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Mind Of Mav
Bitcoin Hits $40k: Is It Invincible?
What if we told you that the most valuable asset in the world today wasn’t money, gold, or bitcoin? Rather, many agree the most valuable asset today is time. How so? Time helps us to determine the value of things, especially technology. To explain why this makes sense, we use a principle known as the Lindy effect. Although this is a less popular term, we set out to define what the Lindy effect is and how this relates back to the most popular cryptocurrency today, bitcoin.
With the Lindy effect, we are helped to consider not only what will change in the future but what won’t change. This is one of the most valuable topics to consider since it helps us to predict where the market is heading. For investors, this principle can also help us to consider what we should be investing in to maximize profit potential. That said, this principle is non-scientific and lacks the statistics to back it up. So after reading this post, it will be up to you to decide whether you believe if the Lindy effect is at work and if like wine, bitcoin technology ages with grace.
Lindy Effect Explained
Back in 1964, a man by the name of Albert Goldman coined the term Lindy effect. However, when coining the term he actually wasn’t referring to technology at all. Rather, the Lindy effect referred to a comedian having more past exposure having an increased likelihood to receive future exposure. The name Lindy came from a deli that these comedians would put their act on. In simpler terms, this concept states that the older something is, the longer it will be around in the future. This is because, for every additional period that an item survives, the life expectancy of that thing is expected to increase. In more recent years the term was popularized by a man named Nassim Taleb who published the book Antifragile. A term used to describe the ability to thrive in the face of adversity.
The Lindy effect can be further applied to something nonperishable. This would include an idea like our example, a book, or even a technology. Before we talk about how the Lindy Effect applies to technologies like bitcoin, let’s consider an alternate example. Take an idea like those of Aristotle. Since these ideas have been around for years already we imagine they will continue to exist for as many years as we can think of to come.
For Bitcoin, this means that each additional year that bitcoin survives we can expect it to be around just a little bit longer. More tactically, consider that if bitcoin were to survive the year 2020 we could expect that it will continue to be around even longer. Perhaps another 10 years. Therefore, bitcoin might actually be aging in reverse.
The Origins of Bitcoin
Consider this, bitcoin was invented back in 2008 by an unknown group or person known as Satoshi Nakamoto. The open-source code was later released in 2009. While at first, we might not have believed the coin would last very long, we saw it survive one year after another. It is important to know that the coin already has survived quite a bit of opposition. This means a lot for new users of the currency. People tend to build trust in new money over time. Bitcoin has continued to gain popularity and proved skeptics wrong. After surviving these obstacles we can say the coin itself proved its antifragility. Or in other words, the ability to thrive in the face of adversity.
Considering that cryptocurrency has survived this long under these circumstances would suggest it is at least a little bit valuable. But what kind of obstacles are we talking about? Here is a quick recap.
Hackers have continued to make cyber threats with the intent to damage the multi-billion dollar bitcoin network. Some of the most notable include $30 Million from Bithumb, $37.2 Million from Coinrail, and $534 Million from Coincheck. Not to mention the famous hack of Mt.Gox. Bitcoin has continued to be a target for theft. As Robert Long states,
“It’s like robbing a bank, except you can do it from a thousand miles away, from the comfort of your home, and the money you get is virtually untraceable and you can disguise it by laundering it through multiple wallets in a matter of minutes.”
Hackers are able to steal bitcoins by gaining access to blockchain wallets. However, with several notable attempts, bitcoin still continues to grow. This is a good sign that perhaps if bitcoin can survive all of these attempts it must be stronger now than it was before. All these attacks might not sound promising. But keep in mind this technology is still very new. As the technology matures so do the security measures backing it. After all, developers have been reviewing, dealing with, and contributing to bitcoin’s open-source code, examining it in detail for over a decade. This means cryptocurrencies might be completely SAFU before you know it!
If the hackers weren’t enough, in 2017 China banned the trading of bitcoin and other virtual currencies. In the same year, South Korea also considered doing the same. Additionally, other countries like Russia, Vietnam, Bolivia, Colombia, and Ecuador have also said no to bitcoin. There have even been allegations that government insiders in the United States had tried to shut bitcoin down. To put it simply, the enemies are many in number. This is because countries continue to fear digital currencies for their ability to threaten the current monetary systems that are in place. With a decentralized currency becoming the status quo, could mean less authority and control of the central banks led by the government. Another concern is that bitcoin can be used for illegal purchases and potentially hurt the masses.
Regardless of the apprehension, people have still found undercover ways to trade the currency. Thanks to its antifragility, bitcoin has continued to survive.
Doubts From the Public
Many well-known celebrities and influencers have raised their doubts about cryptocurrency. After all, its volatility makes it difficult to evaluate which can be scary for investors. If this wasn’t the least of our worries, it is not uncommon for people to be fearful that the currency can’t be trusted. This is because the currency is really not backed by anything. The only reason people believe it is worth something is that the masses say it does. A virtual currency itself has absolutely zero intrinsic value. Similar doubts have arisen from Jamie Dimon of JPMorgan Chase, Bill Harris of PayPal, and Donald Trump.
However, the argument has also been that blockchain is just too complicated of a topic to understand. As we know, people tend to not like what they don’t understand.
What Does That Mean For Us?
If we believe that the Lindy effect is at work, this could be great news for us. Especially, if you had planned to take a stab at investing. But blockchain is far from the average technology, so this principle might not apply at all.
Bitcoin Isn’t Just Technology
However, for others, you might read this and think that this theory sounds great but it doesn’t necessarily apply. In arguments about blockchain needing a killer app, some believe blockchain is a whole new industry that doesn’t follow classic technology trends. If this is the case it might follow its own rules and not apply to the Lindy effect at all. Unlike other technologies, the blockchain will have the power to solve many problems simultaneously.
This is because in some cases bitcoin is considered an application that is built on technology, not a technology at all. The classification might just be what will push bitcoin out of the compatibility zone.
The Lindy Effect Only Applies Sometimes
If this explanation doesn’t have you convinced, others think technologies like the DVD or the fax machine survived quite a few years before drastically declining. An event that runs contrary to the beliefs of the Lindy effect. This would suggest that the Lindy effect is only applied to some technologies but not all. The term used to describe this is cherry-picking, which suggests that we can’t assume the Lindy effect applies to all technologies if there are exceptions to the theory.
This principle will work until it doesn’t. In which place something else will take over. This means even knowing and reading the potential impact of the Lindy effect, is really just a theory.
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