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>And because of that, there has been an incentive to hoard the virtual currency rather than spending it. The actual value of transactions in Bitcoins has fallen rather than rising. In effect, real gross Bitcoin product has fallen sharply.
This to me seems a major problem. But, what I am not clear on, is whether this means that the average value of a transaction has fallen, or if less transactions are being made. If the number of transactions has increased, but the average BTC has fallen, that would seem a good thing, -BTC are being increasingly divided and spent; but if the adjusted value (say in dollars) of BTC transaction has fallen, then that would be bad, -spending is falling.
IMHO, a Bitcoin that was easier to mine might have more success.