Crypto insights part #1: Community growth VS transaction count

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Avatar for codemojo
4 years ago

This is part 1 in the Crypto insights series analyzing Bitcoin. Below are my future writing plans:

  • Part 1: Community growth VS transaction count

  • Part 2: Difficulty VS hashrate

  • Part 3: Tether supply correlation

  • Part 4: Putting it all together

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The law governing real network value

Metcalfe's law states that the value of a communication network is proportional to the square of the number of connected users.

Let's see if we can apply this law to cryptocurrencies, namely - Bitcoin:

Series data is normalized, that's why there's no Y labels.

One might argue, looking at the chart above, that there exists a correlation between r/bitcoin subreddit growth speed (slope of red line) and the price (blue). Even more obvious, the price of bitcoin seems to be correlated to the number of transactions squared (violet), especially during the last 12 months.

Why? One way to look at it is the Metcalfe way mentioned above. But there is also a different explanation.

By common sense, when $BTC goes up, so does the total hashing power of the network - more miners find it profitable. Conversely, when $BTC decreases in value, so does the hashing power. And because the mining difficulty is adjusted every 2 weeks, more hashing power means more produced blocks - more transactions per day.

How would you interpret the above chart? Curious to know.

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From 1 contributor
Avatar for codemojo
4 years ago

Comments

Social engineering to fool the public into liking BTC and r/Bitcoin? Hard to tell. Ideas like this:

"And because the mining difficulty is adjusted every 2 weeks, more hashing power means more produced blocks - more transactions per day."

Suggest this author may just have no idea what they are talking about.

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4 years ago

Highly doubt it is an attempt to make people like BTC. I just think OP is misinformed.

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4 years ago

Misinformed in what way?

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4 years ago

Care to elaborate?

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4 years ago

On which point?

Edit: if you mean how can I tell you do not know what you are talking about? That sentence is false. More hash power means increased mining difficulty to keep the number of blocks per day about the same. BTC can not scale. It cannot get in more blocks per day. That is an intentional bottleneck I believe is being used to keep BTC from becoming peer-to-peer electronic cash for the world's people (a real Bitcoin). Rich people want to fool the public into thinking BTC can grow with demand. It can't.

My thoughts on why you might be a social engineering agent (aka anti-Bitcoin troll). https://read.cash/@Big-Bubbler/the-troll-army-still-cant-stop-magic-internet-money-c84c5b92

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4 years ago