I developed a method for analyzing the bitcoin blockchain using very simple analytical tools. While my initial work was with bitcoin it works with altcoins in general. I wrote a post describing the method and theory. In it I posted the MatLab files I used to perform the analysis.

I am not familiar with programing in general. I do not see any reason why these functions and methods can't be incorporated into abe's source code. They provide powerful description of these currencies and are very easily implemented.

I used abe to parse the bitcoin blockchain and greatly appreciate the effort that you put into developing the source code. Please take my work as a thank you for the work that you did.

http://statisticaleconomics.org/2014/03/13/quantifying-the-value-of-bitcoin-2/

I finished a project that developed statistical measures of the bitcoin blockchain. The method determines the marginal utility of bitcoin, the amount of network activity, an estimate of the number of network participants, and how these all interrelate. It also lays the initial foundation for analyzing the growth of the network.

http://statisticaleconomics.org/2014/03/13/quantifying-the-value-of-bitcoin-2/


Cal Abel

Be very careful about non market pricing mechanisms. The problem with price determination is about discovering the price. While you can set the price, ala a Pigovian tax, you are doing so without knowing the actual value of the item being assessed.

There is much more going on here than the simplistic models being proposed. I'm reminded of Bastiat's "Seen and unseen". The market possess many methods that enforce discipline. Such things are the emergence of practices of what is proper. Things like common law (written and unwritten) emerge from propriety. The complexity contained within these relationships greatly affects the price and value of action within that market.

Satoshi was very wise to leave as much up to the market and the individuals that comprise each market. Here he accessed one of the greatest information aggregators humanity ever devised. For the Etherum developers I suggest you read an article by Hayek, "The Use of Knowledge in Society". You can get a copy here: http://www.econlib.org/library/Essays/hykKnw1.html

Here is an amusing and informative video by Mike Munger explaining the information problem in externalities: http://www.learnliberty.org/videos/externalities-when-is-a-potato-chip-not-just-a-potato-chip

I am from the energy field and have dealt a great deal with understanding the impact of externalities on the production and consumption of energy. I found that invariably any policy that is founded on presuming to know the social value ALWAYS creates a net social harm. I now appreciate the Coasian approach to resolving these externalities through the creation of proerty rights (markets) even this approach is not fail proof. Please look at the work of Coase and Hazzlet. There are two parts to Coase's theorem about externalites. Both need to be understood before effective policy is developed.

I ran a query, probably not very good, trying to understand if Bitcoin can include a Turing complete scripting protocol without forking the block chain.

My apologies if this question has already been asked/answered.  Thank you.

Danny,

Thank you.  I found the coinbase, the 0 position tx_id in the blockchain. So as I understand your explanation is there is an unassigned tx quantity that has an originating address, and no destination address. This sum is then claimed by the miners and divided per the rules of the pool.

What I am still not clear about is that is it possible to go back and access the information in the chain to see the path of the fees in the block chain, or does the inclusion of the fee in the coinbase wipe its history?

I am data mining the block chain to develop network metrics and need to understand the fee protocol. Any help is greatly appreciated.

When I pay a fee, where does it go, is there a specific address or does that portion of the block chain cease to exist and be rediscovered?

What is the fingerprint in the block chain that uniquely identifies the fees paid to the miners for each particular block?

Thanks!

I love abe and it is giving me some incredible capabilities. Thank you for developing it!

Here is a bug report and a recommendation. 
There is an error in how chain summary generates the table. You can see this at block_id 278440 the block_height 278271 skips to 278160. Also as a comment would be convenient if abe.block had the previous block hash, allowing construction of the chain from one db entry.

Thank you all for that information. There are ways of resolving the timestamp in a decentralized manner. when conducting the comparison of the size of the proof of work, each submitted proof of work will have an associated timestamp. Take the average and use that as the timestamp for the longest.  There are also methods of synchronizing the network clock, using the clocktime of participants.

From an analytics standpoint accurate time measurements are very important.

To the second part:

Where can I find the equations that are used to calculate difficulty (base 10 for dummies please) and network hash rate for each block?

Thanks again

I am developing metrics and macro analytics for bitcoin. As a result I need to access the information contained in the blockchain. This resulted in some interesting findings. I use Abe and checked one point on blockchain explorer.

1. The block chain time stamp is non sequential.  I did not think this was possible. I found this when trying to compute the network hashrate using the (t_stamp_i - t_stamp_(i-1))/600*difficulty*4295032833 to find the network hash rate. When I plotted this I had negative numbers, which if the timestamp monotonically increases is not possible.

As an example, blocks 139793 (time stamp 1312599459) and 139792 (time stamp 1312599808) are not monotonically increasing.

How does one determine the appropriate time stamp? And then, estimate the hash rate for each block?

2. I tried to find an explicit function for finding the difficulty (needed in finding the hash rate) Here I used a ratio of the difference in timestamps for blocks 0 to 2015, 2016 to 4031, etc to the 1209600 seconds that it "should" take to find the 2016 blocks. This gives a multiplier for each time step. I then multiplied every previous multiplier to obtain the difficulty for any particular block.  The result is close to the difficulty reported everywhere (1,180,941,214.99 from Abe for current) ( 1,233,468,670.05 by my method). Intuitively the method I used makes sense (I couldn't find a description online that did not involve hexadecimal (sorry I am a base 10 kinda cat) or written in C (I don't program outside of Matlab). Basically every method I found was unintelligible.  My method relies upon accurate timestamps and any accumulated small error will give an erroneous number, and goes back to my first problem.

Any help/explanation here will be appreciated.

FWIW, I got abe up and running natively on Mac OS 10.9. It was painful, OSX doesn't like python... I lost a weekend, if anyone wants a discussion of how and what I used to get the binaries compiled give me a shout.

Abe through MySQL allows me to directly access the database using Mathematica for data analytics.  Very nice tool.  Thanks John!

BTW, where is the data for the number of bitcoins in circulation? I can't seem to find the correct db location.

Interesting post, and subsequent discussion. I am trying to get a grasp on measuring the complexity of the bitcoin economy. Fortunately, the blockchian records every transaction. I do need help in accessing and parsing the blockchain into a file I can pull into Mathematica or Matlab.

Frustrated by there being a lack of formal aggregation of microeconomics into macro phenomena (Keynes and neo Keynesian does not count as rigorous in my book), I aggregated von Neumann and Morgenstern's game theory (micro model of individual action) into macroecon, by adding every individual's action together.  Keynesian tend to look at the individuals resulting from the aggregate instead of the aggregate being composed of the individuals (an Austrian perspective). Basically the Keynesian's have the logic backwards (along with their math) and the Austrians who have the logic in the right direction but reject math.  Go figure.

Because my approach is based on statistical measures, I am very concerned with distributional information, which is why the blockchain is so important.

In earlier derivations I derived a similar relationship that you posted very early regarding the velocity of money, but with a twist:
lambda*M=C*N*T

lambda-marginal utility of money (amount of action that a unit of money can achieve in exchange)
M-quantity of money
C-constant of proportionality
N-number of degrees of freedom of the system. These are the number of logically independent participants within the economy
T-temperature-the marginal utility of information, it is the measure of action of the individuals in the economy.

I looked a 10 blocks (269609 to 269618) and found that the received transactions are LogNormal. I go through some of the interpretations and consequences of that distribution in this post:
http://statisticaleconomics.org/2013/11/29/measuring_the_complexity_of_bitcoin/
Examining the distribution results in measures for the temperature and the number of degrees of freedom. Because we know the quantity of money, at least until fractional reserve takes hold in bitcoin (just wait it is coming) we can easily compute the marginal utility of bitcoin.

I need to push the model further and develop a better/more complete model that describes the functional relationships, but need larger chunks of the blockchain to do so. Any help would be appreciated.

If you are curious of some analysis of the dollar under this framework here is a post Theft at the Grandest Scale:
http://statisticaleconomics.org/2013/11/13/theft-at-the-grandest-scale/

This is why I use bitcoin, and moving away from fiat. Money that is created benefits those who get to use it first. I would rather the expansion of the money supply be used to fund a service that I benefit from (validating transactions and prevent double spending by paying the miners) than where my action goes to benefit some group of individuals who I never met and don't get anything in return.

muyuu,

I am working on the math right now of how to use the miners as a sort of MCMC to asses the money supply. Derivation is proving a little more than I had anticipated. I will list it in full on statisticaleconomcis.org when I am done. Allows for a floating money supply using network information and the self interest of the miners.

As for the implementation of the stock exchange, rather stock certificates. I will likely type that up as a paper and similarly post. I do not have the coding ability to embark on such an adventure.

muyuu,

Thank you very much for the reply. It was actually a discussion thread about a floating blockchain size that brought me here.

https://bitcointalk.org/index.php?topic=144895.0

There are problems with stability of the bitcoin if the money supply is not allowed to grow, Right now we are in a stable position because the entropy gradient is positive. However the number of coins in supply will slowly go down, due to loss. This is not a problem now, however it will become a problem of limiting future growth due to systemic stability issues.

As for the stock exchange. What an individual can do is to create uniquely certificates that are functionally exactly like bitcoin. These certificates have a unique key from the person who made them. Because they are uniquely distinguishable from other certificates, unlike bitcoin. They have a distinct relative value associated with them due to their unique identification. The block chain acts as an overall encryption of all stock certificates.

This idea is not a stock exchange per say although anyone can create an exchange. This idea is a time stamped cryptological stock certificate.  Each certificate would have a unique bitcoin address tied to it allowing dividend payment and a few other features I am working out.

The exchange portion, where people trade these can be done on a P2P basis or can be done on something like Mt Gox. Governments cannot get rid of trade, they can however make it more difficult, just like with bitcoin. Ownership is private and certificates can be traded offline, just like paper stock certificates of yore.

My thoughts on why bitcoin will succeed

First thought is more of a reaction to studying environmental ethics. There is no such thing as intrinsic value. Value is determined as part of the economic calculation and it is always measured relative to something.

A good read on the subject of denationalized currency is Hayek's "Denationalization of Money" Available here:
http://mises.org/books/denationalisation.pdf

There are lots of different kinds of money, seed is one that the joint mentioned earlier, so are stones, gold, silver, platinum, paper, cloth, wood rings... For kids, at least my age crowing up baseball cards and marbles represented a form of currency.

I look at the economic calculation more from an Austrian perspective, specifically Ludwig von Mises "Human Action". Action is an interesting thing especially when we look at it from a perspective of physics. It is observable and countable. Because it has a defined measure that means we can apply statistics (in economics this is called Game Theory). With the application of statistics we can aggregate the action of a manifold of individuals acting and low and behold we get the fundamental equation of thermodynamics with utility having the context of measured action the exact same as energy in thermodynamics. I am in the process of translating a series of papers I wrote into html @ http://statisticaleconomics.org

For a thermodynamic analogy to economics here you go:
http://ajp.aapt.org/resource/1/ajpias/v67/i12/p1239_s1?isAuthorized=no

The interesting thing that I find is that in a thermodynamic analogy there is a marginal utility to information, we call this marginal utility temperature and the measure of information (rather lack of knowledge of a state) entropy.

So I still have not answered where the value of a currency comes form. It is the amount of action that can be traded between one individual to another. They agree on the value of the currency at the time of the transaction. For more on this read:
http://www.gmu.edu/depts/rae/archives/VOL17_4_2004/1-Horowitz.pdf

Currency is a means of exchanging action. The size of an economy is its money supply. The size of a physical system is its volume. The marginal utility of money is akin to pressure in physical system.

When we agree to use bitcoin and trade in it, more importantly when we choose to do business in it, we impart some of our action and our own knowledge of value to the currency. This acts to increase the pressure of the system.

So where you might ask did the initial value of the bitcoin come from. It came when Satoshi expended the first electron to decrypt the very first block (not counting his work in developing and testing bitcoin). See that electron just did not appear at his home with some preordained potential of 120 VAC just because. It came to him because he exchanged his action (I'm assuming he's from US please forgive me if you are not) stored in USD for the infrastructure to produce and deliver that electron to him. The cost of electricity to decrypt the very first block was the value of that first bitcoin.

I find it convenient to measure things next to something I can measure with a ruler. I like converting the value of a currency into the amount of primary energy that it purchases. $/J is the marginal utility of the dollar measured relative to the definition of a joule, the dollar being an american is the one I study the most. Ayers and Warr equate 80% of GDP to exergy (useful work) input to the economy: http://www.amazon.com/Economic-Growth-Engine-Prosperity-International/dp/1849804354

Useful work is the measure of action that can be achieved with that energy. Our action is not what we do with our hands but what we can affect with our knowledge. To change the world around us, it requires exergy. This is a combination of the first and second laws of thermodynamics. So my selection of energy as a measure of utility is not mere heuristics.

So "the joint" please refrain from denigrating bitcoin. You do not have a logically defensible position. If you doubt its value, don't trade in it. If you are trading in it then you don't even believe your own gas, because your act of trading is adding value to bitcoin. Go ahead and sell off. Please, I need to buy some BTC for my daughter. My kids keep there allowance money in BTC.

As for measuring the value of something relative to something else, this goes back to how we define Euclidian space and the Lebesgue measure. Everything is relative to something else, Pick a defined measure and reference everything else to it. In thermodynamics, the scale is not necessarily important it is the relative change. The same holds true in economics.

I use Bitcoin to hedge against inflation, especially as the news grumbles of currency wars. I am concerned about protracted devaluation of global currencies as a way of inflating away the debt problem. I do not trust politicians to act responsibly. I expect them to act in their interest and depending on who gave them campaign money is who they will support. The banks fund both parties equally well (US) so don't be fooled.

I am a theorist. I developed a framework to create an open source stock exchange, the concept I call Bitcoin Open Source Stock Exchange (BOSSE).

I have no development experience and will present the idea this May at the conference. The idea is to create a code framework that leverages the characteristics of bitcoin, preventing governmental DOS and allow individuals to exchange stock certificates in a PTP basis.

The model does allow for exchanges, where companies would pay to list for faster transaction speeds, fee for service, something akin to Mt Gox like a currency exchange, but this is for stocks.

If you are interested in hearing the framework, please promote me from Newbie status.

I also have some ideas on how to adjust the BTC production algorithm to allow stability in the quantity of money in circulation as a function of the cost of mining BTC, borrowing from the physical model of gold production here.

What is the issue with using something like armory? The problem with the bitcoin client is that it takes forever to sync the blockchain. Am I missing something here. The issue is air gapping to prevent online intrusion and encryption to prevent offline intrusion.

Hello, testing to see if I can post