I agree with your conclusion: the only way to grow Pf is to grow the economy. I'm personally not interested in growing Pf, but I do want to see the economy grow. I would rather this happen with inflation: grow the market cap / total value store with an increasing number of coins and keep the Pf stable, but that's really a topic for altcoins.
Yes, the B and D terms in my original formula are a little fuzzy, since they incorporate several different elements in a nontransparent way. It makes it easier to initially understand at the expense of being messy when you want to apply it in detail. I think breaking them out is worthwhile.
Where does S belong, in D or A*B? Which way is right? Well, what are savings? An attempt to store value? A casual investment in the future? Avoidance of friction? I don't have a simple answer to that.
In the current market I don't think anyone has savings that last more than a week. I think people who hold their coins longer than that pretty universally consider them an investment. Thus, I rolled S into A*B - the coins are still in circulation and intended to be spent on goods even if those goods are not yet selected. At present, that's just taking a slightly broader picture of required value store. In the future, I think you're right to roll it into D. In practical terms, it works either way: in A*B it slightly stabilizes Pf; in D it tracks the market quicker.
I'm not sure why you put a + between the S and I. Here are the two ways I'd write it:
Pf = V * T / (A - S - I - L)
Pf = V * T / (A - (S + I + L) )
A bit more background for those who didn't read the original thread:
Much more detail on how this model works: https://bitcointalksearch.org/topic/m.579137
Explanations for my guesses for the variables: https://bitcointalksearch.org/topic/m.579196
Topic: A revised Revalin Equation for bitcoin Fundemental Price (Read 4253 times)
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It's all fun and games until somebody loses an eye
Revalin has proposed a formula for the fundemental USD price of a bitcoin:
While this equation makes sense, the variable D is unsatisfying to me. Therefore I would like to propose a slightly modified equation:
P(USD/BTC) = V * T / (A - S + I - L)
Where P(USD/BTC) = Price of a bitcoin in USD/BTC
V = Value of goods and services purchased for BTC, in USD
T = Time buyers and sellers hold bitcoin, in days
A = Total bitcoins
S = average bitcoin savings of each person
I = bitcoin investments
L = lost bitcoins
I would like this discussion to address the validity of the equation, and how it can be estimated.
If I understand correctly, any bitcoin investment will have a corresponding bitcoin savings. For example, if Ben gives Joe one bitcoin, then Joe holds one bitcoin of I and Ben holds one bitcoin of S. So investing with bitcoins does not affect the money supply, since an increase in S and I cancel each other.
So to increase the value of P (the USD price of bitcoins), we should focus on increasing V, the value of goods and services traded in bitcoins.
I've been talking fundamentals for a while, and here's my formula:
Fundamental price = A * B / (C - D)
A = USD-value of goods and services purchased per day in BTC
B = Number of days buyers and sellers hold the coins before and after a transaction
C = Number of coins in circulation
D = Number of coins hoarded by (speculators/early adopters/whatever)
Fundamental price = A * B / (C - D)
A = USD-value of goods and services purchased per day in BTC
B = Number of days buyers and sellers hold the coins before and after a transaction
C = Number of coins in circulation
D = Number of coins hoarded by (speculators/early adopters/whatever)
While this equation makes sense, the variable D is unsatisfying to me. Therefore I would like to propose a slightly modified equation:
P(USD/BTC) = V * T / (A - S + I - L)
Where P(USD/BTC) = Price of a bitcoin in USD/BTC
V = Value of goods and services purchased for BTC, in USD
T = Time buyers and sellers hold bitcoin, in days
A = Total bitcoins
S = average bitcoin savings of each person
I = bitcoin investments
L = lost bitcoins
I would like this discussion to address the validity of the equation, and how it can be estimated.
If I understand correctly, any bitcoin investment will have a corresponding bitcoin savings. For example, if Ben gives Joe one bitcoin, then Joe holds one bitcoin of I and Ben holds one bitcoin of S. So investing with bitcoins does not affect the money supply, since an increase in S and I cancel each other.
So to increase the value of P (the USD price of bitcoins), we should focus on increasing V, the value of goods and services traded in bitcoins.
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