Topic: Stephen Reed's Million Dollar Logistic Model - page 18. (Read 123218 times)

Though it may look true, or in fact be true, we should look at the whole thing. Spending natural resources/capital on consumer extravagances has a side effect (or is it a primary effect?) of stimulating scientific progress which is what ultimately matters and drives the economy ahead...

OK you get it. But realistically our economy is in the equivalent of the dot com bubble. We are spending our natural resources/capital on consumer extravagances like flying in drinking water from fiji and making toxic Factory food with multi year shelf lives, dare I say it even roads.

The growth economy will die, can we save some capital before it does I hope will we. In this metaphor the competition are the cryptocurrencies. Industry has been corrupted with fraction reserve banking, and is serving the fiat masters. 

After you have burnt your start up capital, you have no more money. i.e. nothing else to live on. But it is not necessary to go that far, since your competitors would kick in even before that with more money on hand (read no extravagant restaurant in NY) and throw you out of business...

So you have to be thrifty and prudent as much as possible due to competition

More like a fever, the adjustment in temperature prevents the pathogen from replicating.
Cheep energy is consuming the world, we are destroying Non-renewable resource for trivial things it is like burning start up capital on in a business in SV to fly to the most extravagant restaurant in NY for daily lunch.

Sounds horrific. A patient's body temperature lowered as he died...

In one word "deflection death spiritual" as resources are reallocated to serve people's needs.

The deferred consumption during hyper deflation will radically alter the energy usage of society.

Edit: Energy prices will not hyper deflate.

How do you know for sure that Bitcoin will consume less energy than the fiat financial system in case it grows to a scale comparable with the latter? Also, what do you mean by the whole? The cost of all transactions taken together?

Bitcoin definitely consumes less energy than the traditional fiat financial system as a whole, so maybe the Energy Charter Treaty could be used to compel governments to adopt Bitcoin. Unlikely, I know, but the argument could be made.

I believe that a good time to revisit both models, beyond keeping them up-to-date, would be somewhere near the bottom of the next bubble. Perhaps in the late fall. By then we should see more adoption for ordinary transactions and perhaps a lesser proportion involving an exchange. Likewise with the worldwide growth of the Bitcoin Economy there will be more opportunity for small world effects to disconnect the Metcalfe Law model from its up-to-now very close fit to prices.

Thanks so much!

My new project needs this level of scrutiny or it will fail . . . Bitcoin Proof-of-Stake

Waste is relative in nature waste = food so repurposing heat in this case is key to mining profitability.

Before PoW is abandoned and to accommodate the bandwidth and storage I predict mining will be dependent on Proof-of-Storage, only those who maintain live nodes earn mining options, those mining options will be sold on the free market and consumed / destroyed when a miner participates in the mining lottery, the demand to mine will be kept in check by the ability of the network infrastructure to grow, in effect it will be the nodes ability to accommodate the network growth that limits mining.

Ha. You are fast. I wanted to edit my post to include the Energy Charter Treaty signed by many countries in 1991 whose Article 19 requires that each Contracting Party "... shall strive to minimise in an economically efficient manner, harmful Environmental Impacts arising from energy use.". Governments already have a means to regulate bitcoin mining worldwide.

I point out the likelihood of a forced bureaucratic solution, because I want our industry to provide a solution given plenty of time to consider and implement it. The hardest part for us I think, would be the riddance of commercial miners and the equipment providers that benefit most from the earned block rewards.

Proof-of-Stake would reward network-attached, blockchain-maintaining bitcoin holders about 10% annual bitcoin dividends, halving according to schedule, on their respective held coins. If there was a 12 month or more advance notice of the blockchain fork, then datacenter owners could retain the bitcoin otherwise spent on new equipment - giving them a substantial stake in the new scheme.

The PoS scheme enables numerous more miners to participate with ordinary computers, and upon a blockchain fork, those new miners would outvote the current pools, who actually have only one miner for the entire pool, as the pool members submit shares and do not maintain a copy of the blockchain.

I understand the argument here, and agree that is seems as though mining is wasteful.  That was probably your point.  Your fictitious conversation illustrates the difficulty in explaining the benefits of PoW to a general audience.  

But now let's consider the rest of your story.  After the network switches to proof of stake, someone would have the following great idea:

Congressman Y: We have saved the people of the world huge amounts of natural resources by adopting PoS.  To reward the world with this new found abundance, we will issue new bitcoins and direct them towards projects for the greater good of humanity.  We will appoint a wise group of experts to determine the optimal amount of bitcoins to be issued so that we can maintain inflation at 2%, keep the people employed, and grow the economy.    

If bitcoin ever leaves PoW, I think it will be the beginning of the end.  I'm not saying it can't happen….

Imagine a 2018 US Senate Energy and Natural Resources hearing in which a panel of Bitcoin Core developers and Washington State mining datacenter owners answer difficult questions prepared in advance by zealous staff.

Senator X: Is it true that all that electricity, whose infrastructure was paid for by the public as a whole, is simply wasted?

Core Developer Y: No Senator, Beyond securing the network, bitcoin mining also helps efficiently distribute new coins.

Senator X: But these vast datacenters perform meaningless calculations to win a sort of lottery - is that all it amounts to?

Core Developer: Yes, but that method was designed by Satoshi Nakamoto and has stood the test of time.

Senator X: Remember that you are under oath. Is there not some other way to secure the network that does not waste so much power that we could otherwise use for the public good?

Core Developer: None that has gained the adoption of what we call Proof-Of-Work.

Senator X: I am glad you mentioned that. I don't really understand - I'm not an expert like you . . . But my staff has learned of an alternate scheme that has been used in other digital virtual currencies named Proof-Of-Stake. Could you explain that to us and why it cannot be used?

Core Developer: Well, we would have to fork the Blockchain!

. . .

Thanks for referencing my work, SlipperySlope.

I personally expect the square of the number of transactions, N, to diverge from the V = ($1.50) N² model prior to 2022. In fact, I expect it to occur should the market cap grow by another 100X (and the number of transactions grow by another 10X).

I think this current Metcalfe model is capturing more of the "store of value" properties of bitcoin, along the lines of what marcus_of_augustus said when he used the SWIFT analogy.  Bitcoin as a store of value alone could easily take us into the mid 5 figures, due to its useful properties (it has zero weight, is difficult for corrupt governments to confiscate, can be sent anywhere in the world, and the keys can be stored in your brain or geographically distributed in m-of-n form).  

Should bitcoin's usefulness as a "medium of exchange" also be realized (after lifting the 1Mbyte blocksize limit), perhaps it will be convenient to add a new term to the equation:

   V = c_SOV N_SOV² + c_MOE N_MOE²,

where SOV = store of value and MOE = medium of exchange.  c_SOV may still be approximately equal about $1.50, but I expect c_MOE to be significantly less.  We'll have to think of ways to isolate the "store of value" transactions from the "medium of exchange" transactions. I already have a few ideas here I'd like to explore…


Lastly, I don't think I would say that the energy spent on bitcoin mining is wasteful.  Beyond securing the network, bitcoin mining also helps efficiently distribute new coins.  In fact, I would argue that any other coin-distribution method (e.g., lottery, air drop, etc) would result in more waste.  


BTW--I appreciate the interest you've been paying to my model, SlipperySlope, and I've been enjoying your thread (I especially liked your plot where you subtracted the trend line from the log-price chart to isolate the below-trend and above-trend periods)!

The Bitcoin Network Will Probably Be Compelled To Abandon Electricity-Consuming Proof-Of-Work in 2018

Here is a simplified projection of Peter_R's Metcalfe Law bitcoin valuation model. I project that bitcoin transactions grow at the rate 3.2x until 2022 at which point the daily number of transactions equals the daily number of incumbent credit card transactions. The model projects that bitcoin mining pools will receive an income of over $200 billion in 2017, the majority spent by them on mining equipment, but a very substantial portion - perhaps a third - will be spent on electricity. It is widely known that bitcoin mining is entirely wasteful unless the heat can be reused.



Countries around the world have already implemented severe steps, affecting all consumers, that phase out incandescent light bulbs because more efficient alternatives exist. Bitcoin pool miners have relatively few members and thus little political influence that would prevent bureaucrats from asking for better alternatives. And at least one such altcoin-implemented alternative exists - Proof of Stake, which requires little in the way of equipment and electricity but does require miners to hold bitcoin in proportion to their chances of obtaining the scheduled block reward.

In an earlier post, I puzzled how a single Satoshi could be valued at $100 - which is predicted by the up-to-now close fitting Metcalfe Law relationship between transaction quantity and price. Proof-of-Stake is an answer as to what would motivate holders of bitcoin to never sell. The bitcoin mining reward in table above, would be effectively distributed to network-attached holders in proportion to their holdings.

In 2018, should Proof-of-Stake be substituted for the existing Proof-of-Work, then all network-attached holders would fairly share, in proportion to their holdings, over $2 trillion worth of bitcoin.

The accuracy of ^ this chart depends on how good blockchain.info's algorithm is at recognizing "change" (which it subtracts from total output volume).

Young forum member "eXSn" is right now trying to get feedback on his idea for splitting the bitcoin money supply into "active" and "inactive" portions, and then calculating V for just the active portion:  

https://bitcointalksearch.org/topic/measuring-the-intrinsic-value-of-cryptocurrency-572090

I think this fits with the use of Bitcoin as a monetary good of final settlement, store of value, like gold, and the transaction network is used more like a clearing system (e.g. SWIFT or FEDWIRE). Whereby it moves relatively rarely compared with a transactional currency or daily payment system. Some figures on Bitcoin money velocity would be interesting.