Topic: Bitcoin's Real Value, Quantitative Analysis (Read 1833 times)

appreciated, I'm going to try and adjust the time constant so that it doesn't accelerate noticably until then, most of the time constants we're pretty much arbitrarily based off my precieved "timeline of events" and what the network hashrate slop looked like

Epoch for ASIC mining on the network is January 30th of this year when jgarzik got his test unit:
http://pastebin.com/g4BhvCXK

There wasn't a noticeable jump in network hashrate until mid February when Avalon units in bulk and ASICMINER blades started up.

unfortunately, you have no idea what bitcoin is if you think it's a pyramid scheme, this is a common misconception that shows your lack of knowledge. Take a look at the the wiki, learn what bitcoin is, learn what its potential implications are for macroeconomics, I assure you that you have no idea what you're talking about if you think "bitcoin is for suckers". You should also note that the "big fish", the early adopters have not sold even though they had the chance to, its because they don't have the mental capacity of a goldfish and understand what bitcoin means to the world.

https://en.bitcoin.it/wiki/Myths - there's even a specific article talking about "isn't bitcoin a pyramid scheme?"

http://seekingalpha.com/article/1836602-is-bitcoin-for-real-macroeconomic-considerations-for-an-alternative-currency

All this information is out there, please take a minute and read about it.

PS: this is coming from someone who owns <0.1 btc and at one point owned 650 however needed to sell for tuition
 

I agree with you, it's not ready yet. Right now (besides my school-work that I'm doing) I'm designing two compound coefficients that I need to add to the labour value to get the "True Value" (not speculative) These values are the "Risk Factor" of bitcoin, which includes everything that makes the investment not 100% safe and acceptable, and the second one is the "Utility Factor" of bitcoin, or it's ability to be more useful than other systems as a payment processor, as a inflation-less currency, etc. THAT information is mostly independent of most bitcoin variables and will have to be determined empirically based off data points like "number of bitcoin emergency patches, cumulatively per year" this value could definitely contribute to a "security factor" which would be addable to the "Risk Factor" however the specific empirical multiplicative factors I'm not entirely sure on yet, will work on it later.

Absolutely right, Impaler.

Bitcoiners have no economics training. It's like the blind leading the blind. This is too funny.
Many companies spend billions of dollars on R&D and the products fail and never make back the investment. What a fantasy world, if your wealth increases with increase in spending.

Bitcoiners are so blinded by greed that they refuse to see that Bitcoin is a pyramid scheme.

All they look at are the rising prices at the exchanges.
The exchanges are not regulated, no government oversight.
I can open my own exchange have group of friends buy and sell to each other, bid up the price, and wait for the suckers to buy into Bitcoin with real world currency. You are sheeps, helpless against the wolves.

Their is one huge glaring problem with your whole theoretical framework

COSTS != VALUE

The cost to create BTC's has no link what so ever to their market price.  This is a classic 'regression theorem' error by BTC zealots, just because something valuable is destroyed to make a product dose not make the product worth the cost of the inputs.  People make foolish production decisions every day which produce products worth less then the input costs, the free market weeds these people out eventually so in the LONG RUN the products are worth at least the inputs (and hopefully some profit margin if your a good business person).  But it is by no means an absolute that can be applied here.

By adding up all expenditures involved in mining BTC all you have determined is how much minimum value we would have to apply to BTC as a  service in order to consider the production to have been a sound investment.  The actual value we DO assign could be vastly higher or vastly lower then that production cost, it is a fully independent variable.  Your number IS useful (I can't speak to accuracy) don't get me wrong, your just calling it by the wrong name and drawing erroneous conclusions from it.

Also you may find this site to be a treasure trove of data, this guy has been doing analysis of the network for some time and has tracked the ASIC transition and produced estimates of electrical consumption.  http://organofcorti.blogspot.com/

Thanks to both of your for your points, I've been fighting with excel 2013 graphing functions to actually figure out how to make reasonably useful graphs but to this point no avail.

I like the coin destruction factor, I didn't do any research into the amount of coins "lost", or a reasonable way to determine the exact quantity over at timeframe, but I might be able to make an assumption of "very very old" coins that haven't moved since its creation could be considered "lost".

Also there was the FGPA epoch in the middle between GPU and ASIC, however since it never really took over from GPU mining and was nothing in compared to the effect that ASIC mining had, I made a reasonable assumption that the fast acting expotential I used for ASIC would also factor in FPGA, if I did get some more time though I'd definitely refine the expotentials time constants.

Hi James,

I haven't had a chance to dig thru this very carefully, but on the surface this appears to be the best analysis of bitcoin value that I've seen here.

The two small points that I'd add is that: 1.) you skipped the "FPGA epoch" between GPU- and ASIC- mining, which is probably significant for this sort of analysis, and 2.) I don't see any factor here to account for lost coins, which is probably also significant when you are calculating (total cost to mine) / (total bitcoins mined).  The numbers you are getting from blockchain.info seem to be a small factor less than the actual number of coins mined (your/their data says 11,969,600 coins for yesterday, but we've actually been above 12mn for a while) but I can't tell where that difference is coming from, or if it's a good estimate of coins lost.

As for the start date of the ASIC epoch, I believe jgarzik announced his receipt of the first publicly available Avalon so you can probably search back on the forum here or his Twitter for that date.  Of course there were various manufacturers testing equipment before this date, and a significant impact on mining really didn't happen until ASICMINER came online a bit later, but that date is probably as good as any.


From a theoretical standpoint, I've always felt that the equilibrium bitcoin market price should approach the marginal cost of mining a new bitcoin, by looking forward (risk, equipment and difficulty-projection adjusted).  Your analysis seems to do the opposite, by looking backward and calculating what it has cost to mine the existing bitcoins we now have.

I will have to think a bit deeper on how to reconcile this in my mind, perhaps the truth lies somewhere between these two approaches, but your analysis is certainly thought provoking.

added some fancy graphs for people to visualise the data, I forgot how impossible it is to read someone else's excel plots without graphs 

So I've been working on a project to effectively determine the value of a bitcoin irrespective of speculation on a per unit time basis (from bitcoin's inception to now). I've done some work into developing a "cost of labour" analysis of bitcoin by making two assumptions:

1. Bitcoin Mining has two parameters that indicate cost, MH/$ (capital costs), and MH/W (electrical costs). All other costs I assume to be negligible, and with that assumption I assume capital cost increments to be infinitely small.

2. That my (mostly arbitrary) expotential plateauing/decaying curves for CPU mining usage, GPU mining usage, and ASIC mining are mostly accurate, if you can help me work on the time constants for each I'd greatly appreciate it, I've tried to find the 0 day ASICminer came onto the scene but I haven't had any luck.

https://drive.google.com/file/d/0B-1iklukQfPyOEY5eW5wVnJxR0U/edit?usp=sharing

work to do:
I'm still working on the Risk/Utility Factors, however its just about exam time for my last year of university and I can't really afford to do anymore theory crafting this weekend, so I've put my exel on google docs for all to see. If you have any critiques let me know, I'm doing this in the hope that someone might value this financially and help give me a reason to continue (*cough* tips please! *cough*)


Warnings: All data was pulled from blockchain.info for ease of use, values below 0 don't have decimals for some reason, so the begining year or two are pretty hard to use unfortunately, will probably switch to another dataset at some point.
I'm not the best at reading excel functions, there could be a simple error somewhere, please let me know and I'll correct it as soon as possible!



I appologize for the lack of labelling, office 2013 is really obtuse.