest going to BitPay. Nobody is investing millions into proofs of existence or voting systems. These people don't just throw money around when it isn't going to provide a return. That demonstrates that money is the application where the blockchain technology will be most successful.
Why most blockchains will fail
This brings me to why most of these alternate blockchain technologies will fail. Ethereum is an example of a technology that was not primarily designed to be used for money. Namecoin is another example.
The problem with these technologies is that miners need to be rewarded in some way. Namecoins are not money; they are tokens that can be used to register domain names. If you want to register a domain name, then namecoins are great for you, but if you don't, then you want to get rid of them so that you can obtain something that is fungible and is valued by everyone. The only people who value namecoins are people who want domains, people who are squatting domains, and people who think that other people will pay more for them. Unlike bitcoins, namecoins and ethereum are not accepted at 60,000 merchants.
Namecoins would have succeeded if people who mined them were rewarded with bitcoins. But rewarding namecoin miners with bitcoins not only would have been difficult to implement, but would also would have defeated the purpose of their existence as a separate chain. Had they been implemented as colored coins, they might have had a different outcome.
Merge mining
Speaking of namecoins, one way to earn bitcoins while mining namecoins is through merge mining. In merge mining, a miner hashes multiple coins at once, and when a block is found for one of them, then he also gets blocks in all the other coins of lower difficulty.
Merge mining has been heralded as a solution to a number of problems for altcoins. I'm not sure that it's all it's cracked up to be. For one, merge mining does more to centralize mining than anything else. Now, a pool like mine can mine ten coins at once rather than one, and sell them all at once to get bitcoins.
Since merge mining is complicated to set up, and requires miners to be aware of all the new coins coming out every day, solo mining is not optimal for merge mining. Meanwhile, pools can easily add new coins and all of their miners will be mining the newest coins.
Also, merge mining makes coins extremely vulnerable to 51% attacks. Imagine that you have 10 coins you are mining, there are three pools, and there are no other miners. One pool mines 3 of them, one pool mines 6, and the third pool mines all of the coins. The third pool, which makes the most money, therefore attracts the most miners and obtains 40% of the market share of all three pools. The other pools have 30% each.
In this situation, 7 of the 10 coins are unintentionally subjected to 51% attacks. Three of the coins are mined by the two other pools, so the largest pool has a minority share in those coins. For the other 7 coins, the large pool has 70% or 100% of the hashpower.
To make things worse, price is irrelevant to merge mining, since adding a new coin requires no more electricity. The most expensive coins are just as likely to be killed as the most inexpensive coins. If darkcoins were merge mined, they would be just as likely to be killed off as krugercoins would, despite krugercoins having no meaningful advantages over other types of coins. Not only does this jeopardize "better" coins, it also means that junk coins will stick around much longer because nobody will be able to put an end to them.
Merge mining is a great equalizer: price, vulnerability, and features (or lack thereof) all become the same.
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