Reply to post: if only

if only

there was a way to combine bitcoin mining with solving useful (as in more widely useful: e.g. scientific or something) computational problems.

Ah, never mind: but why not read this interesting article about bitcoin and bubbles instead?

http://arxiv.org/abs/1408.1494

The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy.

David Garcia, Claudio Juan Tessone, Pavlin Mavrodiev, Nicolas Perony

What is the role of social interactions in the creation of price bubbles? Answering this question requires obtaining collective behavioural traces generated by the activity of a large number of actors. Digital currencies offer a unique possibility to measure socio-economic signals from such digital traces. Here, we focus on Bitcoin, the most popular cryptocurrency. Bitcoin has experienced periods of rapid increase in exchange rates (price) followed by sharp decline; we hypothesise that these fluctuations are largely driven by the interplay between different social phenomena. We thus quantify four socio-economic signals about Bitcoin from large data sets: price on on-line exchanges, volume of word-of-mouth communication in on-line social media, volume of information search, and user base growth. By using vector autoregression, we identify two positive feedback loops that lead to price bubbles in the absence of exogenous stimuli: one driven by word of mouth, and the other by new Bitcoin adopters. We also observe that spikes in information search, presumably linked to external events, precede drastic price declines. Understanding the interplay between the socio-economic signals we measured can lead to applications beyond cryptocurrencies to other phenomena which leave digital footprints, such as on-line social network usage.