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This metric seems to be just as flawed as total bitcoins transferred. Why should a bitcoin that hasn't been spend in a while be worth more than one that was spe

by thasmin 15y ago

This metric seems to be just as flawed as total bitcoins transferred. Why should a bitcoin that hasn't been spend in a while be worth more than one that was spent yesterday? If someone sells something for bitcoins and then buys something else the same day, that seems like a great indicator of bitcoin activity but the second transaction is completely ignored by this metric.

windsurfer 15y ago
It's also interesting to note that if you were to purchase 100 btc per day of stock using day-old coins, it will appear to be the same as 10 btc per day using 10-day old coins.
- Dylan16807 15y ago
  Sure, but if you ignore the trickle of new coins you have to get those 100 from someone else, and that requires burning significant amounts of bitcoin days.
  - polshaw 15y ago
    At around a 40% increase in the money supply in the coming year, it isn't so much an insignificant 'trickle'.
sathishmanohar 15y ago
I agree. I don't want old money / new money culture in Bitcoins, I hate that attitude among people when dealing with conventional currency.
- flomo 15y ago
  But that's the reality of bitcoin. A tiny group of early adopters are supposedly sitting on a huge percentage of the total coins. Meanwhile, a much larger group of late-comers are mining small amounts and trading in small volumes. I'm not sure if this metric is useful, but it is interesting to see if the early users start to 'cash out'.
feral 15y ago
If you were to monitor velocity of money http://en.wikipedia.org/wiki/Velocity_of_money http://en.wikipedia.org/wiki/Velocity_of_money naively, by calculating total bitcoins transferred, then it would be trivial for any party to increase the velocity arbitrarily high, by just sending their 10 bitcoins through a very long cycle of addresses. And there have been examples in the block chain, where parties unknown have moved large amounts of bitcoin through many accounts, for no obvious reason. Bitcoin-days-destroyed at least seems to avoid that problem. I agree its still a flawed metric. Your example of the same bitcoins being used in multiple transfers, in the one day, seems completely valid to me. But I don't think there's a perfect way of measuring the velocity, unless you've a complete map of addresses-to-identities, which isn't available (and even that is neglecting transactions done within exchanges, that aren't backended onto the bitcoin system - which is probably a fair enough limitation.) The same is true, if you are trying to calcuate velocity of money in any traditional economy, where cash transactions are permitted. The cash could be used in several transactions between observations - theres no way of telling - and theres nothing that can be done to solve that. So, such measures are always going to be approximate. On this topic, something that surprised me recently, was the assertion in Paul Krugmans blog http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/ http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett... "The actual value of transactions in Bitcoins has fallen rather than rising. In effect, real gross Bitcoin product has fallen sharply. " I'd love to know how he came to that conclusion, or what sort of data he used, and whether its accurate.
- trevelyan 15y ago
  The data isn't from Krugman but was in the article he linked to.
  - feral 15y ago
    Ok - it looks like they reached that conclusion by multiplying the number of Bitcoins transacted, by the dollar value of a Bitcoin. Fair enough, but its a measure vulnerable to the problem that days-destroyed is trying to solve - it'd be easy for people currently sitting on large volumes of Bitcoin to 'solve the problem' that is highlighted by Krugman, by just shuffling their coins around.
polshaw 15y ago
Hanging around certain bitcoin corners of the internet, i get the distinct impression that a good section of users (or, speculators) are keen to spin reality to distort the image of bitcoin prospects.. either through hopeful delusion, or (more likely IMO) as attempts to hype up the market. This metric may deal with one issue, but it is still totally useless as an objective metric of 'the bitcoin economy'. A much more reality-based metric would be the number of retailers (etc) accepting payments in BTC (and their volumes if they were available). But this would be a much more sobering picture.

by thasmin 15y ago

windsurfer 15y ago

It's also interesting to note that if you were to purchase 100 btc per day of stock using day-old coins, it will appear to be the same as 10 btc per day using 10-day old coins.

Dylan16807 15y ago
Sure, but if you ignore the trickle of new coins you have to get those 100 from someone else, and that requires burning significant amounts of bitcoin days.
- polshaw 15y ago
  At around a 40% increase in the money supply in the coming year, it isn't so much an insignificant 'trickle'.

sathishmanohar 15y ago

I agree. I don't want old money / new money culture in Bitcoins, I hate that attitude among people when dealing with conventional currency.

flomo 15y ago
But that's the reality of bitcoin. A tiny group of early adopters are supposedly sitting on a huge percentage of the total coins. Meanwhile, a much larger group of late-comers are mining small amounts and trading in small volumes. I'm not sure if this metric is useful, but it is interesting to see if the early users start to 'cash out'.

feral 15y ago

If you were to monitor velocity of money http://en.wikipedia.org/wiki/Velocity_of_money http://en.wikipedia.org/wiki/Velocity_of_money naively, by calculating total bitcoins transferred, then it would be trivial for any party to increase the velocity arbitrarily high, by just sending their 10 bitcoins through a very long cycle of addresses. And there have been examples in the block chain, where parties unknown have moved large amounts of bitcoin through many accounts, for no obvious reason. Bitcoin-days-destroyed at least seems to avoid that problem. I agree its still a flawed metric. Your example of the same bitcoins being used in multiple transfers, in the one day, seems completely valid to me. But I don't think there's a perfect way of measuring the velocity, unless you've a complete map of addresses-to-identities, which isn't available (and even that is neglecting transactions done within exchanges, that aren't backended onto the bitcoin system - which is probably a fair enough limitation.) The same is true, if you are trying to calcuate velocity of money in any traditional economy, where cash transactions are permitted. The cash could be used in several transactions between observations - theres no way of telling - and theres nothing that can be done to solve that. So, such measures are always going to be approximate. On this topic, something that surprised me recently, was the assertion in Paul Krugmans blog http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/ http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett... "The actual value of transactions in Bitcoins has fallen rather than rising. In effect, real gross Bitcoin product has fallen sharply. " I'd love to know how he came to that conclusion, or what sort of data he used, and whether its accurate.

trevelyan 15y ago
The data isn't from Krugman but was in the article he linked to.
- feral 15y ago
  Ok - it looks like they reached that conclusion by multiplying the number of Bitcoins transacted, by the dollar value of a Bitcoin. Fair enough, but its a measure vulnerable to the problem that days-destroyed is trying to solve - it'd be easy for people currently sitting on large volumes of Bitcoin to 'solve the problem' that is highlighted by Krugman, by just shuffling their coins around.

polshaw 15y ago

Hanging around certain bitcoin corners of the internet, i get the distinct impression that a good section of users (or, speculators) are keen to spin reality to distort the image of bitcoin prospects.. either through hopeful delusion, or (more likely IMO) as attempts to hype up the market. This metric may deal with one issue, but it is still totally useless as an objective metric of 'the bitcoin economy'. A much more reality-based metric would be the number of retailers (etc) accepting payments in BTC (and their volumes if they were available). But this would be a much more sobering picture.