Bitcoiners like to compare the nascent technology to the internet in the early 90s. The public at large knows it’s out there, but they don’t know why it’s useful...yet. Take for example this video from the time period where Bryant Gumbel defiantly asks “what is the internet anyways?”
Trough of Disillusionment?
Watching that gives me flashbacks to every bar conversation I’ve ever had with someone about Bitcoin. The comparison is summed up by Marc Andreessen in this interview when he says:
“We're quite confident that when we're sitting here in 20 years, we'll be talking about Bitcoin the way we talk about the Internet today.”
I used to like this analogy, but lately I’ve heard a good argument against it. Back in 1994, people were excited to use the Internet. They wanted to get on this new network that they had heard so much about and do some “surfing.” In contrast, 2014 hasn’t seen the same kind of enthusiasm for Bitcoin.
The price has been in decline since reaching US$1,000 in November/December of last year, currently hovering around US$500 with no sign of breaking up anytime soon. This signals a lack of demand. At this time, most people are not interested in buying Bitcoin and experimenting with what it has to offer.
Is this invention not so revolutionary after all?
I don’t think so. I believe Mr. Andreessen when he says that Bitcoin “is the distributed trust network that the Internet always needed and never had.” But, as aforementioned argument suggests, I also suspect that many people in the community might be jumping the gun on where Bitcoin is currently at in its life cycle compared to where the Internet was in the early 90s.
While I would love to solve this argument, I must admit that I know far too little about the history of the internet to give you a confident answer about where Bitcoin is in its development phase relative to its predecessor. So what can I offer?
The BTC Experiment
I decided to put some of my own hard-earned BTC on the line for a completely unscientific test of the general public’s impression of Bitcoin and enthusiasm to try it. For this experiment I gave US$10 worth away to four different people with the only stipulation being that they figure out how to buy something online with it. My test subjects were: my Dad, my girlfriend, a friend, and a “random” redditor.
Again, I stress the unscientific nature of this experiment for a number of reasons. To start, in no way was the experimentation process standardized. I had to walk my Dad through much of the process and I was there to help my girlfriend with making the payment, while my friend and the redditor were on their own.
As well, four people are too small of a sample size to ever use when making a judgment about the public at large. And I’m sure people in the comment section will poke plenty of other holes in this investigation.
Even so, I found my results to be an interesting look at Bitcoin’s strengths and weaknesses and how they are perceived by people outside of the community.
I’ve been talking to my Dad about Bitcoin for as long as I have been into it myself (October of 2013). Despite many enthusiastic lectures during that time period, he had always maintained a level of distrust toward the idea of a cryptocurrency. A proud environmentalist - deregulated “free markets” and technologies promising to boost them have never been his cup of tea. Still, he holds a strong distaste towards the big banks so Bitcoin’s decentralization and promise to “get away from Federal Reserve control” piqued his interest.
When I approached him about doing the experiment he was hesitant. Computers have never been his favorite thing (despite his affection for posting liberal memes on his freshly minted Facebook account). As he matter-of-factly states “I’m not from the digital age.” But after some arm-twisting and the promise that he could buy a USB keyboard to use on his laptop that refuses to register the letters “s” and “w”, he relented.
After helping him set up a web wallet and transferring him the coin, we went searching for a keyboard on Overstock. A little browsing and one excellent YouTube review later, he settled on a Klear Keys XL and proceeded to the checkout. This is where we ran into his first complaint that “using small increments of bitcoin can be confusing.”
While many in the Bitcoin community have advocated the switch to mBTC as a way of counteracting the problems associated with prices being listed as “0.1584223” – this is what my Dad ran into when checking out on Overstock. While they do offer Coinbase integration that nullifies the payment issue, he was using GreenAddress.it. This meant typing in seven digits and a worried comment about the dangers of messing up a decimal place. Luckily we made it through without wasting a single satoshi and the keyboard was on its way. Or so we thought.
A couple days later my Dad forwarded me an email from Overstock regarding the purchase. They explained that “after the order was processed there was a system connection error and our system cancelled the order because it thought we had not been paid.”
The email was actually the first of three, with the third notifying that since he had not responded to the first two (his email doesn’t get checked very often) a refund had been issued to the Coinbase account registered under his email. He wasn’t sure what to do, because as far as he knew he had no Coinbase account.
This is when I remembered making an account for him in December when I was home for the holidays, trying to convince him that sub-1000 was “cheap coin” territory (he replied it’d be back at $500 in a few months...smart man). A little bit of inbox searching later and he recovered the Coinbase password and was able to redo his purchase, this time on his own.
When I asked my Dad to describe his experience using Bitcoin the word he kept coming back to was “cumbersome.” He complained about how he “Had to have three accounts open for an online transaction: Coinbase, Overstock and my E-mail account” and that “sometimes, because of tech reasons, it just doesn’t work.”
Finally when I asked whether he would prefer to use a debit card or Bitcoin for online purchases after this trial, he selected the former without hesitating. However despite these worries, his opinion towards Bitcoin has improved enough since the trial that he finally relented to my lectures and purchased himself a full coin for cold storage (at his target price of $500, of course).
My girlfriend is awesome for many reasons, one being her willingness to put up with me talking about cryptocurrencies 24/7. Despite this exposure she still hadn’t used BTC on her own, so when I asked her to take US$10 worth online for some shopping she was happy to help out; simply for the educational experience, of course.
She started off by setting up a wallet on GreenAddress.it so I could transfer the coins. After receiving them she went browsing on NewEgg and found a phone case she liked within five minutes. Everything seemed to be going great until she got to the checkout screen and saw no option to pay with Bitcoin…strange.
I took over and tried to figure things out, but I couldn’t see what the problem was. After a bit of searching I found out that Newegg doesn’t accept Bitcoin payments for their Marketplace section which the phone case was listed under. This is because they split the profit with a third party seller. Apparently work is under way to include these items as well, but at the time she was out of luck.
The set back at Newegg sent her shopping trip to Overstock, where my girlfriend criticized the options available for purchase. She found the selection limited compared to her usual online shopping destination, Amazon, and every time she did find a promising item in the $10 price range it seemed to have bad reviews. Nonetheless after 45 minutes of browsing she found a parer knife to her liking. It came out to a little more than $10 after tax, but I had sent a little more just in case (again, I stress the unscientific nature of this experiment).
She pulled up the checkout and was ready to send the money when we realized GreenAddress charged a 0.1 mBTC fee for sending coin, leaving us .03 cents short of the final sale price. I quickly sent some more coin her way, but this meant a ten minute wait before it could be spent on Overstock. Thankfully the market price didn’t drop out during this time and the payment went flawlessly once she had enough. Less than a week later we had a new addition to the kitchen.
When I asked her to sum up the experience my girlfriend was disappointed in the transaction fees GreenAddress charged for sending her payment. She also didn’t like the confusion over which products she could buy with Bitcoin on Newegg. However the overall experience was still a positive one because, while she was “skeptical at first, the wallet was relatively easy to use, and (she) had no trouble placing and receiving (her) order.”
Interestingly enough, the payment failure at Newegg gave her an insight to Bitcoin’s utility. When I asked whether she would prefer to use a debit card or crypto for future payments she said “probably traditional because there are more options, but I would use Bitcoin again because of security. There was a phone case I wanted on Newegg but did not feel comfortable using a debit card because the dealer seemed sketchy. With Bitcoin it would've been fine.”
To find my next participant I opened up the experiment’s scope and asked for volunteers from my group of 500 Facebook friends. This was the status:
Writing an article about the difficulty for an average person to make a purchase with bitcoin. If anyone wants to help, I'll give you $10 worth to make a purchase online. You just need to fill out a questionnaire for me after whatever you buy arrives. Any takers? You've gotta figure out how to make a wallet for yourself as well.
I received three responses to give it a try, but only one person (my High School friend Josh) went through the trouble of setting up a wallet. Josh had heard about Bitcoin before but his “knowledge of Bitcoin before the trial was only a tiny bit from reading about it on magazines and brief bits from television news. (He) knew a little about the mining process and how people build special computers to mine Bitcoins” but he had never delved too deeply beyond that saying it was “super interesting but super confusing.” He used CoinPocket for iPhone as his wallet.
Josh, like my girlfriend, ended up spending his Bitcoin on Overstock after a failed Newegg experience. The problem was that he got stuck trying to figure out a way to pay partly with Bitcoin and partly with a debit card (something Newegg does not allow). Once he made it to Overstock he found a cologne sample for under $10 and was able to figure out the payment process and his order arrived a few days later without a hitch.
Josh was not impressed with Bitcoin as a payment option. When I asked for a list of criticisms he said:
“I did not like that I was unable to purchase an item for more Bitcoins than I had in my wallet such as using all my Bitcoin and then covering the rest of the cost with debit/credit/ or Paypal. I did not enjoy that when I submitted my order, it took a few minutes to process and I was unsure if I did it correctly. And one of the more important things I did not like was websites that accept Bitcoin do not display how much goods cost in Bitcoin until well into the checkout process.”
When I asked whether he would prefer to use Bitcoin or a traditional debit card for online purchases his response was “traditional card every time” concluding that “the process to use Bitcoin is far from being ready for everyday consumer use.”
The only positive comments he had were that he enjoyed the learning experience of trying a new technology, saying “it was a fun process, but being too difficult to use makes me aware that I will stay away from it with future purchases until stores create a more user friendly experience.”
To find the final volunteer I took to my local city’s subreddit, /r/Bellingham. I posted this thread to the ~2,800 person sub and six interested users replied. The first lead I contacted never responded to my request for an address, but my second inquiry (to user HorrendousRex) was successful. I was excited to help Rex give Bitcoin a shot because in his initial response he said
“I’ve done a lot of research on Bitcoin and I'm highly skeptical of it, but I've been curious to give it a try.”
While my previous three subjects hadn’t known much about cryptocurrency, it was clear from the beginning that Rex had done his homework. This was the first message I received in regards to him setting up a wallet:
“I decided to go with the ‘Bitcoin Core’ wallet, which is produced by the people that maintain the Bitcoin public code repository, and is considered to be the 'reference implementation' of all Bitcoin software. I chose Bitcoin Core over an online wallet for two reasons:
There have been a few incidents where popular online bitcoin wallet companies have been hacked and people have lost a lot of money. On /r/bitcoin the general response to this happening was "serves them right for not having their own encrypted wallets.
Using an online wallet eliminates one of the qualities of bitcoin that I find most attractive. Bitcoin allows purchasers and buyers to be in full control of monetary transactions without any central intervention, electronically. Credit cards and debit cards don't have this feature as you need to pay a credit card processor or place your money in a bank. When you use an online wallet, you are once again placing trust in a central authority - and this one is not regulated!
I downloaded the software and installed it at 12:05 AM today (8/4/2014) and immediately asked the software to encrypt my wallet. I did this because there is a long-standing ‘bug’ where the wallet is not encrypted by default, and if you make backups - even if those backups were unintentionally created, like from an automated computer backup - then your unencrypted wallet will be backed up with all of its secrets, rendering your wallet insecure even if you secure it later. This process was easy but I only knew to do it because I had read about it - there was no warning or suggestion to do this.
As of 12:16 AM, my wallet is still "Synchronizing with network". There is something like 5 years and 25 weeks of transactions that need to be downloaded before your wallet is in synch and you can safely make purchases. This was what stopped me from using Bitcoin last time, as it takes a long time to create this wallet. Not very user friendly! The counter is now at ‘4 years and 1 week behind,’ although I will say that it does seem to be speeding up.
As some of you can guess, Rex was in for a wait. Downloading the entire Blockchain history (which clocks in at >20GB and is necessary for running BitcoinQT) can take days to weeks depending on your internet connection. I suggested a “lightweight” wallet like Electrum as well as the option of downloading the bootstrap.dat file available on Bitcoin.org, but Rex was committed to his decision. On day two of downloading he did concede saying: “I chose... poorly.”
I nonetheless applaud his commitment, because on day 4 I received the long awaited response that his wallet was synced and ready to use. I sent the coin and quickly received confirmation from Rex of its arrival. Three days later it looked like we were good to go when I received a message that he was preparing to gild a comment on Reddit with Bitcoin. I waited to hear how it went but there were no further messages. Four days later, I got some bad news:
Hey, just wanted to let you know what's up. The last time I messaged you, I wanted to gild a comment (see last message for that comment). Coinbase accepted my payment but a web error meant that the transaction was invalidated - I believe that I waited too long. Here's the breakdown:
- Click "give gold" on reddit, select "Bitcoin" as payment. Get directed to CoinBase page.
- Click link on coinbase to pay, launch bitcoin app. Wallet is <1 day behind, begin resyncing.
- Coinbase payment expires without my knowing (10 minute expiry)
- Wallet finished syncing about 30 minutes later.
- Through wallet app, send funds to gild comment ($3.99 worth).
- Click back to Coinbase, get error message that claims that my transaction expired and which persists even if I re-initiate gilding through reddit.com
- Transfer on bitcoin finalizes, but comment remains ungilded.
So basically, reddit (or Coinbase) stole $4 [from] me and I have no obvious recourse. Personally I'm just chalking this up to a bitcoin failure, but if you'd like me to follow up I'd be happy to.
I'm trying to guild another comment now with a synced wallet, will report back if successful.
Not exactly a confidence building experience for a new Bitcoin user, especially because it happened on a day (August 14th) that saw Bitcoin prices drop from $520 to $480. This was on top of a price drop that had already happened. When I first sent the coin (August 7th) the price was hovering around $585.
Once again, I applaud Rex’s commitment to the experiment. He denied my offer to send more coin to make up the difference in value (interestingly enough, he never complained about the volatility) and three days later I saw the message I’d been waiting for: “Gilding finally worked today! I re-synced my wallet, clicked ‘Give Gold / pay with bitcoin’, it launched my wallet. I clicked 'send', and a few seconds later I got a message from reddit that my gilding had succeeded.”
Obviously Rex had some complaints. He pointed out the “inconvenience of Bitcoin in terms of needing to constantly re-sync and wait for confirmation and hope that your order isn't swallowed by 'web demons.'” He also added that “Getting everything set up took WAY too long.
When a transfer went badly, there was no obvious way to recover funds - although to be fair I never asked reddit for a refund. My wallet took up 23 gigabytes on my hard disk, which is pretty darn big considering I only have two 256 GB SSD's (I like to live dangerously).
However he was also reasonable with the criticism, remarking:
“A lot of the fault is on me for dragging my feet. I think if Bitcoin was a bigger part of my life, something I used on a daily basis, the whole operation would have barely taken any more time than getting my credit card out of my wallet.”
So what was his lasting impression? I was surprised to find out that despite the fact he came into the experiment a skeptic and experienced a number of technical issues, Rex concluded “I’m much more impressed with it than I was before I started.”
He marveled at the overall payment process saying “the purchase flow was SO fast and easy. I clicked two buttons and then my Bitcoin wallet opened up and asked for my wallet password to complete the transfer. It was easier than using a credit card, and far more secure...honestly, and I find myself shocked to say this as I went in to this a skeptic, I would use Bitcoin again in an instant.”
In conclusion he added:
“All in all, I think there are still concerns BUT I think I might keep this wallet around for future purposes. I'm really optimistic about the future of cryptocurrencies, I'm just not sold that the current Bitcoin system is going to be adoptable by the general public...I think there are major issues to be solved with Bitcoin...before widespread adoption can occur, but I'm much more impressed with it than I was before I started.”
This experiment set out to judge public perception of Bitcoin, but I admit it is flawed in many ways. For one, my sampling was not random. I personally knew three of the subjects and that undoubtedly influenced their impartialness. The sample size was also far too small to draw any statistically significant conclusions.
Despite these shortcomings, I think this exercise presented a number of insights concerning Bitcoin’s perceived strengths and weaknesses to potential consumers. While many in the Bitcoin community like to label Bitcoin payments as the best way to pay for goods online, the examples above show that getting started can be “cumbersome” to say the least.
Of course, Rex brought up a good point when he said that if Bitcoin was a “bigger part of (his) life” the experience would’ve been easier. The general public is already used to online credit card payments, which gives the legacy system a leg up on the new experience that is paying with Bitcoin.
I also must comment on what I perceive as a general lack of enthusiasm to try Bitcoin. While $10 isn’t very much money, I was surprised that more people did not jump at the opportunity to have some online shopping paid for. Out of a combined potential audience of 3,300 for my two public posts (Facebook and Reddit), only nine people expressed interest. That tells me the idea of Bitcoin being the next Internet might be slightly overblown, at least concerning public interest in taking the new technology for a test run.
It would be nice to run this experiment on a larger scale with a more rigorous scientific method, but unfortunately I have neither the time nor the resources to undertake such a project. Despite the limited scale though, it was fun to gift people some magical internet money to try out something new. I highly encourage anyone who has some coins to spare and knows a curious friend or acquaintance to consider trying it for themselves.
Did you enjoy this article? You may also be interested in reading these ones:
- The Ethnic Group That Knows the Most About Bitcoin Is Not Who You Think It Is
- PayPal’s Bizarre Bitcoin survey
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