Editor’s note: This article from the chain: the smell of ChainNews (ID:chainnewscom), the author: Willy Woo: Perry Wang, compiled by Odaily authorized reprint, the daily planet.
First talk about who is Willy Woo.
He is the first to propose the bitcoin NVT valuation model of God, can be said to be a legend of bitcoin trading area. He first proposed the NVT valuation model is applied to the bitcoin valuation to the unpredictable market lit a beacon. Based on this, how about bitcoin and cryptographic currencies began to develop a reasonable valuation theory. After this, a variety of encryption currency valuation theory or valuation system, early studies are not open around the Willy Woo.
Willy Woo was a 2008 programmer, the outbreak of the financial crisis, banking stocks after a successful short, bitcoin market capitalization rose to 10 billion dollars, pay attention to encryption currency, I moved to Indonesia Bali Island, where a leisurely life.
This time, he pushed through a special details of the “Quantity Theory of Investment on the number of investment”, a kind of encryption can be used to estimate the assets of fundamental value theory.
He said, “read very obscure”. Well, the first collection and forwarding, then please get into silence.
Warning: This is a very obscure read analysis technology. But you can understand the encryption of asset valuation theory, and understand the bitcoin NVT valuation method.
I called the Quantity Theory of Investment on the amount of investment. I’m not sure whether this is my unique theory, but published on twitter for reference to discuss.
From the economic point of view, I put the value of the economy is divided into three types of flow:
U – practical amount
I – Investment
S – the amount of speculation
Specific to the bitcoin:
The amount of practical u refers to the number of expenses paid by the bitcoin, data forensics chain
I is the number of investment turn around in the block chain among different users, by way of evidence chain data filtered a user mouse in a number of their positions between the wallet
The amount of speculation s is a global exchange amount minus the number of practical u and investment I
Specific to the legal tender:
U refers to the practical amount of global gross domestic product GDP sum, measure of goods and services to pay the legal tender but let us ignore swaps, to guarantee the simple data
I refers to the investment of money flow between long-term cash accounts for storage.
S refers to the amount of speculation in international trade component of global foreign exchange total minus I and u in the
The British cryptographer, the inventor of the hashcash Adam Back estimates that the currency in the world of speculation has been very serious, the amount of speculation in the world currency ratio than the practical amount s/u up to 240:1. Please ignore the his tweets in the bitcoin world speculation than the amount ratio of the amount of 4:1 practical argument, because he said is wrong, the ratio of what they say is close to the amount of speculation in the bitcoin investment ratio of s/i.
I don’t know the ratio in the world investment currency / utility amount i/u, but I never think money is mainly used for commodity trading, large institutional fund managers including all of us will put money in storage for a long time.
When all the market crash, only one value bujianfanzeng is legal tender. Because the value of the loss from the market, people think that all investment targets are in decline, and were higher, but the monetary unit does not reflect this trend, the dollar is the United States currency unit.
For the above three indicators, we can use them a percentage of the total money supply to measure.
Practical Vu circulation – Practical currency
The circulation of the investment amount Vi investment value storage currency
The amount of currency speculation – short-term speculative trading volume Vs
Economists expect this indicator will be considered known as the velocity of money, but I would like to warn…
What economists call the velocity of money is actually refers to the practical Vu currency, the currency in circulation caused by the utility of currency. It’s easy to sieve out. The money supply economists to measure GDP index, division known to estimate the velocity of money, but this is only the practical velocity of currency circulation.
But they can not see the long-term savings and our regular savings account to measure the value of the more investment currency circulation speed. We sell stocks, gold and bonds, the proceeds will be deposited into a savings account, but they can not estimate the index.
Why is it important?
When we examine the bitcoin chain circulation speed, general utility quantity of money circulation velocity is not Vu and economists consider to compare bitcoin chain flow velocity is related to the amount of money invested in the world with Vi, not legal tender commercial payment and the quantity of money Vu.
We continue to talk about the valuation index……
We are using the traditional quantity theory of money Fisher Equation of exchange where M is the amount of money MV=PQ, V is the speed of currency circulation. P price level, Q for the total commodity trading block chain network behind computer encryption currency future value, this is only suitable for the application of block chain mature, completely ignore their ability to store the value of the investment.
In the real world of encryption in the assets, we need new formula to calculate its valuation. I will call the “theory” in exchange for new investment quantity equation. It opened to calculate its value based on the valuation of storage capacity of these tokens blockchain doors for us.
According to the definition of flow among investors in investment value can be expressed as the total money supply times within a certain period of time for the purpose of investment and the proportion of currency exchange.
I = M * Vi
This equation describes the flow of stored value.
Let us use high school algebra to calculate:
M = I * (1/Vi)
What are the results?
The NVT network is almost equal to the 1/Vi value, that is inversely proportional to the speed of currency circulation and investment.
M = NVT * I
This is the reason why a rough estimate of the block volume distribution token value chain.
NVT is not equal to 1/Vi, because it is derived from the original data flow between the wallet and not between investors, circulation data.
We need to filter out a wallet controlled by a single user of the rat data, in order to obtain investment amount of money Vi. This is more efficient and accurate than the NVT index.
A lot of money instead of trying to reduce the amount of money the project investment by suocang Vi. ERC20 token project brings this effect to the etheric Fang, because these ICO assets will be a considerable number of ETH locked in their token assets. Dash and other rights that the master node mechanism blocks in the chain has the same effect.
If the investment amount of money Vi smaller, equal amount of investment or the velocity of the block into the chain, its market value will be higher.
M = I * (1/Vi)
M refers to the token supply value, also called network or market value
But let us further research about this equation.
M = I * (1/Vi)
If we know the investment amount and investment currency circulation velocity of money circulation, we can calculate the value stored in SoV block chain “fundamental value” of M.
Please note that these variables can be cycle calculated, because once we from the block chain chain in the amount of money Vi forensics investment data, we need to know the token price to determine the value of I, but often fails to reflect the transaction price and token fundamental value circulation speed token Vi determined the situation.
In these times, we can detect the token by calculating the price is too high or too low valuation. Part of the reason for this is NVT index can indicate the market. It is about 1/Vi. Therefore this index can detect the tokens in the trading market and the fundamentals are deviated from the value.
For a mature block chain network:
The quantity theory of money equation M * Vu = PQ can be used to calculate the practical elements of money.
The amount of investment on the equation M = I * Vi can be used to calculate the value of SoV storage elements.
The practical value of storage elements and elements together:
M = PQ/Vu + I/Vi
In a certain period of time:
PQ is a practical economic scale
I is the input to the block in the chain store of value of assets for the purpose
Block chain forensics can calculate these elements, combined with the specific time node of the token price, we can calculate the velocity of tokens based on the fundamentals of the block value chain. We can judge whether the token valuation is too high or too low, this is NVT index benchmark mature blockchain.
The fundamental value of encryption assets can be calculated, but the market price mainly depends on the investor is willing to pay the price for what kind of assets.
It sounds like is justified, but we can use it to determine whether the market value deviates from the fundamental value.