Coincidentally I am a Wikipedia editor, having authored and improved various articles in my computer science research field.

I read the article and the associated Talk discussion.  I find the article factual, appropriately balanced and sourced considering the inherent conservatism of active editors. Given the continued adoption of Bitcoin, I expect the mood of editors to become more positive over time as more of them actually hold bitcoins.

I edited the Bitcoin ATM English Wikipedia article in the adoption section to mention that Austin, Texas, USA now has three Robocoin ATMs. Also I added a reference to the Bitcoin Network article. Note that the editors are complaining that the Bitcoin Network article is mostly copied from Satoshi's whitepaper - which is improper according to Wikipedia policy. It should be rewritten in a more clear manner without relying on undefined terms.

In some more spare time, I will rewrite parts of the Network article in a manner that makes it more understandable - if no else does it first. Anyone can edit Wikipedia - but your contributions must meet the reasonable editing policy: factual, balanced, and sourced.

Not dangerous, I think. But rather short sighted. VC investment is already several times higher in the USA than in China, despite the fact that most trading, and more importantly - trading innovation, e.g. no-fee trading - is happening in China.

Unlike other countries prominent in the Bitcoin economy, China has imposed foreign exchange controls in order to prevent capital flight, which is a real danger to the developing Chinese economy.

And its not just the US embracing bitcoin, its the rest of world vs China in this regard.

Risto is a successful precious metals dealer - and this is a flamboyant depiction of someone who simply loves silver. Mr. Pietila became a Bitcoin millionaire in the months following the first time I saw this image. Given the strength of then bullish convictions and his obvious resultant success, the majority of his early detractors have moved on, or shut up.

I, for one, welcomed his perspective as a precious metals dealer, his cheerful optimism, his ambitions, and his analysis skills. I cannot think of any other whale who is this transparent. He really does not need this forum, but I think we need him. In particular, his Bitcoin Savings Plan has been a model for my own holdings.

Ha! I put my paper wallets in a downtown bank safe deposit box - specifically to keep me from trading them. I can of course add more coins to the public address without needing the private key printed on the wallet. I bought some fractional coin a couple of days ago, again this evening, and I plan to test out the two other Bitcoin ATMs in town in the next few days. I love bargains.

This too.

This.

In the last week, bitcoin prices have dropped from $600 to under $500.

An hour ago I purchased some fractional coin from the Robocoin ATM close to my house. Looks like I will make another purchase tomorrow given the bargain prices available. There are two more Bitcoin ATMs in town made by Lamassu, I believe - and I want to try them out. It is so much fun to operate the machines that I like to spread out the purchases.

Here is a video about this particular ATM. Note that I am not a gun enthusiast, but welcome them to our community. I expect that eventually Bitcoin ATMs will become as numerus as bank ATMs. Hope you enjoy them as much as I do.

http://www.usatoday.com/media/cinematic/video/6304515/looking-to-purchase-a-bitcoin-head-to-the-gun-store/



Texas, USA observers may note that in this particular case the orange bitcoin logo color has been darkened a bit to exactly match the local University of Texas school color - burnt orange. Ha.

I think the price busts out of the triangle pattern by the end of April. Many observers expect the next bubble to start in a few months, so I would be looking for signs of stability and a gentle rise beyond April given the similarity between the April 2013 bubble collapse and the current November 2013 bubble collapse.

Yes, I agree with this observation. I have legacy coins that I CPU solo-mined back in 2010. I figure my tax basis is essentially zero dollars for these.

I sold some unused gold jewelry yesterday and bought bitcoin at my local Robocoin ATM.

I expect the next bitcoin price bubble to occur in the next few months - at which point the issue of 1 BTC vs 1 oz Gold will be history.

You challenge one of the main features of Bitcoin. History shows that governments cannot resist printing money for themselves, or causing inflation to reduce the impact of government debt. The US Federal Reserve props up the banking system by creating money to loan at low rates to banks, and creates money to purchase toxic assets from them. Central control of Bitcoin, I believe, will be limited to prudent government regulations necessary to protect consumers, while encouraging innovation.

Because business cycles are currently related to credit expansion and contraction, a Bitcoin dominated economy may not need central banks to create money to prop up collapsed equity markets. A bitcoin economy is one in which credit as we know it will be replaced by something else. Loans cannot be easily made when denominated in a deflationary currency because the loan interest rate must be greater than the rate of deflation, which is currently about 10x annually. I think that future homeowners will rent-to-own rather than obtain 30 year Bitcoin mortgages. The monthly payments would be indexed to the rate of deflation.


According the economic principal popularized in Crossing the Chasm, it will be difficult for entrenched financial institutions to create new financial products that cannibalize their existing revenue streams. The US Federal Reserve has been pushing for immediate settlement of transactions but that is simply not good enough. Bitcoin's no-recourse feature makes settlement immediate. Bank card operators charge high fees to pay for the fraud that the current system allows and which Bitcoin prevents.


Good tip. I have used coursera before.


I am familiar with the stack model of software development, e.g. building RDF on XML, building HTTP over TCP/IP, etc. But Bitcoin startups are discarding the upper layers of the financial services stack and plugging in at the lowest possible level for a re-engineering of the system. For example, consider a Bitcoin ATM compared to a bank ATM. The Bitcoin ATM uses the internet to operate same as a bank ATM - but the Bitcoin ATM does not involve the vast overhead of the banking infrastructure. A bitcoin point of sale device likewise plugs into the cashier station in a manner similar to a bank card POS device. A Bitcoin wallet on a smartphone fits in a pocket in a manner similar to a conventional leather wallet holding bank cards.

Billions of individual Bitcoin users will be their own bankers but will not themselves be providing banking services to others. Bitcoin is programmable money that permits new financial services to be operated by third parties that add value to the system.

If indeed Bitcoin becomes the dominant financial instrument, then converting back to fiat would not be needed. For example, it is difficult for taxing authorities and public utilities to accept bank card payments from taxpayers and ratepayers because of the high merchant fees that cannot reasonably be passed on to the public. But Bitcoin is free for the receiver so when taxing authorities accept Bitcoin then the last reason to convert to fiat is gone.

Bitcoin is supposed to solve all the problems caused by the legacy financial infrastructure - the most severe of which I believe is the horrific misallocation of scarce resources given inflation, and the boom and bust business cycles caused by fiat-created credit.

I agree with your viewpoint with regard to bubbles. Bitcoin prices get ahead of the fundamentals. I admit selling at the April 2013 peak and buying back during the ensuing collapse. There is an element of pump and dump going on - but I think that is not because Bitcoin is a scam but rather because when an asset goes from zero to potentially millions USD per unit, bubbles are going to be inevitable and is it not reasonable to expect that speculators will try to time them?

I am not completely sure that Metcalfes law can used to price an asset class.

However, the stunning results posted by gbianchi and Peter R are sufficiently convincing, e.g. the close alignment of the data series in Peter R's graph, make me very interested to see just how the law can indeed apply. Especially considering much headroom the Bitcoin economy has with regard to transaction quantity growth over the next seven years.

You might get a stronger explanation by posting your issue in gbianchi's thread linked earlier.

Well yes, all peers on the network can speak Bitcoin. My hypothesis is that when considering the likelihood of connections between peers, i.e. the likelihood of a transaction between two addresses, the entire future Bitcoin network will be partitioned somewhat into clusters of addresses more likely to participate in transactions. For example, walk-in local merchants will have transactions with local walk-in customers, but are much less likely to participate in transactions with far away customers.

If someone can convince me that within 7 years Bitcoin entails the economic version of the Singularity, please do so. Otherwise I believe that Metcalfe's Law must eventually disconnect from explaining bitcoin prices given daily transaction quantity and addresses quantity.

Thanks! I received permission from Peter R to post his graph. And I will abide by your wishes regarding on-topic relevant material from other threads.

Sorry that I was not sufficiently clear. By way of example lets look at the worldwide email system. Every email client can reach any other email client by email address - just like Bitcoin. But if China was suddenly subtracted from the email system, it would not make my email service worth a lot less because I cannot communicate in Chinese. The worldwide email system has small world effects in that well connected nodes, i.e. nodes that might send messages to one another, are partitioned by natural languages that the users understand.

By well connected, I mean that a node has a reasonable probability of reaching another node in the network - not that it merely possible to reach that node.

Metcalfe's Law Explains 10x Price Growth Vs. 3.2x Transaction Quantity Growth

At least two posters, gbianchi https://bitcointalk.org/index.php?topic=441336.0
and Peter R https://bitcointalk.org/index.php?topic=400235.msg5877592#msg5877592
have presented a theory on the relationship between Bitcoin transactions and bitcoin prices.

The consensus result is that prices are growing in proportion to the square of the transaction quantity and also in proportion to the number of addresses. Peter R uses the Blockchain.info data series that excludes the 100 most popular bitcoin addresses from the recorded transaction quantities.

Here is the outstanding chart provided by Peter R that best illustrates the application of Metcalfe's Law to bitcoin prices . . .



And here is the example device network from the Wikipedia article on Metcalfe's Law. The insight of the law is that the utility of the network, e.g. bitcoin users, is directly related to the number of reachable nodes. The number of connections is the approximately the square of the number of nodes.



Supposing that Bitcoin completely replaces the current payment infrastructure entails a transaction rate that surpasses the current quantity of bank card transactions. At a growth rate of 3.2x annually, Bitcoin daily transaction quantity will exceed 350 thousand in 8 more years. But applying Metcalfe's law predicts a bitcoin price of 58 billion USD per coin at that point - which is implausible. Therefore it is reasonable to suppose that small-world effects will disconnect the bitcoin price relationship from transaction volume, in that the future whole Bitcoin network will not be uniformly well connected but rather be clusters of well connected nodes. Here is the example graph from the Wikipedia article on small world networks . . .

I am intrigued by your analysis, but cannot position the figures on my chart. Can you provide the dates for the figures so that I can see them on my Bitstamp daily price chart? For 2010 and 2011 I can use the Mt.Gox price series.

Before understanding the logistic model, I too assumed that the rapid growth rate of bitcoin prices would decline. I accepted then, as I do now, plausible arguments that bitcoin prices could be 1 million USD or higher - provided that the Bitcoin economy eventually replaces the existing financial infrastructure.

But after fitting the logistic model to the historical bitcoin price series, it is a clear result of the model that the average exponential growth we have witnessed in the past four years will continue until we approach the half way point of speculator adoption. So I believe we will continue to see an average bitcoin growth rate of 10x annually for a few more years - given the tiny fraction of possible bitcoin purchasers that have actually purchased bitcoin.

Regarding consolidation, we can see from the price history that the consolidation periods follow bubbles, with the longest consolidation period of approximately 18 months following the greatest bubble in June 2011. The consolidation period following the April 2013 bubble in contrast was only about 5 months. Most observers here believe that the next bubble will begin in a few more months - assuming a consolidation period of say 5 to 8 months from the collapse of the November 2013 bubble.

There is little we can do about prices getting ahead of fundamentals, e.g. the steady 3.2x annual Bitcoin transaction growth, because that is human speculative nature.

Yes, I share the feeling that we are near the bottom. I believe the resolution of the November 2013 bubble is remarkably similar to the resolution of the April 2013 bubble. Others have observed that twice prices dipped down briefly to around $400.

However I would not be surprised if prices fell briefly to an even lower level as $400 is about 34% of the peak at $1163. Back in the collapse of the April 2013 bubble, prices fell from a peak of $259 to $63 which was about 24% of the corresponding peak.

Sorry I cannot be more precise. The logistic model offers little in the way of short term price prediction aside from the price direction bias towards the trendline.