Agreed, Satoshi himself had the same viewpoint - which I share. Bitcoin most probably either takes over the world or becomes worthless.


Yes I am looking at Bitcoin adoption only. In particular I am modelling the adoption of Bitcoin purchases by the population of all those entities which are now or in the future are capable of purchasing. I ignore fiat in this analysis. Bitcoin is unlike fiat in that its value is determined by its users, not by a government. Demand for Bitcoin is related to its utility, and I believe that governments will eventually accept tax and fee payments in Bitcoin. I suppose that central banks may get the notion that Bitcoin is better than, or at least a useful alternative to gold when accumulating reserves.


I have a different view of the history of money. Governments have a history of debasing their fiat currencies. Inflation is a horrible menace to savings and rational allocation of resources. Bitcoin fixes that problem.


Agreed.


Wikipedia has an excellent article on First-mover advantage that convinces me that the concept is not a myth. Furthermore, Bitcoin was not the first digital virtual currency - rather Satoshi solved all the problems with the prior iterations to produce Bitcoin.

And I give you the last word on this day.

All your points are valid issues but not relevant to my research. I want to understand the circumstances under which the exponential growth of bitcoin prices eventually slows down. So I assume a logistic adoption model. I assume that Bitcoin will replace fiat, and that the existing financial infrastructure will be disrupted.

My assumptions are plausible according to arguments posted earlier in this thread.

Let me address your issues . . .

1. From what I have seen so far, fundamental analysis of the Bitcoin economy supports the notion of exponential growth. The number of Bitcoin transactions, and the number of bitcoin addresses on the blockchain are both growing exponentially. I use some of the techniques of technical analysis, e.g. drawing trendlines through a historical price series in order to illustrate and understand exponential growth.

2. The assumption that Bitcoin will achieve mass adoption is plausible; namely Bitcoin is a deflationary digital virtual currency that avoids the need for a trusted intermediary thus it is much more efficient than existing banking infrastructure, and can plausibly reach vast numbers of unbanked consumers. Furthermore, Bitcoin is a platform upon which numerous value added services are being developed, e.g. Bitcoin is programmable money.

3. Government support of Bitcoin is best exemplified by the US Senate hearings this year in which powerful US politicians heard that existing laws were sufficient to deter virtual currency criminals. The chairperson stated that the US needs a balance between protecting the consumer and encouraging innovation. This point is very important. Bitcoin is innovation. I believe that the Chinese government feels the same way - but they are hamstrung by foreign exchange controls so they need to be sure that these cannot be circumvented by Bitcoin purchases transferred out of China. Bitcoin is currently not legal tender anywhere. Your issue actually could be stated as - under what circumstances would a government permit Bitcoin to become legal tender? Perhaps when a majority of that government's employees prefer to be paid in Bitcoin.

4. Economic network effects prevent an alternate coin from replacing Bitcoin - given that Bitcoin was first, is by far the largest, and is good enough. Any particular altcoin innovation can be adopted by Bitcoin if necessary. Many believe that altcoins provide a gateway into Bitcoin and thus add to its value.

5. I thought that Facebook would replace MySpace. The latter was simply not good enough.

Yes, the new model for academic journals is open access. Online is much less expensive and generally more useful for consumers. I do not see a necessity to involve the Bitcoin Foundation. I believe that such a journal should encompass any cryptocurrency, which might be a conflict of interest with regard to the Bitcoin Foundation - or at least outside their focus.

Suppose we start a new thread in the Economics sub forum as this discussion is off topic here and may be deleted anyway by the moderator.

Not much money is needed to start an online open-access journal. I believe the main effort will be to find qualified and motivated academics to edit the journal. They could well be young post-docs.

I happen to be the treasurer of an unrelated academic society that has an open-access peer-reviewed online journal. We grant immediate free access to the public and charge authors 100 USD per accepted submission. The publisher is http://www.degruyter.com/.

I lack a PhD, but helped found an academic society. Perhaps we need an international Cryptocurrency Society for academics, that would hold an annual conference and publish the journal. For this to be accepted we need academics with doctorate degrees in charge.

Metcalfe's Law is based upon the common sense notion that adding nodes to an economic network adds value in proportion to the quantity of other nodes that can be reached. So perhaps at some point the Bitcoin economy develops small world effects in which clusters of nodes are well connected, but otherwise nodes are not as well connected universally. By well connected, I mean economically visible and useful. For example, small world effects are present in the world's email network due to incompatible natural languages.

See this thread from 2012 ...

https://bitcointalk.org/index.php?topic=115048.0

A simply stunning discovery and insight.

It seems quite plausible that bitcoin transaction growth will continue at this rate for at least a few more years as current payment transaction infrastructure is disrupted. For example, in three years time 3.2x annual transaction growth would be only 2 million Bitcoin transactions per day correlating to a bitcoin price 1000x higher than today. Two million daily bitcoin transactions is not much compared to the current 212 million daily Visa transactions.

There could well be a disconnect from Metcalfe's Law beyond four more years. In say 8 more years, when the quantity of Bitcoin transactions exceed the current quantity of bank card transactions, I find the predicted bitcoin price value of 57 billion USD per bitcoin implausible.

There does appear to be a rally developing which can be clearly seen on the Huobi and Bitstamp one hour charts.  Support held at $550.

Awesome chart that well illustrates your discovery. May I refer to it in my logistics model thread?

Apparently there is some controversy whether Metcalfe is right with regard to N squared. N * log (N) has been proposed as an alternative. However I agree that your observation is compelling.

Agreed.

Using a two year version of the chart, I read 3.2x per year transaction growth. Which yields a 7-8 year time frame before the number of daily bitcoin transactions will exceed the current bank card, amex, paypal, etc. competition.

I believe that the number of Bitcoin transactions is a good indicator of the underlying economy, and very useful for fundamental analysis.

Most analysts and pundits who refer to the number of transactions prefer an alternate chart available from Blockchain.info . . .

https://blockchain.info/charts/n-transactions-excluding-popular?timespan=2year&showDataPoints=false&daysAverageString=7&show_header=true&scale=1&address=

Popular addresses are excluded from the preferred chart because of the issue with numerous dust transactions related to gambling sites, e.g. Satoshi Dice last year.

It appears from that indicator that the number of Bitcoin transactions increases at about 5x per year and the trend continues. Given the bitcoin prices have increased at a rate of 10x per year, one may ask whether prices have gotten far ahead of transactions. I hypothesize that prices are ahead because speculators have the future in mind, not the present.

Using data presented by http://www.coinometrics.com/bitcoin/tix, the sum of competing payment network transactions is 345,292,000 per day. Using the Blockchain.info figure of 58,620 for adjusted current daily Bitcoin transactions, then at 5x increase per year, the number of daily bitcoin transactions will exceed the current bank card, amex, paypal, etc. competition in five or six more years.

I wonder why you did not pick a ASIC-resistant POW scheme such as scrypt-N.

Legions of GPU miners are often enthusiastic supporters of coins that they mine. Who is going to mine CatholicCoin? Only latest generation ASIC owners - right?

Yay! Yay for Huobi!

They forced the other Chinese exchanges to zero-fee trading. And I expect that trend to spread to other exchanges worldwide - especially if Huobi adds a USD pair.

It is reasonable for a rig owner to monitor the performance of the rigs being leased, but I believe that it is a conflict of interest to spy on what is being done with a leased rig.

I shall make a post in my reputation thread that I never compete with my tenants.

To a certain extent, the past bitcoin price series does suggest a prediction for the future. Namely that there were bubbles and there will be more bubbles.

You misunderstand the mathematical nature of the logistic model when you state that it assumes that what occurred in the past must continue in the future. Eventually, the exponential growth of bitcoin prices must end. The logistic model is the simplest way to explain that phenomenon - that eventually future bitcoin prices will not have the exponential growth observed in the past, as we pass the 50% adoption rate by the population of possible bitcoin speculators. For a maximum bitcoin price of 1 million USD, the model predicts the halfway adoption point at year end 2016.

I use a simple, widely applicable, mathematical model to explain historical bitcoin prices and to characterize the circumstances in which exponential bitcoin exponential price growth eventually slows down. Fitting the model requires me to guess at a maximum bitcoin price, and I selected 1 million USD per bitcoin as explained earlier.

I figure that 2014 is the last year in which ordinary persons will be able to afford a whole bitcoin, because the logistic model suggests prices next year will range between 10000 and 100000 USD. Glad that you are along for the ride.

March 2014 Logistic Model Status

Here is the log chart for the logistic model covering 2013 and 2014 . . .



Presently the bitcoin price of $575 is significantly below the model value of $856. I share the conventional wisdom on this forum that the next Bitcoin bubble will begin in a few months as illustrated below, assuming that the next bubble is similar to the last two bubbles  . . .



The shared spreadsheet is https://docs.google.com/spreadsheet/ccc?key=0ArD8rjI3DD1WdFIzNDFMeEhVSzhwcEVXZDVzdVpGU2c
 

I have simplified the rig rentals at LeaseRig.net to only offer 72 hour rentals. I set prices for rehire and if need be accept offers such that my rigs are nearly always rented.

Thanks!!