Network, bacteria and population: the fate of Bitcoin

In 1993, all computers connected to the US Department of Defense network ARPAnet were converted to TCP / IP protocol, and then entered large-scale commercial use. The Internet was officially born. Humans have entered the information age.

With the development of the Internet, three major laws of the Internet have emerged: Moore’s Law (Moore’s Law) reveals the speed of hardware progress: the number of transistors that can be accommodated on the IC will double every 18 months, and the performance will double. . Under the condition of constant cost, the performance of computers continues to improve.

Gilder’s Law reveals that in addition to the influence of routing transmission media, bandwidth is mainly affected by the computing speed of routing and other hardware transmission equipment and computer computing speed: In the next 25 years, the bandwidth of the backbone network will increase by one every 6 months The growth rate of the backbone network bandwidth is at least three times the growth rate of computing performance. Metcalfe’s law focuses on the description of the value of the network: the value of the network is proportional to the square of the number of connected users. Moore’s Law describes the economic law of technological development: when a product enters a large market, the unit profit will increase, and at the same time, the technology will be further invested, the price will drop significantly, and the market will expand further. Metcalfe’s law provides ideas for the value evaluation of the network from a macro social and economic perspective: for a network, the more users there are, the more information each person contacts increases rapidly, then the entire network and the nodes in the network The greater the value of, attract more people to join, forming positive feedback. The value of the final network has increased exponentially. At the same time, this process also keeps the network usage fees down. Network Value (t) = C * Nt2

C: value coefficient; N: number of users

It ’s like a person ’s network. The more people you know, the more valuable you are as a node; if you know another “super node”, the value of the connection between the two will be greater; , Then the value of the entire network is immeasurable.

The same is true for learning. If there are enough knowledge points in the brain, you can quickly connect to form a perfect thinking model, and the ability to solve problems will be greatly improved. This is the value. This is the case with typical networks, such as telephones and mobile phones. This is the case with car gas stations. Alibaba, Alipay, Amazon, Windows systems, QQ WeChat, Weibo, etc. are all true. When a technology has established the necessary user scale, its value will break through the critical point and explode. Last year, the “bullet text message” made by Lao Luo rushed to the top of the App Store’s free list, because the number of users was too small, the network did not have enough nodes, and the ecosystem was not established. After a short flash, it fell like a meteor.


  • Source: Outreaching Financial Inclusion With Cost-Cutting Innovation, Roberto Moro Visconti

Metcalfe’s law essentially reveals the increasing trend and speed of network or technology value. The most basic variable is the number of nodes in the network, which determines the degree to which the network is used. ——Yes, from here we can think of Bitcoin. The value of Bitcoin is also largely dependent on the number of users. The number of users is at least an important dimension to describe requirements. The greater the number of users and the larger the network, the stronger the consensus and the greater the value of Bitcoin. In short, the value of Bitcoin is proportional to the square of the number of nodes in the Bitcoin network.

Node restrictions

For the Bitcoin network, how to describe the number of nodes? First, the quality and reliability of on-chain data (number of addresses, number of transfers, number of full nodes, currency age) are far superior to off-chain data (number of exchange users, number of wallets, etc.). Due to the characteristics of the blockchain, we can easily obtain the data on the chain. Among them, the most important metrics are the number of network unique addresses on the chain (Network Unique Addresses) and the number of daily transactions confirmed on the chain (Transactions). This is The most basic and accurate indicator of the usage of the network.


Data source: In the early days of Bitcoin, it was limited to a few Cypherpunk, and there was a price of 10,000 bitcoin to buy two pie. Ten years later, the daily transfer amount of Bitcoin has reached the level of 10 billion US dollars, and the daily active address has reached 1 million. From the financial elite on Wall Street to the young people in the suburbs of Abuja, the capital of Nigeria, are using Bitcoin. Too. Of course, the value of Bitcoin is not only due to the number of users and liquidity premium, but more importantly, it is a deep story of political, economic and sociological reasons. For 10 years, the history of Bitcoin has been a legend, and its success was once greatly exaggerated. But after the music is gone, one can’t help but think deeply about the future of Bitcoin-will this continue to grow exponentially? It seems not. You know, Moore’s Law has been the truth since 1965, but half a century later, chip transistors and operating frequencies have begun to show no exponential growth, Moore’s Law has become history.


Source: The Future of Computing Performance (2011)

From the network value, the number of nodes, to the number of users, what is the limit of the number of users? The tree can’t grow into the sky, it won’t really To Da Moon. We look for a little inspiration from sociology and hard science.

Logistic curve

I studied the population growth model. There is a Logistic growth model in population dynamics, which shows the continuous growth of a population in a limited environment. This growth is not an exponential wireless acceleration, but is subject to limited environmental resources and self-inhibition, showing the growth of the S-type Logistic function.


Specifically: when the number of individuals is small, the population number grows slowly; as the number of individuals increases, the number increases rapidly. When the number reaches half of the saturation state, the growth rate is the fastest; finally the growth rate slows down and reaches a stable saturation status. This is a simple population model. For most of human society, resources restrict the growth of population. Humans could successfully defend against natural enemies hundreds of thousands of years ago. Like animals without natural enemies, after instinct-driven intrinsic growth ability brought about rapid population growth, it mainly relied on unscheduled mass deaths (disease, famine, war) To achieve a “reduction-recovery” cycle. In recent centuries, with the increase in productivity, human beings have a predictive outlook on the living environment. In order to avoid hunger, disease, and poverty, they will proactively control fertility and limit the size of the population by controlling the birth rate. Therefore, natural population growth could have been unlimited, but since civilization, it has not been a state of unlimited natural growth. Natural, economic, cultural, policy, war and other factors all affect the increase of population. All of these include uncertainty. To explore more essential internal laws, it is necessary to further abstract the population growth. This requires an environment with ideal temperature, humidity, light and food, and no natural enemies. This requires measuring the intrinsic growth rate under laboratory conditions and looking for mathematical laws.

Bacterial reproduction

An experiment in biology is very interesting. This question is more common in high school biology exams. This experiment is to observe the propagation of bacteria in a pure laboratory medium environment. Regardless of other interference items, it is simple, original and direct.


In this experiment, a small amount of single-cell microorganisms were placed in a clean culture medium, and under appropriate light and temperature conditions, regular sampling was performed to record changes in the number of bacteria. Finally, take the logarithm of the number of bacteria as the ordinate and time as the abscissa to draw the curve. This is the Bacterial Growth Curve. To simplify, it is like this:


Source: Encyclopædia Britannica, Inc.

At the beginning, the number of bacteria is in the Lag stage, and the increase is slow because the initial small amount of bacteria has an adaptation process to the environment; after adaptation, the bacteria enter a logarithmic growth period, which is a stable upward sloping straight line under logarithmic coordinates; subject At the scale of the culture medium, environmental resources are gradually consumed, and the number of bacteria enters a stable period; finally, the environment deteriorates, more and more deaths occur, and the number decreases.

This is almost a high-level summary of the population development curve, as if it were the population index, rise and fall index of a Chinese dynasty. In an unrestricted environment, before reaching saturation, population growth is theoretically logarithmic. This inspiration is first recorded here.

Growth trajectory

The growth process is similar whether it is bacterial reproduction in an ideal environment or human population. If we summarize this model, it is probably an S-shaped curve, that is, the logistic function curve. The reason is not showing an exponential growth (J-type growth), but rather an S-type with slower growth in the middle. The first is limited by environmental resources, and the second is the self-regulation mechanism. The exponential increase in constant growth rate only exists in mathematics.


The growth of the population cannot be unrestricted without the influence of the density change of the population itself; in the same way, the growth of a new technology must also be restricted by the market share and the total number of people, showing a Logistic curve.


Source: Growth and Dynamics of Populations, Kirsten Menking

We have all seen the following technology adoption diagram. In the past hundred years, taking the United States as an example, the progress of new technological inventions has been used by the society. However, the process of popularization of these technologies all showed the trend of Logistic function.


Data source:

This rule revealed by the bacteria experiment clearly shows in the popularization of new human technology.

Life cycle and hype cycle

This new technology acceptance law is further summarized as Technology Adoption Life Cycle. (“Bridging the Gap”, Jeffrey Moore)


Models for Predicting the Future: Geoffrey Moore’s “Crossing the Chasm”, Matt S. Smith

The life cycle of technology adoption is originally a bell-shaped curve, which is divided into 5 components, each of which corresponds to a type of group. At the beginning of the birth of technology, 2.5% of the adventurous innovators (Innovators) began to explore, 13.5% of early adopters (Early Adopters) continue to try, these two groups of people are early curious babies. Between the curious baby and the mainstream people, there is a “death gap” (The Chasm), most of the new technology can not cross this gap at all, just hang here. New technologies continue to be accepted. The mainstream masses are the early masses (34%) and the late masses (34%), who make up the majority of the population. Finally, technology has become popular / saturated, leaving 16% of the laggards in the crowd.

The technology uses the life cycle and the Logistic curve to superimpose. It can be seen that the former describes the Logistic curve from the “speed” dimension.


Gartner publishes a series of reports on the research and analysis of the maturity of new technologies every year, of which the “hype cycle curve” is best known. In this hype cycle, the development prospects of emerging technologies can be analyzed.


Data source:

The principle of the curve is very simple: superimpose the two factors of “hype expectation” and “technological maturity”. The hype drastically affected the Y-axis of the curve. It came quickly and violently. In the short extreme fanaticism, a lot of attention and funds were consumed, followed by a long low tide. Technology maturity, like the intrinsic value of stocks, guides market expectations like gravitation, especially over long periods of time. The longer the time, the milder the hype and expectations become, the closer to the technology maturity. After the birth of Bitcoin, the commercial feasibility has not been falsified, and the halo has been strengthened. Under the advocacy of some early technical fanatics, the media is just interested in pushing the waves and talking about this has become a trend. With this positive feedback, there have been many myths and stories that people have talked about (10,000 bitcoin “bread”), and the success of new technologies has been quickly exaggerated; blockchain-related startups have started round by round financing , Swarming into the frenzy bubble. This seemingly “opportunity” of prosperity is essentially driven by hype, and its fundamentals lag far behind hype expectations. After entering the deep water area, it was not very smooth. Everyone found that there was no imaginary scene. The exploration of commercial applications of blockchain technology encountered setbacks. Excessive expectations were not met by actual progress. Negative reports poured out. Numerous corporate cash flows broke. The interest of the public has also turned from prosperity to decline, the interest in hype has vanished, criticism is overwhelming, and it has quickly slid into the trough. Only a few companies can survive. After a long period of depression, a few people who persisted have gradually made breakthroughs. Bitcoin ’s own technology has been introduced (SegWit, Lightning Network, Privacy Solutions, Stratum V2, Schnorr signature), driving the germination of related industries, and mainstream people are gradually beginning to accept; The maturity of technology strongly promotes public awareness, the actual value is continuously generated, and it is expected to be gradually realized. Eventually, related applications began to recover, with smart contracts, application tokens, and security tokens in full bloom, and the market continued to expand. Gartner released the Hype Cycle for Blockchain Business (Hype Cycle for Blockchain Business) this year. We can see the development of blockchain technology in different industries.


Data source:

Blockchain-based data exchange, smart assets, ACH payment, Internet of Things, and crypto asset custodial services are all in their infancy, and are rarely realized. In the field of crypto asset custody, Fidelity and Bakkt of Wall Street have already begun to test water, and Coinbase and Huobi of Crypto World are also under development, but they have not yet been adopted on a large scale. The difficulty of landing on a large scale is the main reason for the death of most blockchain projects in the past two years.

Cryptocurrencies and blockchain supervision, smart contracts, healthcare, communications, supply chain, logistics, insurance, education, and ZF blockchain projects are in the rising stage of hype. Some of them have already landed. In August last year, Tencent ’s blockchain electronic invoices have been applied. By the end of this year, 10 million have been issued, which is considered a successful landing. At the bottom of the bubble burst, there are distributed ledgers, 1C0, cryptocurrencies, exchanges, etc. In the depths of the bear market, the oldest most successful blockchain applications (commonly known as “currency circles”) at the bottom of the valley have entered a low tide. Compared with the ghost crying wolf howling in the year, the slow knife cutting meat at the end of the year felt no pain. The project party ran away, the exchange was stolen, and 1C0 was beaten with a heavy punch. But there is gold in it, the cheap one. The above two curve models are superimposed, and the bottom of the bubble burst in the hype cycle corresponds to the valley of death in the life cycle. This hurdle is a life-giving rite of passage for emerging technologies.


Data source:

What we care about is where Bitcoin is.

Bitcoin has been running safely for eleven years and is a big kid. Although he was “aborted” hundreds of times along the way, but after two rounds of bulls and bears, he has successfully passed the innovator period. At this moment, I believe that in the Logistic curve, Bitcoin has just entered a period of logarithmic growth. Since 2017, the influence of Bitcoin has continued to expand: the price was once approaching $ 20,000, the Bakkt set up by the New York Stock Exchange opened, Jianan Yunzhi was listed on the Nasdaq, China emphasizes the blockchain as an important breakthrough, countries have Powerful people frequently mentioned bitcoin, Libra was born, DE / CP was about to launch, and Wall Street began to build positions-this exceeded cryptography, the Internet, and finance, and has become a global trend of thought. Every day we seem to see the sparks of shattered thoughts in the night sky. In the past two years, the price has not reached a record high, but the computing power has been increasing. At the same time, the underlying technology continues to improve, and media exposure, acceptance of offline merchants, and millennial generation’s willingness to hold have increased substantially. It is only one day in the world, and the close circle has been three years. Bitcoin may have crossed the “divide”, and perhaps not yet. The vast majority of projects that go beyond it are because there are no core users and no applications that can land. Among them, the only one who has a core user, successfully landed, and withstood the test of time is Bitcoin. Therefore, we can almost be sure that it has been, or can eventually be crossed. Because in this turbulent world-negative legal interest rates, negative risk-free returns, over-debt ZF, round-by-round currency easing, predatory regimes, turbulent situations, local conflicts, local wars, wars, decades Round of financial crisis-demand is determined, but the mainstream people need some time and opportunity.

the end of the world

Bitcoin is growing quietly, where is the end? From the perspective of supply, the total is 21 million pieces, and 18.36 million pieces are currently mined, and 12.6% are not mined. The current annual inflation rate is 3.6%; after two days, after the “halving”, the annualized inflation The rate fell to 1.8%, lower than gold, and also lower than the 2% set by the Fed to the US dollar. The future output is getting smaller and smaller than the stock, and the scarcity is more and more prominent.


Data source:

From the perspective of demand, UTXO Age Distribution shows that more and more coins have been hoarded for a long time, and no longer enter the circulation field, and the coins available for use in the future are becoming scarcer. The impact of this deflation will be much greater than the inflation brought by mining output. And the people who use Bitcoin, according to the number of addresses (multiple address problems and exchanges without wallet users to offset), only 0.4% of the world-know that 65% of the world ’s people own mobile phones and 56% of the population using the Internet.


Data source:

In terms of volume, bitcoin is still small. The current market value of $ 180 billion is one-fourth that of gold; Bezos has a worth of 143 billion after the divorce, which can be almost completely bought; Ma Yunma and Huateng add up to 77 billion, and a partnership can buy most of them. The size is small and the ceiling is high.


Data source:

By the way, this is not the future of Bitcoin alone, this is the future of Bitcoins. In the bitcoin born in the 2008 financial crisis, there is a distrust of centralized currency in the DNA, but it can be “in the midst of being defeated and ordered to be in distress”. In 2011, New Oriental teacher Li Xiaolai came to know Bitcoin, and immediately exclaimed, “This thing is out of the world!” , Must be convinced.) Bitcoin’s ingenious design makes it a powerful anti-fragility. In the past two years, high-level executives of major economies have mentioned bitcoin many times, but they haven’t thought of cracking down on them-either do it or not. In addition, every time the “iron fist” hits, it is a display of centralized evil, a positive propaganda for bitcoin; the global currency is flooding, and the hyperinflation in Asia, Africa, and Latin America is constantly diverting to bitcoin. In the future, only the comrades within the cryptocurrency can send the pie to the road; at that time, we will not blame him, turning our attention to a better target, people will make choices. At that time, we just need to stand up, applaud, and hug it.


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