Topic: Stephen Reed's Million Dollar Logistic Model - page 4. (Read 123218 times)

What year is the first data point? I really hate badly labeled axes.

I have made a non-linear regression of the historic Bitcoin prices:



More info here: Logarithmic (non-linear) regression - Bitcoin estimated value

Some data for you in terms of internet adoption:

https://twitter.com/conradhackett/status/521485477870727168/photo/1

https://pbs.twimg.com/media/BzywR2nCcAAb2LF.png

That would be expected, however look at the advantages of off-chain built services:
- instant no-wait transactions (1-2 seconds to update a central database)
- zero network fees (company can choose fees between 0 and regular blockchain levels, required for a single server)
- brand recognition (see http://www.google.com/trends/explore#q=blockchain%2C%20coinbase&date=today%2012-m&cmpt=q)
- familiar model (centralized company with visible public trust rating and identifiable representatives)
- less technical overhead (use email to manage bitcoins)
- very accessible (very simple intuitive processes compared to regular wallets)
- apparently more secure (centralized security, individuals are exempt from applying security practices, until
- fit for fiat-only AND bitcoin-only B2B processes (payment processors)

Some disadvantages
- centralized control, policy and security applies to all users in generic models which affects some users but is acceptable to the majority
- risk of bankruptcy which is not apparent until the company goes under and is actionable in courts (punish vs manage risks)
- network downtime (is critical for the blockchain but not as critical for a single domain)

In the future, people will still ignore the disadvantages and trade in security and costs for accessibility.

Aren't these various quasi-centralized and off the blockchain systems, such as coinbase and circle and even most of the established exchanges transitional institutions - because currently, there are a lot of obstacles in transitioning in and out of fiat and there is NOT really very credibly established decentralized exchanges.

Once bitcoin becomes more widely established and there becomes fewer needs to convert in and out of fiat, then there will likely evolve more and more businesses providing decentralized services.  I certainly do NOT know the answers to these questions nor do I have a crystal ball, but it does seem that bitcoin does NEED to go through some transitional phase(s) until it becomes more widely adopted and more part of the regular financial fabric - before we get there, however, there are going to be a lot more attempts, by traditional status quo banking institutions to take stabs at undermining bitcoin because bitcoin challenges the very core of some of the status quo financial arrangements.

This will be very bad for bitcoin

If some centralized companies like circle and coin base become the de facto way of using bitcoin we're back to centralization. Sure, some smart people may be able to use the blockchain itself to avoid being controlled by centralized corporations, and at least they can't print real bitcoin (although who's to say they don't inflate bitcoin by fractional reserve, if the mayority uses their centralized systems without even actually owning their own bitcoin, no one is going to notice the bitcoin aren't real) well, they may notice there's more than 21 million bitcoin are in circulation, but it will be hard to seperate the real from the fake.

What's more, if all or most of the transactions are off-chain, than eventually miners will not get enough transactions so not enough fees and the hashrate will drop. Which will make bitcoin not very secure anymore, with all that hardware idling, it'd be pretty easy to attack the network.

Still underbouhht either its that trade of the century or we see a long slow decline to weed out new dumb money

Slightly irrelevant at the moment, the price of Bitcoin should be valued in a mix of other external value systems, including gold, S&P 500, inflation, CPI, etc.



In 2012, gold peaked and you can see that the black line is higher than the white line, Bitcoin had actually less value than indicated by today's dollar. Since the chart is logarithmic, this doesn't affect it much, but remember gold went up 300% during the time Bitcoin gained popularity.

Also according to the models presented in this thread, a bitcoin should be worth about 1500 USD now, it is clear that the current undervaluation is half the story, the models themselves need to be adjusted as well in the following year.

Very Interesting read,Thanks to you...

Should I find someone or something that can filter blocks better (I am interested in writing something by the above rules), I will update here.

The chart shows levels of transactions when only Satoshi was mining (and he did not send money to himself), it seems 100 is the 2009 level with only 1-2 people inside. In reality there are only a few thousands transactions that year and not over 50000 which are coinbase transactions.

I also think the first coinbase output transaction should be filtered out because pools were invented and that transaction was basically required for operating a pool but it was not something of utility (send value, spend value, receive value). p2pool for example puts the payouts in the coinbase transaction. The utility starts when pool users start to send bitcoin around.



Another thing that happens at the top of the chart, which is correctly excluded are off-chain transactions. Coinbase, BitPay and Circle for example, execute value transfers inside their own servers between users of their service. They combine and reuse funds and only push transactions in the blockchain when people send value outside the service.

This however does not add fees, data or txs to the blockchain so they can be safely excluded and the model should still map correctly. It also shows the future, people will forgo the blockchain costs and time for internal service settling, causing the 7tx/s limit to remain sufficient.

There are also some issues for transactions from multipools and altcoin pools that pay thousands of users at once but you can consider this a service built on top of Bitcoin.

Thanks for contributing to this discussion!

You suggest a way that mining payouts can be filtered out of the ordinary bitcoin transactions, so that we have a more principled data series of economic bitcoin transactions as input to a Metcalfe Law network-effects model relating either bitcoin price or market cap. A scan of the recent blocks created could be used to filter out transactions output directly or indirectly from a coinbase, i.e. 25 BTC block reward transaction.

In addition to perhaps obtaining a less noisy Metcalfe Law model, I wonder if the unexpected might occur. Satoshi envisioned that miners would be enthusiastic supporters of Bitcoin, and I was there back in 2010 to see that happen. If we remove the effects of their reward-based transactions from the data series, we might end up with more noise instead of less, if indeed the filter removes a substantial portion of the daily transactions.

For the present, I will continue to rely on the Blockchain.info data series for the Number of transactions excluding popular addresses. I invite other modellers to pursue alternatives and share their findings.

Because it's false. New users don't install the full wallet and don't keep relay nodes online. There are not 2 million blockchain wallets out there for nothing. New users use Coinbase, Circle, exchanges, cold storage, mobile wallets, etc. None of these are network nodes.

My question remains. Why are coinbase transactions included? Why are first-moved-coins pool-payouts transactions included? These are not actual usage, they are the results of coin issuing.

When I read into metcalfe law it states

"Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system"

 You were modelling with number of transaction previously , and have decided now to model with the market cap since you say
 "market cap takes into account the supply of bitcoin that meets the demand of the marginal new adopter".

Buy my basic question here is if every new user who is running a wallet represent the nodes in the network, then is not the number of users a better variable to run the model than no.of transactions or market cap? and this model fits with metcalfe law better than no.of transactions or market cap right!

It would be really difficult to accurately predict the number of users across globe using bitcoin but am I right in what I say?

So why not have a model like this?

it seems to be a different address each payment. 

Why are coinbase transactions included? In the first year many of the coins have not moved but the transaction speed is around 100.

Further, you can exclude first time coinbase output transactions (pool payouts) as a part of the base system and not part of the peer transactions.

When Satoshi Dice used dust transactions to indicate wager results, Blockchain.info developed the simple algorithm of discarding transactions that involved any of the 100 most popular addresses each day - Satoshi Dice of course being high on that list.

https://blockchain.info/popular-addresses

When I was mining for BTCGuild on my GPU rigs a couple of years ago, I suppose that the origin pool payer address was the same for each miner. It might be harder today if the pools are using unique payer addresses to enhance anonymity.  Looking over my daily payout last spring from LeaseRig.net, I do not see any address reuse.

Any miners on this thread know if their daily pool payouts originate from the same address from day to day?

It would also be interesting to see, given the theory that everything is consolidating into massive mining farms. Payouts from mining pools to different addresses may decline with the trend toward mining centralization.

I am not suggesting it accounts for all transactions nor all of the transaction growth but If there are 100,000 miners (small miners), all mining to pools, that is a lot of transactions each day (just the pool sending the fractions to workers).  I would love to see someone be able to pull out all the sends that are just paying people their rewards and see what the amount of real transactions are.   Above someone was saying that the dice transactions were removed from their data, so it is likely not a herculean task to subtract out all the pool payouts too (or maybe the number is small and does not matter to the overall growth).   

I consider mining transactions to be economic, but of lesser importance than using bitcoin for purchases or earned income. I suppose that network difficulty is arguably unrelated to transaction volume, and that the correlation you observe is merely a coincidence. I could argue that vertically integrated industrial mining leads to fewer miners and thus fewer transactions required to pay them.

I suffered through a steep increase in mining difficulty the week in June-July 2010 when I first downloaded bitcoin and began CPU mining on my then-awesome quad core AMD server. Within a few hours I solved my first block, but the next one took a week and that was it for solo CPU mining. I learned of Bitcoin from the widely read Slashdot blog article, and that same article was also read by many system administrators who proceeded to install the software on the hundreds and thousands of computers that they managed. According to the Blockchain.info data series, the number of daily transactions back then was about 200-300 and did not match the sudden difficulty increase from 24 to 182 - a factor of 7.5x.

I will be speaking on a panel presentation on the subject of mining algorithms at the Hasher' United Conference in Las Vegas this month. I wonder what mining equipment vendors' answer will be to the question of the relative proportion of small miners vs large miners over time.

Wouldn't the number of transactions increase with difficulty (and network hashrate) just because people have to mine at pools and the pools are paying thousands of small miners with every block instead of hundreds?