The red line below is a power law distribution for B=0.5 which you can see above is the value of B I fitted.



What that distribution says is that the rich hold most of the percentage of wealth, which we know is in fact always true. And the fitting of the cumulative distribution function to BTC price is the theoretical claim that earlier adopters will be more wealthy (by now) than later ones.

The research I cited points out is that the masses use money as a unit-of-exchange, not as a store-of-value.

However does the Metcalf's law value of money (which Peter R has shown BTC mcap and thus price is tracking) where the value is proportional to the square of the number of nodes in the network nullify my use of a power law distribution? I.e. do the wealthy not create (proportional to their wealth) more network nodes (e.g. unique active BTC addresses) than the masses?

I see the really diehard power users (e.g. SlipperySlope and Peter R) are both talking about creating a new node every day. Thus this anecdotally supports that the power law distribution applies correctly here.

Thus I think we need to take this theory seriously. It might be the correct growth curve. The linear one with a least squares fit seems really out-of-touch with historical data. It totally ignores the shape of the earliest adoption curve up to July 2011. Risto's explanation was the early adopters were bad speculators and bid the price up too much, but my interpretation is they are the most wealthy now and they were the most powerful because they are early adopters. The least squares fitting of a line to a curved adoption could possibly be (confirmation bias in play as) an (emotional "to the moon") attempt to force a linear projection on a growth curve which obviously was not always linear. Has it become linear since January 2012?

I very much doubt it!

Convince me? Risto how do you analytically defend your linear least squares fit that makes you so sure of everything and gives you the audacity to browbeat all the bears?

Add: why don't stocks follow this log-logistic curve? Maybe they do (?), if we don't compress the early adopters into a single event IPO. Also can a stock issue have network effects, i.e. does Metcalf's law apply to company shares? Seems to me yes if the shareholders network amongst themselves, but much less so than a network of money holders.

Add: Fact is the slope during the runup to July 2011 was 0.33 per month. Since Jan 2012, it has been 1/4 of that 0.08 roughly. Why should we expect the slope to not decline again? Why should the pace of adoption remain constant? Seems intuitively unlikely to me. Pace of adoption should slow as we slog into the less astute demographics. Larger mass with more inertia grows more slowly than smaller mass with nimble inertia.

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The 3 - 5% is an ancillary argument and not the core one. If they wish to be irrational and waste 3-5%, it doesn't mean they are part of a trend of new adopters who love to waste money. Whether Bitcoin holders continue to be interested in Bitcoin is irrelevant to the point I was making. I was making the point that if we don't create more merchants that accept only BTC, i.e. hold BTC and not just a useless facade for fiat, then there is no compelling need for non-Bitcoin owners to decide to acquire Bitcoin (if we are speaking about its demand as a currency and not as an investment).

On the investment demand side, the adoption is slowing and thus due to Metcalf's Law's correlation P = 1.5 x n^2, the rate of price growth (increase) has and will continue to slow. There is no linear growth on the log 10 chart "to the moon". Price growth will moderate and we won't exceed $10,000 before 2016. (note that is still a very nice gain, just not as "to the moon"). Bitcoin's price increase after 2015 will further slow, will not exceed gold. (assuming gold bottoms around $1000 in 2015 as I expect) Remember Risto was the guy calling for $300,000 by now (I've seen others write this, I wasn't around when he purportedly made that projection). How did that work out for him?

Buffet is correct, Bitcoin is just a facade for fiat. Bitpay and Peter Thiel have just put that future in concrete.

Now I sit back and watch my observations wreck havok on Risto's net worth expectations and confidence.


Add: slowing rate adoption can still be very large nominally, e.g. if going from 1 million to 100 million takes 3X longer it still happens. You see as Peter Thiel helps to convert Bitcoin to the government coin, the masses will come in as it will become essentially be a form of fiat with offchain services that Peter Thiel creates. Everything is running exactly to plan as how I expected it to go when I wrote Bitcoin : The Digital Kill Switch in March 2013 and first joined this community.

P.S. Mining is now concentrated in one pool with greater then 51% attack hash power. And there are individual miners with 7 - 10% of the entire hash power. Everything is going exactly how I predicted. Yet people still think I am wrong.