4 ms·

Absolute rubbish metric, if anything it measures the absolute opposite of monetary velocity. The value is basically guaranteed to grow and grow even in the face

by trotsky 15y ago

Absolute rubbish metric, if anything it measures the absolute opposite of monetary velocity. The value is basically guaranteed to grow and grow even in the face of flat or declining economic activity Monetary velocity is the sum of all transactions in a period divided by money supply Vt = nT / M Imagine a model where the number of bitcoins is increased by one each period, and one random bitcoin is transfered to another party as economic activity day 1 day2 day 10 Total Money Supply: 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.0 Actual Transactions: 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Mean BTC days destroyed: 0.00 1.00 1.33 1.66 2.00 2.33 2.66 3.00 3.33 3.67 Monetary Velocity: 1.00 0.50 0.33 0.25 0.20 0.17 0.14 0.13 0.11 0.10 As you can see monetary velocity goes in the exact opposite direction of bitcoin days destroyed and doesn't follow any similar curve. Whats worse is it doesn't have a consistent relationship with any of the real measures as you change your assumptions. Imagine instead you model a situation where every coin turns over every period. In this case Total money supply, actual transactions and BTC days destroyed will all be the exact same thing, instead of the earlier wide divergence. Monetary velocity will be exactly 1 each time because total transactions will equal total money supply. BTC days destroyed also has a hard upper limit at total days created which means it can't measure very quick activity accurately (all money turning over once a day will be identical to it turning over 10x a day) and will over weight economic growth after a period of low activity.

nealmcb 15y ago
If you look at the graph pictured on the post, copied from the bitcoin wiki, it does not always "grow and grow", because it is in fact graphing the percentage of the total bitcoin days, not the absolute number. This is further described on the stackexchange post, and you'll note that my answer there explains that it has been flat over the last 3 months. I agree that it is quite different from a velocity measure, simply because it was not intended to be a raw velocity measure. Bitcoin has some unusual features which require unusual metrics. This is just one that is being explored, as an alternative to raw transaction volume, as the posts explain.
- trotsky 15y ago
  here is the graph that I saw linked, that I used: http://banana.mine.nu/daysdest.html http://banana.mine.nu/daysdest.html the scale appears to exceed 110,000,000 - I don't believe that it is a percentage. I understand the desire to remove the noise of transfers that are not actual economic activity, but I think this is a poor way to go about it. With bitcoin it is almost as if you had the ability to record every time a dollar bill went into a pocket. Sure, some of that is economic activity but it can also just be someone changing their pants. Even if economists had that data available they'd likely still rely on the business and financial institution reports to gauge economic activity. In this way raw BTC volume is a bit of a red herring, at least until you can produce a good view of economic activity and see how it relates to BTC volume or BTCdd. As BTC continues to have an unstable price, a large percentage of the real economic activity will include exchanges for other currencies or value stores. Since exchange volume is quite centralized, you'd only need to have the cooperation of a few exchanges (you'd want to filter out traders) to gain what would probably be a rather accurate picture of real economic activity in bitcoins.

by trotsky 15y ago

nealmcb 15y ago

If you look at the graph pictured on the post, copied from the bitcoin wiki, it does not always "grow and grow", because it is in fact graphing the percentage of the total bitcoin days, not the absolute number. This is further described on the stackexchange post, and you'll note that my answer there explains that it has been flat over the last 3 months. I agree that it is quite different from a velocity measure, simply because it was not intended to be a raw velocity measure. Bitcoin has some unusual features which require unusual metrics. This is just one that is being explored, as an alternative to raw transaction volume, as the posts explain.

trotsky 15y ago
here is the graph that I saw linked, that I used: http://banana.mine.nu/daysdest.html http://banana.mine.nu/daysdest.html the scale appears to exceed 110,000,000 - I don't believe that it is a percentage. I understand the desire to remove the noise of transfers that are not actual economic activity, but I think this is a poor way to go about it. With bitcoin it is almost as if you had the ability to record every time a dollar bill went into a pocket. Sure, some of that is economic activity but it can also just be someone changing their pants. Even if economists had that data available they'd likely still rely on the business and financial institution reports to gauge economic activity. In this way raw BTC volume is a bit of a red herring, at least until you can produce a good view of economic activity and see how it relates to BTC volume or BTCdd. As BTC continues to have an unstable price, a large percentage of the real economic activity will include exchanges for other currencies or value stores. Since exchange volume is quite centralized, you'd only need to have the cooperation of a few exchanges (you'd want to filter out traders) to gain what would probably be a rather accurate picture of real economic activity in bitcoins.