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Author Topic: Bitcoin Days Destroyed Metric  (Read 703 times)
maxkoda
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October 25, 2011, 02:18:49 AM
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I see that many have considered the Bitcoin Days Destroyed ( https://en.bitcoin.it/wiki/Bitcoin_Days_Destroyed) as a measure of the transaction volume of Bitcoin.

From the wiki:

Example
If someone has 100BTC that they received a week ago and they spend it then 700 bitcoin days have been destroyed. If they take those 100BTC and send them to several addresses and then spend them then although the total transaction volume could be arbitrarily large the number of bitcoindays destroyed is still 700.


My question is how do we define "spend"? When bitcoins are sent from one address to another aren't those bitcoins spent? If not, then what differentiates a spent bitcoin from one that is sent from one address to another?

Scenario #1:
If I have two wallets and send 10 bitcoins from one wallet to another. I have transferred the bitcoins, I have not really spent them.

Scenario #2:
If the 10 bitcoins are sent from my wallet to another individuals wallet in exchange for goods or services, then I think we can consider them spent.

How can the two scenarios be differentiated from a "spent" perspective? How can the Bitcoin Days Destroyed metric differentiate scenario #2 from scenario #1 and provide a meaningful metric?

What am I missing?

maxkoda

 
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October 25, 2011, 05:02:07 AM
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I think the metric relies on the fact that people rarely move coins from one place to another unless they are spending them, or plan to spend them soon, or just received them from somebody else. As long as this is the case, then the metric is valid.

If I randomly transfer bitcoins from one address to another, then it throws off the days-destroyed metric, since those were not spent but the metric still measures them as spent coins.

You don't have to assume that this doesn't happen, you just assume it isn't correlated with anything. Which still isn't right, but I don't think there is reason to believe people are moving them for no reason any MORE than they were last month.

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