rpietila Wall Observer - the Quality TA Thread ;)

[Peter R]

just a small thing: I guess you need to multiply the price of a bitcoin with the number of coins.
The value of a network is the market cap, I suppose...

If you do that, I guess the large "spread" at the left side in the chart will become smaller.

Good idea dnaleor.  The fit between Metcalfe Value and market cap is better than the fit to bitcoin price for the early days.  It also seems like number of transactions per day (excluding popular addresses) fits the left side better than unique addresses used per day:

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[chriswilmer]

I think it's relatively easy to find these seemingly insightful correlations among Bitcoin metrics... since the userbase is growing exponentially, pretty much everything about Bitcoin is increasing exponentially as well. Not saying this use of Metcalfe's law is a waste of time, just that it shouldn't be so surprising that it works so well.

[Peter R]

I think it's relatively easy to find these seemingly insightful correlations among Bitcoin metrics... since the userbase is growing exponentially, pretty much everything about Bitcoin is increasing exponentially as well. Not saying this use of Metcalfe's law is a waste of time, just that it shouldn't be so surprising that it works so well.

This is showing more than exponential growth. It is showing that a 10X increase in market cap is correlated with a Sqrt(10)X increase in N, i.e., we are witnessing the economic realization of Metcalfe's Law.  For the last four years, a 316% increase in N has corresponded with a 1,000% increase in market cap.  

If you plot market cap vs N the fit is not nearly as good (see below).  The price diverges by an order of magnitude at both sides, where the Metcalfe model is fairly accurate over more than 4 decades of market cap growth!


  

[chriswilmer]

OK, I'm convinced!!!

Thanks for making the plot Peter!

[chriswilmer]

This would make for a great academic paper!

[Peter R]

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers.  We need to found J Bitcoin.  This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise.  It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

[SlipperySlope]

This is showing more than exponential growth. It is showing that a 10X increase in market cap is correlated with a Sqrt(10)X increase in N, i.e., we are witnessing the economic realization of Metcalfe's Law.  For the last four years, a 316% increase in N has corresponded with a 1,000% increase in market cap.  

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.

[chriswilmer]

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers.  We need to found J Bitcoin.  This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise.  It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

Yeah, I've been pestering my academic colleagues in economics (I am myself a prof. of chemical engineering) to publish a paper that addresses something to do with Bitcoin... but they either laugh or take the idea seriously, but the serious ideas they will consider is how to prove that Bitcoin is a bubble

*sigh*

As a chemical engineer, I am interested in potentially applying some of the rigorous powerplant optimization methodology to a large-scale Bitcoin mining operation and publish a paper on that.

[Peter R]

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.

Lol, I was doing the same math earlier today while jogging.  

I came to a similar conclusion: we may see up to ~4 more years of growth following Metcalfe's law, putting us at a Metcalfe Value near $50,000 / coin and near 1% market saturation.  At some point we must diverge from V~N² growth, otherwise the price projections get ridiculous like you just pointed out.      

[chriswilmer]

Either way... kind of makes you want to HODL doesn't it?

[SlipperySlope]

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers.  We need to found J Bitcoin.  This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise.  It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

See this thread from 2012 ...

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

Looks like the correct search term is "Financial Cryptography".
Also the spring link (http://www.springer.com/generic/search/results?SGWID=0-40109-23-0-0&searchType=EASY_CDA&queryText=Financial+Cryptography+and+Data+Security&sortOrder=relevance&searchScope=books) seems to be the closest thing to something peer-reviewed.

[chriswilmer]

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers.  We need to found J Bitcoin.  This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise.  It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

See this thread from 2012 ...

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

Looks like the correct search term is "Financial Cryptography".
Also the spring link (http://www.springer.com/generic/search/results?SGWID=0-40109-23-0-0&searchType=EASY_CDA&queryText=Financial+Cryptography+and+Data+Security&sortOrder=relevance&searchScope=books) seems to be the closest thing to something peer-reviewed.

Yes, but a result about Metcalfe's law doesn't need to go in a cryptography journal. It's really an economic result and should go in a journal of economics... it just seems that there is a cultural barrier to overcome at the moment.

[SlipperySlope]

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.

Lol, I was doing the same math earlier today while jogging.  

I came to a similar conclusion: we may see up to ~2 more years of growth following Metcalfe's law, putting us at a Metcalfe Value near $50,000 / coin and near 1% market saturation.  At some point we must diverge from V~N² growth, otherwise the price projections get ridiculous like you just pointed out.      

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.

[Peter R]

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers.  We need to found J Bitcoin.  This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise.  It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

See this thread from 2012 ...

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

Looks like the correct search term is "Financial Cryptography".
Also the spring link (http://www.springer.com/generic/search/results?SGWID=0-40109-23-0-0&searchType=EASY_CDA&queryText=Financial+Cryptography+and+Data+Security&sortOrder=relevance&searchScope=books) seems to be the closest thing to something peer-reviewed.

Yes, but a result about Metcalfe's law doesn't need to go in a cryptography journal. It's really an economic result and should go in a journal of economics... it just seems that there is a cultural barrier to overcome at the moment.

Perhaps there actually would be a demand for J Bitcoin. It would be unorthodox in the sense that it would accept papers in all bitcoin-related fields (cryptography, economics, hardware engineering, etc), but I may actually read it!  I think if you kept the quality high via a rigorous peer-review process, it may eventually establish itself as the journal for research regarding bitcoin.  Chris's colleagues in economics who scoff at bitcoin now will be hoping to get published in J Bitcoin five years hence, lol.

[chriswilmer]

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers.  We need to found J Bitcoin.  This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise.  It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

See this thread from 2012 ...

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

Looks like the correct search term is "Financial Cryptography".
Also the spring link (http://www.springer.com/generic/search/results?SGWID=0-40109-23-0-0&searchType=EASY_CDA&queryText=Financial+Cryptography+and+Data+Security&sortOrder=relevance&searchScope=books) seems to be the closest thing to something peer-reviewed.

Yes, but a result about Metcalfe's law doesn't need to go in a cryptography journal. It's really an economic result and should go in a journal of economics... it just seems that there is a cultural barrier to overcome at the moment.

Perhaps there actually would be a demand for J Bitcoin. It would be unorthodox in the sense that it would accept papers in all bitcoin-related fields (cryptography, economics, hardware engineering, etc), but I may actually read it!  I think if you kept the quality high via a rigorous peer-review process, it may eventually establish itself as the journal for research regarding bitcoin.  Chris's colleagues in economics who scoff at bitcoin now will be hoping to get published in J Bitcoin five years hence, lol.

I would read it. Heck, I would volunteer to be an editor (I've been an assistant editor for another journal).

[chriswilmer]

Seriously... let's make J Bitcoin happen.

(sounds like something the Bitcoin Foundation might give a seed grant to support)

[SlipperySlope]

Seriously... let's make J Bitcoin happen.

(sounds like something the Bitcoin Foundation might give a seed grant to support)

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.

[Peter R]

Seriously... let's make J Bitcoin happen.

(sounds like something the Bitcoin Foundation might give a seed grant to support)

I'm on board.  I think we should gauge community interest over the next while and discuss the logistics of how this could best be accomplished.  I like your idea of approaching the Bitcoin Foundation for a seed grant--supporting an academic journal would shine a positive light on them too.    

[SlipperySlope]

Seriously... let's make J Bitcoin happen.

(sounds like something the Bitcoin Foundation might give a seed grant to support)

I'm on board.  I think we should gauge community interest over the next while and discuss the logistics of how this could best be accomplished.  I like your idea of approaching the Bitcoin Foundation for a seed grant--supporting an academic journal would shine a positive light on them too.    

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.

[Peter R]

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/ (http://www.degruyter.com/).

Thanks for the info, SlipperySlope.  Is the main benefit of publishing through degruyter.com that the you can leverage their website for dissemination of the papers?  I wonder what the politics are with a publisher like Elsevier for a touchy subject like bitcoin.  Perhaps it may even be preferable to publish independently under the Bitcoin Foundation brand (I don't expect there would be demand or a need for a print edition).  A lot to brainstorm about.

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.

I have a feeling there are more PhDs around here than are letting on…