Topic: BTC Price Stability (Read 2009 times)

Bitcoin really is still in its infancy. Personally, I wouldn't call it stable or successful until I can use it to pay for my mortgage, my utilities, and my groceries. That won't be tomorrow, next month, or even next year, but if my BitBrew sales are any indication, it is on its way there.

I see the hashing power, amount of money people spent on their rigs, and price of electricity to be directly related to Difficulty.
People will only spend so much, thus is the direct effect of the difficulty.

I agree with what you stated about getting more and more people to use Bitcoins.
All I can offer are Game Servers and Games themselves. I can't really offer anything else in person.

Excellent, but don't forget to factor in  - price per kilawatt hour, overhead costs of a simple mining operation and it's maintenance and repair and of course there must be some profit involved for the miner. Don't forget to include global inflation calculated geometrically.

Some guy said Bitcoin is not backed by gold like the dollar. You don't know much about ecnomics do you? Hell I don't know much about economics but I know enough to know that the U.S. dollar is backed by so little gold that if that were the only factor keeping it in place it would be worth 0.0000001335 of it's current value.

 The value of a currency is influenced by so many things it is astounding. Some of the major factors affecting the stability of most currencies are national debt, stability of government, natural resources, education and belief systems, land mass, population and on and on. Bitcoin has none of these. The vendors using Bitcoin, the availability and demand for bitcoin and the availability and demand for the products offered by vendors using bitcoin are the major factors affecting the stability of bitcoin. Volume people! Sell something on craig's list - Bitcoins only. Open an online greeting card company that can include transfer of Bitcoins. Wear a tee-shirt with a bitcoin logo, purchased using bitcoins. Increase the stability of Bitcoin by increasing the amount of people who use bitcoin and the value associated with the articles traded for bitcoin. Want to drive the value of Bitcoin up? Sell your wares at a near loss and the demand for Bitcoin will go up. Consider the amount of Bitcoins available, consider the number of people who want to use Bitcoins and consider a fair range of increments to trade for a variety of products. For example:
a fair range of increments would be 0000.00 six decimal places. The general population doesn't make many purchases over $9999.99 on the web that often. Chocolates, flowers and a case of beer should make a couple happy for a few minutes on a Friday night. All of these articles have real world value associated with thier own respective currencies but nonetheless their values are different than each other. Flowers $0013.98 Chocolates $0005.76 Beer $0018.00. I think a fair range of decimal places is 6. Most of us work in weekly cycles, most of us get paid in weekly cycles and most of us spend our money in weekly cycles. Most of us do not take home more than four figures in a weekly cycle.
 OK so everyone agrees 6 decimal places is a reasonable range? Let's now find out how many bitcoins are out there 7231900.00000000. And how many peoploe will eventually want to use bitcoin? Let's be generous let's say at any given point currently 2000000 people use bitcoin.  That's just over 3 bitcoins each. 3.61595. So my pay for this week is 3.61595. Compare that to a global average weekly income of $165. Rougly making the current bitcoin value equal to $45 U.S. (This is all hypothetical people, don't get all jumpin' up and down screamin' and stuff yet) If my life was entirely lived through the internet - receive pay, buy groceries, pay mortgage, all in bitcoins then that would make the current bitcoin the equivalent of $45. (purely hypothetical) Now let's jump down the road and be really generous and let us say 15,000,000 bitcoins are available and bitcoin has gained much public acceptance and now 500000000 people now use bitcoin globally that's roughly .03 bitcoins each and in those days the average weekly net income is $200.  That's $6666.67 per bitcoin. If we go even further down the road we run out of decimal places and that would cause bitcoin value to suffer some sort of parabolic demise. Ok now I'm really talking out my wahoo.
 The bottom line is if we wish to stabilize bitcoin we need to spread it around like butta. The more people associate bitcoin equivalancy with the value of goods and sevices the more reluctant they will be to spend it when the bitcoin is undervalued in their eyes. If you see a can of peas and carrots on special you grab it, because you know you're getting good value for your money. Bitcoin needs to have that general association of value. So get out there, sell your products using only bitcoins. Wear that tee shirt with the bitcoin logo so your buddy says "what the f$%* is that?"

(Quick Bump)
Also, wanted to note that the above post (last edit) will prove probably the best formula to use.

If you noticed at 21mil coins mined and the blocks generating next to nothing (only with transaction fee's), the price per coin sky-rockets.
Think about how many bank notes are in circulation (and they keep printing more?), now take that number and divide it among everyone.
You may notice that 1 BTC will be around ~50-100k USD, but remember there are 2 big factors.
1) Bitcoins goes to the 8th decimal (satoshi),
2) There won't be any more coins generated, only traded.

Supply & Demand.

My formula is only a theoretical idea of what it should be.
I'm sure someone could tweak this formula even further and come up with a better PPB (Price Per Bitcoins) based on how much money people have put into their mining machines, time spent mining, and mostly electricity cost.

I'm thinking about modifying the old formula for USD<>BTC.

Something using the variables;
[Block Count],
[Reward],
[Coins in Circulation]/[(constant)21000000],
[Hashing Speed],
[Difficulty]

So roughly:
Now to figure out how to weight the [Difficulty] and [Hashing Speed].
Any ideas?

[Edit]:
Kept looking at my new formula, and changed it a little to reflect [Difficulty].
http://zombietoday.com/dev/pricecal.2.php

[Edit2]:
Found out that the higher the difficulty the lower the price would be (in the above code)...so I modified it to add.
Seems to work a lot better.
I also added a feature so you can see what the price will be at a predicted rate (custom).
http://zombietoday.com/dev/pricecal.2.php?vars

Your right about day to day (even week to week) price fluctation being annoying for buyer and/or seller.
To me this is simply a symtom of this new currency being adopted world wide. It is going to take some
time for these day to day bumps to smooth out, but I'm confident it will eventually happen for short term fluctations.
My speculation is that it will take serveral more years.

Thanks for the post. That is pretty much how I see it working in the future.

This is very interesting work. Thanks for sharing.
It definatly deserves a new block chain and I hope one is started.

After thinking about your work, Moore's Law came to mind.
More or less it states that computing power will increase by a factor
of 2 every 18 months. So, it will cost half as much in capital and electricity in 18 months to mine. Just another thought as
you "hash" out your formula.

Good luck, please let me know how it goes. I would definatly mine some on a new block chain if it was started.

All the creative math a side, what bitcoin really needs is an options market.  It would provide a buffer for the major price fluctations and allow merchants to hedge against the volatility in the market.  This would get more merchants in the game and move the use of the currency away from speculation and into transactional use.

Anyway, just a theory.

I've though about how I can have the 140000 change.
Take the current blockcount and round to 4 places. Would that work?

I'm not sure what the 2.1mil control represents, so I don't understand :|
This method (above) should work as long as the blocks don't go past 999,999...right?

Awesome job. I put a page on my site, but I will not be letting people know what my site is... Long story short, his link is the only place you can find it. Once I get out of here I can tell everyone in the other forums about this formula I have created.

To find a, we just need to see the last 2 blocks (or further if needed) and figure out the difficult change in minutes?
To find e, we just need to see the last 3 or 4 blocks and predict the amount of time till the next block?

[Edit]:
Just threw the current formula (without this post's changes).
http://zombietoday.com/dev/pricecal.php

[Edit2]:
a = http://blockexplorer.com/q/interval
e = probably just set this to 600 (10 minutes)?

[Edit3]:
Just made some changes, and it looks like the average should be about 8.8USD<>1BTC.

[Edit4]:
http://zombietoday.com/dev/pricecal.php?json
Added JSON

Wait a minute. My brain is working. m=140000*(a/e)
a =average block generation time since last difficulty change in minutes out to 2 decimals
e = expected generation time in minutes = 10

I will have within 48 hours of this post.

So, what's the new formula?

After watching a few blocks pass and setting up a script to calculate the price with current data, I found that the price should go like this. Price jumps high or low at difficulty change, but lowers about $0.01 every 100 blocks, then jumps suddenly to a new price at the difficulty change. That is the theory based off 3 data points, and my intuition. So people would sell off bitcoins after the new difficulty if it was higher, otherwise, they would buy. Then as it nears the change of difficulty the exact opposite would occur. This provides a stable trading market for everyone!

Thank You so much. That means a lot. I will work on m.

Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation.

[Edit]:
Still need to figure out how to modify m.

It is a control variable for highest difficulty that is possible for quite a while. It is like how the score at bitcoin.cz or whatever pool does score is calculated. I fixed some of that in my later equation.

I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty