Selles bebe allaite tres liquides bancaria31 comments
Bitcoin paper wallet tutorial blog
In a post a few weeks ago I wrote:. Bitcoin is great SOV not just because of its limited supply and those hashing cost network effects. As the volume of bitcoin transactions increases, so will the demand to hold bitcoin balances for the purpose of making transactions in goods and services.
But a total of only 21 million bitcoins will ever be produced, so the price of a bitcoin must reflect the ratio of expected future MOE money demand to 21 million. Now, on Twitter today Marc Andreessen , links to Fortune article citing Stanford economist Susan Athey , who apparently makes an argument virtually identical to the above:.
Building from that basic formula, Athey adds a variety of variables to build an analytic framework. The first is velocity — how frequently a bitcoin can be spent. That, Athey says, would allow a small volume of bitcoin to process a large volume of payments, keeping the price of bitcoin relatively low. A bit of Googling turned up this interview with Athey in November of last year:. What do you think about the bitcoin price increases recently? Well, if you expect the volume of transactions to grow a lot, then the exchange rate from dollars to bitcoins has to grow too, because each bitcoin can only be used so many times per day.
The market value of all bitcoins has to be enough to support transaction volume. You could interpret the price increases as reflecting increased optimism about the future volume of transactions, driven by China implicitly signaling that it will allow bitcoins to be used for commerce there.
As a cryptocurrency pays no income, the only way to value it fundamentally is in terms of expected future cryptomoney demand uncertain in relation to its future supply deterministic and completely predictable in Bitcoin.
Money demand is proportional to the level of transaction volume if velocity —the number of times the coin supply changes hands over the period—is stable. So, if we can make that assumption of stable velocity, the price of Bitcoin today should reflect expectations of future bitcoin transaction volume.
Let be some future time when the growth rate of transaction volume levels out and let be the velocity at time , and is the supply of bitcoin:. In that scenario, velocity will be very high.
Here is a back-of-envelope valuation. Here are the blockchain transaction volume figures for the last four years, converted into USD values at the time of transaction as calculated by blockchain. In light of recent history, the result is conservative! The problem with this sort of valuation analysis is that the inputs and are entirely speculative. You can plug-in anything you like. Bitcoin translates that uncertainty about its future prospects into present exchange rate volatility.
And that exchange rate volatility dampens demand today for using bitcoin as a medium-of-exchange, undermining the very assumptions behind its current valuation. To me Bitcoin—not cryptocurrency in general, but Bitcoin—is like one of those M. Escher drawings, where the impossible looks deceptively plausible. The criticism that merchants will not accept Bitcoin because of its volatility is also incorrect. Bitcoin can be used entirely as a payment system; merchants do not need to hold any Bitcoin currency or be exposed to Bitcoin volatility at any time.
Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want. What about the extreme volatility? That creates risk and frictions. You still incur some fees when getting money in and out, but those are relatively low and should fall over time with competition. But I feel I must.. Whatever that velocity turns out to be, the interval between time coin received and time coin paid will impose an irreducible risk on the party who wishes to use Bitcoin to make payments.
A risk that is costly to layoff to someone else. But I am a believer in cryptocurrency, I would just prefer to back a cryptocurrency where whose supply was more responsive to its demand, where is a function of , or a function of the exchange rate itself. This can be done in an entirely trustless way, and such a coin is likely to have a much more stable exchange rate and be a better medium-of-exchange. You are commenting using your WordPress.
You are commenting using your Twitter account. You are commenting using your Facebook account. Notify me of new comments via email.
Notify me of new posts via email. Menu Skip to content Home About Papers. In a post a few weeks ago I wrote: Now, on Twitter today Marc Andreessen , links to Fortune article citing Stanford economist Susan Athey , who apparently makes an argument virtually identical to the above: A bit of Googling turned up this interview with Athey in November of last year: Let be some future time when the growth rate of transaction volume levels out and let be the velocity at time , and is the supply of bitcoin: Athey qualifies this position a little from the same interview above: Leave a Reply Cancel reply Enter your comment here Fill in your details below or click an icon to log in: Email required Address never made public.
Richard Gendal Brown Thoughts on the future of finance. Financial Cryptography the economics of crypto-markets. A Few Thoughts on Cryptographic Engineering the economics of crypto-markets. Economics of Bitcoin the economics of crypto-markets. Freedom to Tinker the economics of crypto-markets. CoinDesk the economics of crypto-markets. TheMoneyIllusion the economics of crypto-markets.
Moneyness the economics of crypto-markets. Eli Dourado I write about economics and technology.