What factors predict the success of a Steam game?
I've seen quite a few discussions, comments and questions on /gamedev
about what determines a game's success. How much does quality matter? Is establishing market awareness before launch the only thing that matters? Does a demo help or hurt? If your game has a poor launch, how likely is it to recover? Is it possible to roughly predict the sales of a game before launch?
In preparation for my game's launch
, I spent a lot of time monitoring upcoming releases trying to find the answer to these questions. I compiled a spreadsheet, noted followers, whether it was Early Access or not, and saw how many reviews it received in the first week, month and quarter.
I'm sharing this data now in the hopes that it helps other developers understand and predict their games' sales.
First some notes on the data:
- One of the important sources of data are the number Steam reviews. There is good evidence that these correlate strongly with copies sold, with frequently cited ratios of 50 sales per Steam review, but there's a wide range. It seems likely that the majority of Steam games fall between 25 and 120 sales per Steam review, but there are outliers. Also, games with a very small number of reviews are much more likely to be outliers in this respect. My own game is the only game I have hard sales numbers for. You can read my lengthy Reddit post on its release, but the relevant numbers are that it sold 1587 copies in the first week and 3580 copies in its first quarter.
- The total number of games in the sample was 115.
- I selected games semi-randomly from from both Popular Upcoming and All Upcoming. This favors the popular upcoming tab somewhat and this was deliberate: I wanted a diverse sample but also one not completely dominated with titles that sold zero copies.
- Games are ordered by their release date which range from 10/26/18 to 12/20/18.
|Game ||Price ||Launch Discount ||Week Guess ||Week actual ||3 Month ||3 Month/week ||Followers ||Early Access ||Demo ||Review Score |
|Pit of Doom ||9.99 ||0 ||7 ||27 ||43 ||1.592592593 ||295 ||Y ||N ||0.8 |
|Citrouille ||9.99 ||0.2 ||16 ||8 ||12 ||1.5 ||226 ||N ||N || |
|Corspe Party: Book ||14.99 ||0.1 ||32 ||40 ||79 ||1.975 ||1015 ||N ||N ||0.95 |
|Call of Cthulhu ||44.99 ||0 ||800 ||875 ||1595 ||1.822857143 ||26600 ||N ||N ||0.74 |
|On Space ||0.99 ||0.4 ||0 ||0 ||0 || ||4 ||N ||N || |
|Orphan ||14.99 ||0 ||50 ||0 ||8 || ||732 ||N ||N || |
|Black Bird ||19.99 ||0 ||20 ||13 ||34 ||2.615384615 ||227 ||N ||N || |
|Gloom ||6.99 ||0 ||20 ||8 ||17 ||2.125 ||159 ||N ||N || |
|Gilded Rails ||5.99 ||0.35 ||2 ||3 ||7 ||2.333333333 ||11 ||N ||Y || |
|The Quiet Man ||14.99 ||0.1 ||120 ||207 ||296 ||1.429951691 ||5596 ||N ||N ||0.31 |
|KartKraft ||19.99 ||0.1 ||150 ||90 ||223 ||2.477777778 ||7691 ||Y ||N ||0.84 |
|The Other Half ||7.99 ||0 ||2 ||3 ||27 ||9 ||91 ||N ||Y ||0.86 |
|Parabolus ||14.99 ||0.15 ||0 ||0 ||0 || ||16 ||N ||Y || |
|Yet Another Tower Defense ||1.99 ||0.4 ||20 ||22 ||38 ||1.727272727 ||396 ||N ||N ||0.65 |
|Galaxy Squad ||9.99 ||0.25 || ||8 ||42 ||5.25 ||3741 ||Y ||N ||0.87 |
|Swords and Soldiers 2 ||14.99 ||0.1 ||65 ||36 ||63 ||1.75 ||1742 ||N ||N ||0.84 |
|SpitKiss ||2.99 ||0 ||3 ||1 ||2 ||2 ||63 ||N ||N || |
|Holy Potatoes ||14.99 ||0 ||24 ||11 ||22 ||2 ||617 ||N ||N ||0.7 |
|Kursk ||29.99 ||0.15 ||90 ||62 ||98 ||1.580645161 ||2394 ||N ||N ||0.57 |
|SimpleRockets 2 ||14.99 ||0.15 ||90 ||142 ||272 ||1.915492958 ||3441 ||Y ||N ||0.85 |
|Egress ||14.99 ||0.15 ||160 ||44 ||75 ||1.704545455 ||7304 ||Y ||N ||0.67 |
|Kynseed ||9.99 ||0 ||600 ||128 ||237 ||1.8515625 ||12984 ||Y ||N ||0.86 |
|11-11 Memories ||29.99 ||0 ||30 ||10 ||69 ||6.9 ||767 ||N ||N ||0.96 |
|Rage in Peace ||12.99 ||0.1 ||15 ||10 ||42 ||4.2 ||377 ||N ||N ||0.85 |
|One Hour One Life ||19.99 ||0 ||12 ||153 ||708 ||4.62745098 ||573 ||N ||N ||0.81 |
|Optica ||9.99 ||0 ||0 ||2 ||3 ||1.5 ||18 ||N ||N || |
|Cybarian ||5.99 ||0.15 ||8 ||4 ||18 ||4.5 ||225 ||N ||N || |
|Zeon 25 ||3.99 ||0.3 ||3 ||11 ||12 ||1.090909091 ||82 ||Y ||N || |
|Of Gods and Men ||7.99 ||0.4 ||3 ||10 ||18 ||1.8 ||111 ||N ||Y || |
|Welcome to Princeland ||4.99 ||0.1 ||1 ||15 ||55 ||3.666666667 ||30 ||N ||N ||0.85 |
|Zero Caliber VR ||24.99 ||0.1 ||100 ||169 ||420 ||2.485207101 ||5569 ||Y ||N ||0.73 |
|HellSign ||14.99 ||0 ||100 ||131 ||334 ||2.549618321 ||3360 ||Y ||N ||0.85 |
|Thief Simulator ||19.99 ||0.15 ||400 ||622 ||1867 ||3.001607717 ||10670 ||N ||N ||0.81 |
|Last Stanza ||7.99 ||0.1 ||8 ||2 ||4 ||2 ||228 ||N ||Y || |
|Evil Bank Manager ||11.99 ||0.1 || ||106 ||460 ||4.339622642 ||8147 ||Y ||N ||0.78 |
|Oppai Puzzle ||0.99 ||0.3 || ||36 ||93 ||2.583333333 ||54 ||N ||N ||0.92 |
|Hexen Hegemony ||9.99 ||0.15 ||3 ||1 ||5 ||5 ||55 ||Y ||N || |
|Blokin ||2.99 ||0 ||0 ||0 ||0 ||0 ||10 ||N ||N || |
|Light Fairytale Ep 1 ||9.99 ||0.1 ||80 ||23 ||54 ||2.347826087 ||4694 ||Y ||N ||0.89 |
|The Last Sphinx ||2.99 ||0.1 ||0 ||0 ||1 ||0 ||17 ||N ||N || |
|Glassteroids ||9.99 ||0.2 ||0 ||0 ||0 ||0 ||5 ||Y ||N || |
|Hitman 2 ||59.99 ||0 ||2000 ||2653 ||3677 ||1.385978138 ||52226 ||N ||N ||0.88 |
|Golf Peaks ||4.99 ||0.1 ||1 ||8 ||25 ||3.125 ||46 ||N ||N ||1 |
|Sipho ||13.99 ||0 ||24 ||5 ||14 ||2.8 ||665 ||Y ||N || |
|Distraint 2 ||8.99 ||0.1 ||40 ||104 ||321 ||3.086538462 ||1799 ||N ||N ||0.97 |
|Healing Harem ||12.99 ||0.1 ||24 ||10 ||15 ||1.5 ||605 ||N ||N || |
|Spark Five ||2.99 ||0.3 ||0 ||0 ||0 ||0 ||7 ||N ||N || |
|Bad Dream: Fever ||9.99 ||0.2 ||30 ||78 ||134 ||1.717948718 ||907 ||N ||N ||0.72 |
|Underworld Ascendant ||29.99 ||0.15 ||200 ||216 ||288 ||1.333333333 ||8870 ||N ||N ||0.34 |
|Reentry ||19.99 ||0.15 ||8 ||24 ||78 ||3.25 ||202 ||Y ||N ||0.95 |
|Zvezda ||5.99 ||0 ||2 ||0 ||0 ||0 ||25 ||Y ||Y || |
|Space Gladiator ||2.99 ||0 ||0 ||1 ||2 ||2 ||5 ||N ||N || |
|Bad North ||14.99 ||0.1 ||500 ||360 ||739 ||2.052777778 ||15908 ||N ||N ||0.8 |
|Sanctus Mortem ||9.99 ||0.15 ||3 ||3 ||3 ||1 ||84 ||N ||Y || |
|The Occluder ||1.99 ||0.2 ||1 ||1 ||1 ||1 ||13 ||N ||N || |
|Dark Fantasy: Jigsaw ||2.99 ||0.2 ||1 ||9 ||36 ||4 ||32 ||N ||N ||0.91 |
|Farming Simulator 19 ||34.99 ||0 ||1500 ||3895 ||5759 ||1.478562259 ||37478 ||N ||N ||0.76 |
|Don't Forget Our Esports Dream ||14.99 ||0.13 ||3 ||16 ||22 ||1.375 ||150 ||N ||N ||1 |
|Space Toads Mayhem ||3.99 ||0.15 ||1 ||2 ||3 ||1.5 ||18 ||N ||N || |
|Cattle Call ||11.99 ||0.1 ||10 ||19 ||53 ||2.789473684 ||250 ||Y ||N ||0.71 |
|Ralf ||9.99 ||0.2 ||0 ||0 ||2 ||0 ||6 ||N ||N || |
|Elite Archery ||0.99 ||0.4 ||0 ||2 ||3 ||1.5 ||5 ||Y ||N || |
|Evidence of Life ||4.99 ||0 ||0 ||2 ||4 ||2 ||10 ||N ||N || |
|Trinity VR ||4.99 ||0 ||2 ||8 ||15 ||1.875 ||61 ||N ||N || |
|Quiet as a Stone ||9.99 ||0.1 ||1 ||1 ||4 ||4 ||42 ||N ||N || |
|Overdungeon ||14.99 ||0 ||3 ||86 ||572 ||6.651162791 ||77 ||Y ||N ||0.91 |
|Protocol ||24.99 ||0.15 ||60 ||41 ||117 ||2.853658537 ||1764 ||N ||N ||0.68 |
|Scraper: First Strike ||29.99 ||0 ||3 ||3 ||15 ||5 ||69 ||N ||N || |
|Experiment Gone Rogue ||16.99 ||0 ||1 ||1 ||5 ||5 ||27 ||Y ||N || |
|Emerald Shores ||9.99 ||0.2 ||0 ||1 ||2 ||2 ||12 ||N ||N || |
|Age of Civilizations II ||4.99 ||0 ||600 ||1109 ||2733 ||2.464382326 ||18568 ||N ||N ||0.82 |
|Dereliction ||4.99 ||0 ||0 ||0 ||0 ||#DIV/0! ||18 ||N ||N || |
|Poopy Philosophy ||0.99 ||0 ||0 ||6 ||10 ||1.666666667 ||6 ||N ||N || |
|NOCE ||17.99 ||0.1 ||1 ||3 ||4 ||1.333333333 ||35 ||N ||N || |
|Qu-tros ||2.99 ||0.4 ||0 ||3 ||7 ||2.333333333 ||4 ||N ||N || |
|Mosaics Galore. Challenging Journey ||4.99 ||0.2 ||1 ||1 ||8 ||8 ||14 ||N ||N || |
|Zquirrels Jump ||2.99 ||0.4 ||0 ||1 ||4 ||4 ||9 ||N ||N || |
|Dark Siders III ||59.99 ||0 ||2400 ||1721 ||2708 ||1.573503777 ||85498 ||N ||N ||0.67 |
|R-Type Dimensions Ex ||14.99 ||0.2 ||10 ||48 ||64 ||1.333333333 ||278 ||N ||N ||0.92 |
|Artifact ||19.99 ||0 ||7000 ||9700 ||16584 ||1.709690722 ||140000 ||N ||N ||0.53 |
|Crimson Keep ||14.99 ||0.15 ||20 ||5 ||6 ||1.2 ||367 ||N ||N || |
|Rival Megagun ||14.99 ||0 ||35 ||26 ||31 ||1.192307692 ||818 ||N ||N || |
|Santa's Workshop ||1.99 ||0.1 ||3 ||1 ||1 ||1 ||8 ||N ||N || |
|Hentai Shadow ||1.99 ||0.3 || ||2 ||12 ||6 ||14 ||N ||N || |
|Ricky Runner ||12.99 ||0.3 ||3 ||6 ||13 ||2.166666667 ||66 ||Y ||N ||0.87 |
|Pro Fishing Simulator ||39.99 ||0.15 ||24 ||20 ||19 ||0.95 ||609 ||N ||N ||0.22 |
|Broken Reality ||14.99 ||0.1 ||60 ||58 ||138 ||2.379310345 ||1313 ||N ||Y ||0.98 |
|Rapture Rejects ||19.99 ||0 ||200 ||82 ||151 ||1.841463415 ||9250 ||Y ||N ||0.64 |
|Lost Cave ||19.99 ||0 ||3 ||8 ||11 ||1.375 ||43 ||Y ||N || |
|Epic Battle Fantasy 5 ||14.99 ||0 ||300 ||395 ||896 ||2.26835443 ||4236 ||N ||N ||0.97 |
|Ride 3 ||49.99 ||0 ||75 ||161 ||371 ||2.304347826 ||1951 ||N ||N ||0.74 |
|Escape Doodland ||9.99 ||0.2 ||25 ||16 ||19 ||1.1875 ||1542 ||N ||N || |
|Hillbilly Apocalypse ||5.99 ||0.1 ||0 ||1 ||2 ||2 ||8 ||N ||N || |
|X4 ||49.99 ||0 ||1500 ||2638 ||4303 ||1.63115997 ||38152 ||N ||N ||0.7 |
|Splotches ||9.99 ||0.15 ||0 ||2 ||1 ||0.5 ||10 ||N ||N || |
|Above the Fold ||13.99 ||0.15 ||5 ||2 ||6 ||3 ||65 ||Y ||N || |
|The Seven Chambers ||12.99 ||0.3 ||3 ||0 ||0 ||#DIV/0! ||55 ||N ||N || |
|Terminal Conflict ||29.99 ||0 ||5 ||4 ||11 ||2.75 ||125 ||Y ||N || |
|Just Cause 4 ||59.99 ||0 ||2400 ||2083 ||3500 ||1.680268843 ||50000 ||N ||N ||0.34 |
|Grapple Force Rena ||14.99 ||0 ||11 ||12 ||29 ||2.416666667 ||321 ||N ||Y || |
|Beholder 2 ||14.99 ||0.1 || ||479 ||950 ||1.983298539 ||16000 ||N ||N ||0.84 |
|Blueprint Word ||1.99 ||0 || ||12 ||15 ||1.25 ||244 ||N ||Y || |
|Aeon of Sands ||19.99 ||0.1 ||20 ||12 ||25 ||2.083333333 ||320 ||N ||N || |
|Oakwood ||4.99 ||0.1 || ||32 ||68 ||2.125 ||70 ||N ||N ||0.82 |
|Endhall ||4.99 ||0 ||4 ||22 ||42 ||1.909090909 ||79 ||N ||N ||0.84 |
|Dr. Cares - Family Practice ||12.99 ||0.25 ||6 ||3 ||8 ||2.666666667 ||39 ||N ||N || |
|Treasure Hunter ||16.99 ||0.15 ||200 ||196 ||252 ||1.285714286 ||4835 ||N ||N ||0.6 |
|Forex Trading ||1.99 ||0.4 ||7 ||10 ||14 ||1.4 ||209 ||N ||N || |
|Ancient Frontier ||14.99 ||0 ||24 ||5 ||16 ||3.2 ||389 ||N ||N || |
|Fear the Night ||14.99 ||0.25 ||25 ||201 ||440 ||2.189054726 ||835 ||Y ||N ||0.65 |
|Subterraneus ||12.99 ||0.1 ||4 ||0 ||3 ||#DIV/0! ||82 ||N ||N || |
|Starcom: Nexus ||14.99 ||0.15 || ||53 ||119 ||2.245283019 ||1140 ||Y ||N ||0.93 |
|Subject 264 ||14.99 ||0.2 ||25 ||2 ||3 ||1.5 ||800 ||N ||N || |
|Gris ||16.9 ||0 ||100 ||1484 ||4650 ||3.133423181 ||5779 ||N ||N ||0.96 |
|Exiled to the Void ||7.99 ||0.3 ||9 ||4 ||11 ||2.75 ||84 ||Y ||N || |
For the columns that are not self-explanatory:
- Launch Discount: Percent first week discount, 0.25 = 25% off
- Week Guess: This is my guess, made before the game launched as to how many Steam purchaser reviews it would have after exactly one week.
- Week Actual: The number of reviews that the game had after 1 week.
- 3 Month: The number of reviews that the game had after 3 months.
- Followers: The number of group followers the game had prior to launch. In some cases this recorded just before launch, in some cases up to a week before.
- Review score: The percent favorable score on Steam at the one month mark. Games needed a minimum of 20 reviews to be counted.
Question 1: Does Quality Predict Success?
There was a recent blog post stating that the #1 metric for indie games' success is how good it is.
Quality is obviously a subjective metric. The most obvious objective measure of quality for Steam games is their % Favorable Review score. This is the percentage of reviews by purchasers of the game that gave the game a positive rating. I excluded any game that did not have at least 20 user reviews in the first month, which limited the sample size to 56.
The (Pearson) correlation of a game's review score to its number of reviews three months after its release was -0.2. But 0.2 (plus or minus) isn't a very strong correlation at all. More importantly, Pearson correlation can be swayed if the data contains some big outliers. Looking at the actual games, we can see that the difference is an artifact of an outlier. Literally. Valve's Artifact by far had the most reviews after three months and had one of the lowest review scores (53% at the time). Removing this game from the data changed the correlation to essentially zero.
Spearman's Rho, an alternative correlation model that correlates rank position and minimizes the effect of huge outliers produced a similar result. Conclusion: If there is correlation between a game's quality (as measured by Steam review score) and first quarter sales (as measured by total review count), it is too subtle to be detected in this data.
Question 2: Do Demos, Early Access or Launch Discounts Affect Success/Failure?
Unfortunately, there were so few games that had demos prior to release (10) that only a very strong correlation would really tell us anything. As it happens, there was no meaningful correlation one way or another.
There were more Early Access titles (28), but again the correlation was too small to be meaningful.
More than half the titles had a launch week discount and there was actually a moderate negative correlation of -0.3 between having a launch discount and first week review count. However it appears that this is primarily the result of the tendency of AAA titles (which sell the most copies) to not do launch discounts. Removing the titles that likely grossed over a $1 million in the first week reduced the correlation to basically zero. Conclusion: Insufficient data. No clear correlation between demos, Early Access or launch discount and review counts: if they help or hurt the effect is not consistent enough to be seen here.
Question 3: Does pre-launch awareness (i.e., Steam followers) predict success?
You can see the number of "followers" for any game on Steam by searching for its automatically-created Community Group
. Prior to launch, this is a good rough indicator of market awareness.
The correlation between group followers shortly before launch and review count at 3 months was 0.89. That's a very strong positive correlation. The rank correlation was also high (0.85) suggesting that this wasn't the result of a few highly anticipated games.
Save for a single outlier (discussed later), the ratio of 3 month review counts to pre-launch followers ranged from 0 (for the handful of games that never received any reviews) to 1.8, with a median value of 0.1. If you have 1000 followers just prior to launch, then at the end of the first quarter you should expect "about" 100 reviews.
One thing I noticed was that there were a few games that had follower counts that seemed too high compared to secondary indicators of market awareness, such as discussion forum threads and Twitter engagement. After some investigation I came to the conclusion that pre-launch key activations are treated as followers by Steam. If a game gave away a lot of Steam keys before launch (say as Kickstarter rewards or part of beta testing) this would cause the game to appear to have more followers than it had gained "organically." Conclusion: Organic followers prior to launch are a strong predictor of a game's eventual success.
Question 4: What about price?
The correlation between price and review count at 3 month is 0.36, which is moderate correlation. I'm not sure how useful that data point is: it is somewhat obvious that higher budget games have larger marketing budgets.
There is a correlation between price and review score of -0.41. It seems likely that players do factor price into their reviews and a game priced at $60 has a higher bar to clear to earn a thumbs up review than a game priced at $10.
Question 5: Do first week sales predict first quarter results?
The correlation between number of reviews after 1 week and number of reviews after 3 months was 0.99. The Spearman correlation was 0.97. This is the highest correlation I found in the data.
Excluding games that sold very few copies (fewer than 5 reviews after the first week), most games had around twice as many reviews after 3 months as they did after 1 week. This suggests that games sell about as many copies in their first week as they do in the next 12 weeks combined. The vast majority of games had a tail ratio (ratio of reviews at 3 months to 1 week) of between 1.3 to 3.2.
I have seen a number of questions from developers whose game had a poor launch on Steam and wanted to know what they can do to improve sales. While I'm certain post-launch marketing can have an effect on continuing sales, your first week does seem to set hard bounds on your results. Conclusion: ALL SIGNS POINT TO YES
Question 6: Does Quality Help with a Game's "Tail"?
As discussed in the last question while first week sales are very strongly correlated with first quarter, there's still quite a wide range of ratios. Defining a game's Tail Ratio
as the ratio of reviews after 3 months to after 1 week, the lowest value was 0.95 for "Pro Fishing Simulator" which actually managed to lose 1 review. The highest ratio was 6.9, an extreme outlier that I'll talk about later. It is perhaps not a coincidence that the worst tail had a Steam score of 22% and the best tail had a Steam score of 96%.
The overall correlation between the Tail Ratio and Steam score was 0.42. Conclusion: Even though there is no clear correlation between quality and overall review count/sales, there is a moderate correlation between a game's review score and its tail. This suggests that "good games" do better in the long run than "bad games," but the effect is small compared to the more important factor of pre-launch awareness.
Question 7: Is it possible to predict a game's success before launch without knowing its wishlists?
While I was compiling the data for each game, sometime prior to its scheduled launch date, I would make a prediction of how many reviews I thought it would receive in its first week and add that prediction to the spreadsheet.
The #1 factor I used in making my prediction was group follower count. In some cases I would adjust my prediction if I thought that value was off, using secondary sources such as Steam forum activity and Twitter engagement.
The correlation between my guess and the actual value was 0.96, which is a very strong correlation. As you can see in the data, the predictions are, for the most part, in the right ballpack with a few cases where I was way off.
Based on my experience, multiplying the group follower count by 0.1 will, in most cases, give you a ballpark sense of the first
quarter review count. If a game doesn't have at least one question in the discussion forum for every 100 followers, that may indicate that there are large number of "inorganic" followers and you may need to adjust your estimate. Conclusion: Yes, with a few exceptions, using follower data and other indicators you can predict first week results approximately. Given the strong correlation between first week and quarter sales, it should also be possible to have a ballpark idea of first quarter results before launch.
Final Question: What about the outliers you mentioned?
There were a few games in the data that stood out significantly in one way or another.
Outlier #1: Overdungeon. This game had 77 group followers shortly before launch, a fairly small number and based solely on that number I would have expected fewer than a dozen reviews in the first week. It ended up with 86. Not only that, it had a strong tail and finished its first quarter with 572 reviews. This was by a wide margin the highest review count to follower ratio in the sample.
Based on the reviews, it appears to basically be Slay the Spire, but huge in Asia. 90% of the reviews seem to be in Japanese or Chinese. If anyone has some insight to this game's unusual apparent success, I'm very curious.
This seems to be the only clear example in the data of a game with minimal following prior to launch going on to having a solid first quarter.
Outlier #2: 11-11 Memories Retold. This game had 767 group followers shortly before launch, ten times as many as Overdungeon. That's still not a large number for even a small indie title. It had a fair amount going for it, though: it was directed by Yoan Fanise, who co-directed the critally acclaimed Valiant Hearts, a game with a similar theme. It was animated by Aardman Studios of "Wallace and Gromit" fame. Its publisher was Bandai Namco Europe, a not inexperienced publisher. The voice acting was by Sebastian Koch and Elijah Wood. It has dozens of good reviews in both gaming and traditional press. It currently has a 95% positive review rating on Steam.
Despite all that, nobody bought it. 24 hours after it came out it had literally zero reviews on Steam. One week after it came out it had just 10. Three months later it had demonstrated the largest tail in the data, but even then it had only climbed to 69 reviews. Now it's at about 100, an incredible tail ratio, but almost certainly a commercial failure.
This is a solid example that good game + good production values does necessarily equal good sales.
The big take-aways from this analysis are:
- The success of a game on Steam very strongly depends on its first week performance
- A game's first week performance is strongly correlated with its pre-launch market awareness
- Quality does not seem to strongly impact first week performance, but may have some positive effect on a game's "tail"
- All inferences regarding sales are dependent on the relationship between review counts and sales
Thanks for reading!
Bitcoin Table of contents expand: 1. What is Bitcoin? 2. Understanding Bitcoin 3. How Bitcoin Works 4. What's a Bitcoin Worth? 5. How Bitcoin Began 6. Who Invented Bitcoin? 7. Before Satoshi 8. Why Is Satoshi Anonymous? 9. The Suspects 10. Can Satoshi's Identity Be Proven? 11. Receiving Bitcoins As Payment 12. Working For Bitcoins 13. Bitcoin From Interest Payments 14. Bitcoins From Gambling 15. Investing in Bitcoins 16. Risks of Bitcoin Investing 17. Bitcoin Regulatory Risk 18. Security Risk of Bitcoins 19. Insurance Risk 20. Risk of Bitcoin Fraud 21. Market Risk 22. Bitcoin's Tax Risk What is Bitcoin?
Bitcoin is a digital currency created in January 2009. It follows the ideas set out in a white paper by the mysterious Satoshi Nakamoto, whose true identity is yet to be verified. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies.
There are no physical bitcoins, only balances kept on a public ledger in the cloud, that – along with all Bitcoin transactions – is verified by a massive amount of computing power. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Despite it not being legal tender, Bitcoin charts high on popularity, and has triggered the launch of other virtual currencies collectively referred to as Altcoins.
Understanding Bitcoin Bitcoin is a type of cryptocurrency: Balances are kept using public and private "keys," which are long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key (comparable to a bank account number) serves as the address which is published to the world and to which others may send bitcoins. The private key (comparable to an ATM PIN) is meant to be a guarded secret and only used to authorize Bitcoin transmissions. Style notes: According to the official Bitcoin Foundation, the word "Bitcoin" is capitalized in the context of referring to the entity or concept, whereas "bitcoin" is written in the lower case when referring to a quantity of the currency (e.g. "I traded 20 bitcoin") or the units themselves. The plural form can be either "bitcoin" or "bitcoins."
How Bitcoin Works Bitcoin is one of the first digital currencies to use peer-to-peer technology to facilitate instant payments. The independent individuals and companies who own the governing computing power and participate in the Bitcoin network, also known as "miners," are motivated by rewards (the release of new bitcoin) and transaction fees paid in bitcoin. These miners can be thought of as the decentralized authority enforcing the credibility of the Bitcoin network. New bitcoin is being released to the miners at a fixed, but periodically declining rate, such that the total supply of bitcoins approaches 21 million. One bitcoin is divisible to eight decimal places (100 millionths of one bitcoin), and this smallest unit is referred to as a Satoshi. If necessary, and if the participating miners accept the change, Bitcoin could eventually be made divisible to even more decimal places. Bitcoin mining is the process through which bitcoins are released to come into circulation. Basically, it involves solving a computationally difficult puzzle to discover a new block, which is added to the blockchain and receiving a reward in the form of a few bitcoins. The block reward was 50 new bitcoins in 2009; it decreases every four years. As more and more bitcoins are created, the difficulty of the mining process – that is, the amount of computing power involved – increases. The mining difficulty began at 1.0 with Bitcoin's debut back in 2009; at the end of the year, it was only 1.18. As of February 2019, the mining difficulty is over 6.06 billion. Once, an ordinary desktop computer sufficed for the mining process; now, to combat the difficulty level, miners must use faster hardware like Application-Specific Integrated Circuits (ASIC), more advanced processing units like Graphic Processing Units (GPUs), etc.
What's a Bitcoin Worth? In 2017 alone, the price of Bitcoin rose from a little under $1,000 at the beginning of the year to close to $19,000, ending the year more than 1,400% higher. Bitcoin's price is also quite dependent on the size of its mining network since the larger the network is, the more difficult – and thus more costly – it is to produce new bitcoins. As a result, the price of bitcoin has to increase as its cost of production also rises. The Bitcoin mining network's aggregate power has more than tripled over the past twelve months.
How Bitcoin Began
Aug. 18, 2008: The domain name bitcoin.org is registered. Today, at least, this domain is "WhoisGuard Protected," meaning the identity of the person who registered it is not public information.
Oct. 31, 2008: Someone using the name Satoshi Nakamoto makes an announcement on The Cryptography Mailing list at metzdowd.com: "I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party. The paper is available at http://www.bitcoin.org/bitcoin.pdf." This
link leads to the now-famous white paper published on bitcoin.org entitled "Bitcoin: A Peer-to-Peer Electronic Cash System." This paper would become the Magna Carta for how Bitcoin operates today.
Jan. 3, 2009: The first Bitcoin block is mined, Block 0. This is also known as the "genesis block" and contains the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks," perhaps as proof that the block was mined on or after that date, and perhaps also as relevant political commentary.
Jan. 8, 2009: The first version of the Bitcoin software is announced on The Cryptography Mailing list.
Jan. 9, 2009: Block 1 is mined, and Bitcoin mining commences in earnest.
Who Invented Bitcoin?
No one knows. Not conclusively, at any rate. Satoshi Nakamoto is the name associated with the person or group of people who released the original Bitcoin white paper in 2008 and worked on the original Bitcoin software that was released in 2009. The Bitcoin protocol requires users to enter a birthday upon signup, and we know that an individual named Satoshi Nakamoto registered and put down April 5 as a birth date. And that's about it.
Though it is tempting to believe the media's spin that Satoshi Nakamoto is a solitary, quixotic genius who created Bitcoin out of thin air, such innovations do not happen in a vacuum. All major scientific discoveries, no matter how original-seeming, were built on previously existing research. There are precursors to Bitcoin: Adam Back’s Hashcash, invented in 1997, and subsequently Wei Dai’s b-money, Nick Szabo’s bit gold and Hal Finney’s Reusable Proof of Work. The Bitcoin white paper itself cites Hashcash and b-money, as well as various other works spanning several research fields.
Why Is Satoshi Anonymous?
There are two primary motivations for keeping Bitcoin's inventor keeping his or her or their identity secret. One is privacy. As Bitcoin has gained in popularity – becoming something of a worldwide phenomenon – Satoshi Nakamoto would likely garner a lot of attention from the media and from governments.
The other reason is safety. Looking at 2009 alone, 32,489 blocks were mined; at the then-reward rate of 50 BTC per block, the total payout in 2009 was 1,624,500 BTC, which at today’s prices is over $900 million. One may conclude that only Satoshi and perhaps a few other people were mining through 2009 and that they possess a majority of that $900 million worth of BTC. Someone in possession of that much BTC could become a target of criminals, especially since bitcoins are less like stocks and more like cash, where the private keys needed to authorize spending could be printed out and literally kept under a mattress. While it's likely the inventor of Bitcoin would take precautions to make any extortion-induced transfers traceable, remaining anonymous is a good way for Satoshi to limit exposure.
Numerous people have been suggested as possible Satoshi Nakamoto by major media outlets. Oct. 10, 2011, The New Yorker published an article speculating that Nakamoto might be Irish cryptography student Michael Clear or economic sociologist Vili Lehdonvirta. A day later, Fast Company suggested that Nakamoto could be a group of three people – Neal King, Vladimir Oksman and Charles Bry – who together appear on a patent related to secure communications that were filed two months before bitcoin.org was registered. A Vice article published in May 2013 added more suspects to the list, including Gavin Andresen, the Bitcoin project’s lead developer; Jed McCaleb, co-founder of now-defunct Bitcoin exchange Mt. Gox; and famed Japanese mathematician Shinichi Mochizuki.
In December 2013, Techcrunch published an interview with researcher Skye Grey who claimed textual analysis of published writings shows a link between Satoshi and bit-gold creator Nick Szabo. And perhaps most famously, in March 2014, Newsweek ran a cover article claiming that Satoshi is actually an individual named Satoshi Nakamoto – a 64-year-old Japanese-American engineer living in California. The list of suspects is long, and all the individuals deny being Satoshi.
Can Satoshi's Identity Be Proven?
It would seem even early collaborators on the project don’t have verifiable proof of Satoshi’s identity. To reveal conclusively who Satoshi Nakamoto is, a definitive link would need to be made between his/her activity with Bitcoin and his/her identity. That could come in the form of linking the party behind the domain registration of bitcoin.org, email and forum accounts used by Satoshi Nakamoto, or ownership of some portion of the earliest mined bitcoins. Even though the bitcoins Satoshi likely possesses are traceable on the blockchain, it seems he/she has yet to cash them out in a way that reveals his/her identity. If Satoshi were to move his/her bitcoins to an exchange today, this might attract attention, but it seems unlikely that a well-funded and successful exchange would betray a customer's privacy.
Receiving Bitcoins As Payment
Bitcoins can be accepted as a means of payment for products sold or services provided. If you have a brick and mortar store, just display a sign saying “Bitcoin Accepted Here” and many of your customers may well take you up on it; the transactions can be handled with the requisite hardware terminal or wallet address through QR codes and touch screen apps. An online business can easily accept bitcoins by just adding this payment option to the others it offers, like credit cards, PayPal, etc. Online payments will require a Bitcoin merchant tool (an external processor like Coinbase or BitPay).
Working For Bitcoins
Those who are self-employed can get paid for a job in bitcoins. There are several websites/job boards which are dedicated to the digital currency:
Work For Bitcoin brings together work seekers and prospective employers through its websiteCoinality features jobs – freelance, part-time and full-time – that offer payment in bitcoins, as well as Dogecoin and LitecoinJobs4Bitcoins, part of reddit.comBitGigs
Bitcoin From Interest Payments
Another interesting way (literally) to earn bitcoins is by lending them out and being repaid in the currency. Lending can take three forms – direct lending to someone you know; through a website which facilitates peer-to-peer transactions, pairing borrowers and lenders; or depositing bitcoins in a virtual bank that offers a certain interest rate for Bitcoin accounts. Some such sites are Bitbond, BitLendingClub, and BTCjam. Obviously, you should do due diligence on any third-party site.
Bitcoins From Gambling
It’s possible to play at casinos that cater to Bitcoin aficionados, with options like online lotteries, jackpots, spread betting, and other games. Of course, the pros and cons and risks that apply to any sort of gambling and betting endeavors are in force here too.
Investing in Bitcoins
There are many Bitcoin supporters who believe that digital currency is the future. Those who endorse it are of the view that it facilitates a much faster, no-fee payment system for transactions across the globe. Although it is not itself any backed by any government or central bank, bitcoin can be exchanged for traditional currencies; in fact, its exchange rate against the dollar attracts potential investors and traders interested in currency plays. Indeed, one of the primary reasons for the growth of digital currencies like Bitcoin is that they can act as an alternative to national fiat money and traditional commodities like gold.
In March 2014, the IRS stated that all virtual currencies, including bitcoins, would be taxed as property rather than currency. Gains or losses from bitcoins held as capital will be realized as capital gains or losses, while bitcoins held as inventory will incur ordinary gains or losses.
Like any other asset, the principle of buying low and selling high applies to bitcoins. The most popular way of amassing the currency is through buying on a Bitcoin exchange, but there are many other ways to earn and own bitcoins. Here are a few options which Bitcoin enthusiasts can explore.
Risks of Bitcoin Investing
Though Bitcoin was not designed as a normal equity investment (no shares have been issued), some speculative investors were drawn to the digital money after it appreciated rapidly in May 2011 and again in November 2013. Thus, many people purchase bitcoin for its investment value rather than as a medium of exchange.
However, their lack of guaranteed value and digital nature means the purchase and use of bitcoins carries several inherent risks. Many investor alerts have been issued by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), the Consumer Financial Protection Bureau (CFPB), and other agencies.
The concept of a virtual currency is still novel and, compared to traditional investments, Bitcoin doesn't have much of a long-term track record or history of credibility to back it. With their increasing use, bitcoins are becoming less experimental every day, of course; still, after eight years, they (like all digital currencies) remain in a development phase, still evolving. "It is pretty much the highest-risk, highest-return investment that you can possibly make,” says Barry Silbert, CEO of Digital Currency Group, which builds and invests in Bitcoin and blockchain companies.
Bitcoin Regulatory Risk
Investing money into Bitcoin in any of its many guises is not for the risk-averse. Bitcoins are a rival to government currency and may be used for black market transactions, money laundering, illegal activities or tax evasion. As a result, governments may seek to regulate, restrict or ban the use and sale of bitcoins, and some already have. Others are coming up with various rules. For example, in 2015, the New York State Department of Financial Services finalized regulations that would require companies dealing with the buy, sell, transfer or storage of bitcoins to record the identity of customers, have a compliance officer and maintain capital reserves. The transactions worth $10,000 or more will have to be recorded and reported.
Although more agencies will follow suit, issuing rules and guidelines, the lack of uniform regulations about bitcoins (and other virtual currency) raises questions over their longevity, liquidity, and universality.
Security Risk of Bitcoins
Bitcoin exchanges are entirely digital and, as with any virtual system, are at risk from hackers, malware and operational glitches. If a thief gains access to a Bitcoin owner's computer hard drive and steals his private encryption key, he could transfer the stolen Bitcoins to another account. (Users can prevent this only if bitcoins are stored on a computer which is not connected to the internet, or else by choosing to use a paper wallet – printing out the Bitcoin private keys and addresses, and not keeping them on a computer at all.) Hackers can also target Bitcoin exchanges, gaining access to thousands of accounts and digital wallets where bitcoins are stored. One especially notorious hacking incident took place in 2014, when Mt. Gox, a Bitcoin exchange in Japan, was forced to close down after millions of dollars worth of bitcoins were stolen.
This is particularly problematic once you remember that all Bitcoin transactions are permanent and irreversible. It's like dealing with cash: Any transaction carried out with bitcoins can only be reversed if the person who has received them refunds them. There is no third party or a payment processor, as in the case of a debit or credit card – hence, no source of protection or appeal if there is a problem.
Some investments are insured through the Securities Investor Protection Corporation. Normal bank accounts are insured through the Federal Deposit Insurance Corporation (FDIC) up to a certain amount depending on the jurisdiction. Bitcoin exchanges and Bitcoin accounts are not insured by any type of federal or government program.
Risk of Bitcoin Fraud
While Bitcoin uses private key encryption to verify owners and register transactions, fraudsters and scammers may attempt to sell false bitcoins. For instance, in July 2013, the SEC brought legal action against an operator of a Bitcoin-related Ponzi scheme.
Like with any investment, Bitcoin values can fluctuate. Indeed, the value of the currency has seen wild swings in price over its short existence. Subject to high volume buying and selling on exchanges, it has a high sensitivity to “news." According to the CFPB, the price of bitcoins fell by 61% in a single day in 2013, while the one-day price drop in 2014 has been as big as 80%.
If fewer people begin to accept Bitcoin as a currency, these digital units may lose value and could become worthless. There is already plenty of competition, and though Bitcoin has a huge lead over the other 100-odd digital currencies that have sprung up, thanks to its brand recognition and venture capital money, a technological break-through in the form of a better virtual coin is always a threat.
Bitcoin's Tax Risk
As bitcoin is ineligible to be included in any tax-advantaged retirement accounts, there are no good, legal options to shield investments from taxation.
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The satoshi is the smallest unit of the bitcoin cryptocurrency. It is named after Satoshi Nakamoto, the creator of the protocol used in block chains and the bitcoin cryptocurrency.
Chartalism Chartalism is a non-mainstream theory of money that emphasizes the impact of government policies and activities on the value of money.
Satoshi Nakamoto The name used by the unknown creator of the protocol used in the bitcoin cryptocurrency. Satoshi Nakamoto is closely-associated with blockchain technology.
Bitcoin Mining, Explained Breaking down everything you need to know about Bitcoin Mining, from Blockchain and Block Rewards to Proof-of-Work and Mining Pools.
Understanding Bitcoin Unlimited Bitcoin Unlimited is a proposed upgrade to Bitcoin Core that allows larger block sizes. The upgrade is designed to improve transaction speed through scale.
A guide to help you understand what blockchain is and how it can be used by industries. You've probably encountered a definition like this: “blockchain is a distributed, decentralized, public ledger." But blockchain is easier to understand than it sounds.
By Satoshi Nakamoto
Read it once, go read other crypto stuff, read it again… keep doing this until the whole document makes sense. It’ll take a while, but you’ll get there. This is the original whitepaper introducing and explaining Bitcoin, and there’s really nothing better out there to understand on the subject.
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party
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