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Author Topic: Total Bitcoin Economy : $19,120,511.48  (Read 3518 times)
the founder
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October 17, 2011, 04:26:47 PM
 #21

I do agree with you on some points. But i think many ppl think total value of the bitcoin economy as such is because bitcoin isnt a currency.

No matter what kind of bitcoin related business you're working one, it still falls back on fiat currency. As a business owner, you cant put food on your table by using bitcoin.


Some of us run bitcoin businesses as a hobby. Anything I earn with my business is just extra play money Smiley I pretty much do not use any fiat, just bitcoins.

hence why the formula is accurate.


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October 17, 2011, 04:36:30 PM
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If there were some massive global PR about a new 'Bitcoin' which everyone can 'get in on', I could see that working.  Of course these are all big 'ifs', and I admit I'm not educated in market forces at all... but that's why I ask questions Smiley


I think that plan would fail miserably, but it's always okay to speak your mind =) Remember that Bitcoin IS open to all people. Anyone can "get in on it."  But like all real commodities, it has a price, and the ability to "get in" is limited by one's funds. This is not a shortfall of Bitcoin, but simply the natural property of a scarce commodity. Creating a new chain that "everyone could get in on" would mean either that it was given away freely based on something other than a pricing mechanism ( a lottery or something), or it was unlimited in its supply (in which case it'd be worthless and impotent in the transfer of value).

Price mechanisms are our friend. Distributing valuable goods with anything other than a free market price will result in serious economic distortions. Create an alternative currency without a market price and a price will set itself in a black market, or shortages will occur.

People can get in on it now, yes - if they're aware.  Awareness isn't there.  Hell, my neighbor didn't even know the OWS protests were going on in the first place.

Raising awareness now about Bitcoin doesn't bode well.  The trend is down, and once it gets super-low, we have another distribution problem - one entity with a reasonable ammount of wealth can 'gobble up' all the cheap ones, and put is right into a speculative bubble.  Rinse/repeat, with no real room for reliable business transactions.

What I'm primarily concerned about is IF the variables in BTC (x coins at y rate, etc) are correct to nourish an economy before people just 'give up'.

Edit: Also, the lower the prices go, the more miners turn off their rigs, the conceptually easier it becomes to pull off a 51% attack on an exchange.

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October 17, 2011, 04:45:44 PM
 #23

So here's perhaps a naive question,

Is it time for a reboot?

AFAIK "Bitcoin" is just a proof of concept.  And it's shown to 'work'.  But the initial release and distribution was so narrow, we have these massive sell-offs from just a handful of individuals.  Now that the 'cryptocurrency' idea is out there and more people are aware, would it be prudent to launch a new chain with some of the lessons we've learned?

the proof of concept worked amazing.  The idea behind bitcoin is rock solid.  How it was released and how narrow the bitcoin community was is the problem.

If it was released in a fashion that widened it's appeal.. or got more bitcoins into the street with more people it would have been a very different story.    I hate to say it,  but us Geeks keep it as a community within a closed gate.     We knew how to build something, just not how to distribute it.


Quote
We knew how to build something, just not how to distribute it.

This is indicative of singers, musicians, artist, etc., like my brother-in-law.

You could be the best guitar player in the world, but not get recognized, let alone a break, without an agent or a remarkable PR campaign.


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October 17, 2011, 05:45:50 PM
 #24

It was never worth any of those figures, the drop proves this. I doubt it's even worth even $2 mil atm.
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October 17, 2011, 06:15:32 PM
 #25

It was never worth any of those figures, the drop proves this. I doubt it's even worth even $2 mil atm.

Possibly.   However that still doesn't detract from the fact that value is 99% perception and 1% fact.

Gold is worthless too.   You can't eat it,  you can't us it to build virtually anything. But people perceive it to be valuable so it is.

Helium is actually valuable,  there's even a tighter supply of Helium than Gold in relative terms.  A kids helium birthday balloon should be worth at least 200 dollars.    But it's not perceived as such,  so it's not.







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October 17, 2011, 06:21:17 PM
 #26

The Bitcoin economy has grown actually. The exchange rate has fallen.

Current market price X Bitcions outstanding =/= "value of bitcoin economy"

no man it tanked.  

http://www.flexcoin.com/calc

We printed so many of them when the value was still decreasing.    Causing hyperinflation.   Peter the formula is there as well.

Also the entire valuation of all the BTC combined dropped 200k since I hit submit 2 minutes ago.

Total Value of Entire Bitcoin Economy $18,996,192.35

This however does change by the second,   and will go up and down,  but the trend is down and will continue to be until we slow down on printing them.


Again, you are making a serious error in terminology economic reasoning. You are multiplying the market price of a bitcoin by the total bitcoins outstanding, then labelling THAT as the "value of the bitcoin economy"

Why is that an error? Because the "bitcoin economy" is far more than the sum total of Bitcoins. It is the sum total of Bitcoins + the entire ecosystem of systems, goods, services, and intangible capital that constitutes the "Bitcoin economy" + any speculative value ascribed to either of the first two parts.  As a quick example - I own and am building a handful of Bitcoin systems and companies. They have some value, call it "XX".  Now, I also have about 250 bitcoins with a current value of about $600.  Using your calculation, you're adding the $600 + "XX" and calling that equal to $600.  So the only way your calculation is valid, is if my projects have a value of exactly zero, and I promise someone would pay at least $1 for what I'm building =)

You really need to stop attributing the "bitcoin economy value" to the "aggregate market price of all bitcoins."  They are not equivalent in any sense, and you are contributing to a "de-education" of people that read your posts.

+1

Founder, I really wish you would study this topic a bit deeper until you understand what evoorhees and others here are trying to tell you.  The price of a bitcoin multiplied by the number of bitcoins mined tells you zilch about anything.  Trying putting up 10,000 bitcoins for sale and see what that does to the price of a bitcoin and your "total value of the bitcoin economy" figure.  I imagine that would be sufficient to push the price of a bitcoin to below $1, in which case you have to ask yourself where the other $10+ million of value went if all you collected was less than $30k and the total economy is then worth only about $7million.

You are correct that the continued generation of coins will put downward pressure on the price of bitcoin.  If there's no growth in the use of bitcoin then short of another speculative bubble, the price of bitcoin will continue to fall.  You can flexbank on it, so plan accordingly.

As for rebooting bitcoin...it's already been done at least a half a dozen times...see the alternative crypto currencies section of this forum.  There, you'll find a graveyard of reboot attempts.

There is nothing wrong with the bitcoin generation function (and there's nothing particularly magic about it either).  The only thing that was wrong were expectations about how quickly people would start using bitcoin or what price was necessary to support real economic activity using bitcoin (which I think is probably well below $1).  I think even the run up to dollar parity was almost purely speculation.  If you think of it in terms of a stock P/E ratio, it's like bitcoin was trading at a 300x multiple and it simply didn't have the growth rate to justify that...and now it's falling back to a much more modest and appropriate P/E ratio.

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October 17, 2011, 06:25:03 PM
 #27

Helium is actually valuable,  there's even a tighter supply of Helium than Gold in relative terms.  A kids helium birthday balloon should be worth at least 200 dollars.    But it's not perceived as such,  so it's not.
It might also have something to do with the fact that it's difficult to turn helium into coins that are easily traded and stored.

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October 17, 2011, 06:31:12 PM
 #28

It was never worth any of those figures, the drop proves this. I doubt it's even worth even $2 mil atm.

Possibly.   However that still doesn't detract from the fact that value is 99% perception and 1% fact.

Gold is worthless too.   You can't eat it,  you can't us it to build virtually anything. But people perceive it to be valuable so it is.

Helium is actually valuable,  there's even a tighter supply of Helium than Gold in relative terms.  A kids helium birthday balloon should be worth at least 200 dollars.    But it's not perceived as such,  so it's not.


Gah more fallacy heaped upon fallacy!

Gold is not worthless. Just because it's not for eating, nor for building things, doesn't mean it's worthless. It is attractive to people in ornamentation and that is where its original value comes from. On top of that, it is used as a money because its properties make it very effective for this specific purpose. Gold's value as money is not arbitrary... in fact it is almost inevitable given the geographic makeup of the Earth and the properties inherent in the gold element.

So people did not just "decide" that gold had value - it has value because of its usefulness and its properties. The same goes for Bitcoin - it has value because of its usefulness and properties as an international frictionless payment system. Specifically with Bitcoin, it is the protocol which has use value, and the Bitcoin units have market price because their supply is scarce and they are the only units usable with the Bitcoin protocol.

If you really want to claim that helium is more valuable than gold, because it's more useful, then you've lost your final credibility as an economic thinker  Wink. Gold's primary value is in its effectiveness as money - this is an elementary concept. Money, as a "good," is far more useful than helium, and thus gold (being useful as money) is correctly priced above helium in the marketplace. The demand for money FAR outweighs the demand for birthday baloons (and whatever else helium is used for), so even if helium is more scarce it will still command a lower price than gold.  

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October 17, 2011, 06:31:18 PM
 #29

If someone is going to trade bitcoins,  they are going to trade them for their value.

"I'd like to buy a bag of popcorn for a bitcoin"

The merchant then looks at what a bag of popcorn costs him,  then he'll say 3 BTC because that's what he needs.

If these things approach 1 dollar,  then he's going to ask for 6 BTC for that same bag of popcorn.

The value of the bitcoin economy dropped in that case by half...

But remember,  it's not just one merchant,  it's all of them combined buying and selling BTC ...   it's the true value of the Bitcoin economy.  

I know you disagree with me.. it's fine... and I respect your opinion...  I think you built the best payment option for merchants regarding bitcoins and you clearly know what you're doing in that regards.

I just believe that you're wrong in this instance....  Smiley










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October 17, 2011, 06:32:59 PM
 #30

Helium is actually valuable,  there's even a tighter supply of Helium than Gold in relative terms.  A kids helium birthday balloon should be worth at least 200 dollars.    But it's not perceived as such,  so it's not.
It might also have something to do with the fact that it's difficult to turn helium into coins that are easily traded and stored.

Actually it's government manipulation in the market Smiley  you might see the price of Helium skyrocket in terms of an overnight WTF just happened moment.

http://arstechnica.com/science/news/2010/07/science-policy-gone-bad-may-mean-the-end-of-earths-helium.ars


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October 17, 2011, 06:39:24 PM
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But remember,  it's not just one merchant,  it's all of them combined buying and selling BTC ...   it's the true value of the Bitcoin economy.  


Founder - the "true value" of the Bitcoin economy is coins + goods/services + infrastructure + net present value of all future coins/goods/services/infrastructure.

That value is impossible to calculate... but you are not even trying to calculate it. You are ONLY extracting that first component "coins" and labeling that as the "true value of the bitcoin economy."

Surely you must now understand your error? This is not a matter of economic opinion here, this is a matter of logical fallacy and I cannot endure the head of FlexCoin, the Bitcoin bank, to perpetuate it.  Cry
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October 17, 2011, 06:43:21 PM
 #32

Quote
Creation Rate Per 10 Minutes (updated real time)

zlol   Cheesy

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October 17, 2011, 06:51:57 PM
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But remember,  it's not just one merchant,  it's all of them combined buying and selling BTC ...   it's the true value of the Bitcoin economy.  


Founder - the "true value" of the Bitcoin economy is coins + goods/services + infrastructure + net present value of all future coins/goods/services/infrastructure.

That value is impossible to calculate... but you are not even trying to calculate it. You are ONLY extracting that first component "coins" and labeling that as the "true value of the bitcoin economy."

Surely you must now understand your error? This is not a matter of economic opinion here, this is a matter of logical fallacy and I cannot endure the head of FlexCoin, the Bitcoin bank, to perpetuate it.  Cry

how better can I calculate it using existing figures available?

I am on board with improving it.   I'm being serious...  I need to figure a way to create a true value of the BTC economy using existing tools so individuals can update and check it in real time.

The way I came up with it appears to be valid in my opinion,  however...  objections from you guys does lead me to believe that you want more input into the variables to make it more robust...  tell me what to do and i'll do it.


The only thing I ask is that I need existing figures to input.. 



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October 17, 2011, 06:52:24 PM
 #34

If I had 20million USD laying around I'd probably buy out the current BTC market.

Or maybe offer an insurance backing service of some sort, insuring the value of your BTCs up to $1 each.

You can not roll a BitCoin, but you can rollback some. Cheesy
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October 17, 2011, 06:54:08 PM
 #35

If I had 20million USD laying around I'd probably buy out the current BTC market.

Or maybe offer an insurance backing service of some sort, insuring the value of your BTCs up to $1 each.

I think the problem is not many people have 20 million USD laying around that are involved with BTC Smiley


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October 17, 2011, 08:25:59 PM
 #36

If I had 20million USD laying around I'd probably buy out the current BTC market.

Or maybe offer an insurance backing service of some sort, insuring the value of your BTCs up to $1 each.

I think the problem is not many people have 20 million USD laying around that are involved with BTC Smiley
It's not necessary for one person to put up money to buy out the whole market...lot's of individuals with smaller amounts would do that as the price creeps lower.  The floor price is set by the demand for coins for facilitating commerce (which we know is not much right now).  Anything above that floor represents savings demand (aka speculation).

Here are some wild guess about what is needed for actual commerce today.  If you assume 10,000 people wanted to retain $100 worth in bitcoin just to have on hand for spending, then the implied price of bitcoin would be $0.13.  If 100,000 people wanted have $100 spending money, or 10,000 wanted to have $1,000 in spending money, then the implied price is $1.30.  $100 seems like a reasonable bare minimum that someone interested in using bitcoin for commerce would want to have on hand for spending.  Currently, I'd guesstimate that the fundamental value of bitcoin is definitely less than $1 and probably less than $0.25.  Everything above that reflects the savings (speculation) demand.  Of course, if actual commerce with bitcoin slows down, then the fundamental value could fall as well.  And, inflation is always eating away at the price.

One area of commerce that I've found bitcoin to be particularly convenient is paying for software related services (programming, website design, logos, graphics, etc).  I think if someone put together a nice site focused on software development related services where people could offer their talents in exchange for bitcoin, it might help get some more commerce going.

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October 17, 2011, 09:01:32 PM
 #37

If I had 20million USD laying around I'd probably buy out the current BTC market.

Or maybe offer an insurance backing service of some sort, insuring the value of your BTCs up to $1 each.

I think the problem is not many people have 20 million USD laying around that are involved with BTC Smiley


Sorry for cross-posting, but I have the same idea.
   
We need a Bitcoin Foundation.

Sad to admit it, but bitcoin society need credible trusted organization, which would regulate the market of bitcoins. Some rich man could take on this responsibility, but it would be much better if it was an open non-profit organization with the Supervisory Board consisting of eminent people with a good reputation.

This organization will accept donations in fiat money and at least guarantees the minimum price on bitcoins. For example, if the organization took donations for the $ 1 million, it can guarantee a price not less than 1/7.5 = $ 0.13 per bitcoin.

I believe that it is possible to imagine a more subtle mechanisms, but they must be clear to all market participants.
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October 17, 2011, 09:09:51 PM
 #38

What happens if the market wants 10 cents per BTC ?  Everyone goes there to sell at 13 cents..  Until all the funds run out?  Then it goes to 10 cents right after?

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October 17, 2011, 09:17:50 PM
 #39

What happens if the market wants 10 cents per BTC ?  Everyone goes there to sell at 13 cents..  Until all the funds run out?  Then it goes to 10 cents right after?

Could you explain what you mean by "the market wants"?
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October 17, 2011, 09:28:52 PM
 #40

it means people value BTC at 10 cents... this organization is paying 13 cents...   so it becomes buyer of last resort,  and at the end it shelled out all it's money buy the BTC .. but can't offload them at the price they paid for them.

I understand the reasons for backing them,  I don't understand the reasons on why anyone can do it profitably.


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