What is the Lindy effect? Full introduction of lindy effect and its impact on investment
Bitcoin digital currency is rapidly entering its second decade of existence. Even though Bitcoin was a different and emerging phenomenon, some people did not expect that this fledgling technology could last this far and survive all the obstacles. In addition to all the problems that have occurred in these years, Bitcoin has been able to stand and the possibility that it can grow in the future and many people invest in it is very likely. Why has this cryptocurrency survived so far? What is the probability that it will continue to survive? Maybe theory Lindy effect To be able to answer these questions properly.
In this article, we will examine what the Lindy effect is, what it has to do with the crypto market, and whether it includes the current state of Bitcoin or not. Join Valex.
What is the Lindy effect?
Lindy’s work as Lindy’s law It is also known to be named after a New York restaurant where comedy shows were discussed. This effect is a theoretical phenomenon according to which the future life expectancy of some non-renewable things, such as a technology or an idea, is proportional to their actual age. Thus, the Lindy effect states that the longer an idea or technology remains in use, the longer it is likely to have a life expectancy. Greater longevity refers to the degree of resistance to change, obsolescence, or competition, and the greater likelihood that life will continue in the future.
The main nature of Lindy’s work refers to the nature of humans. As humans, the more something exists, the better we can trust it. For example, most people thought the Wright brothers were crazy when they built and flew the first airplane in April 1900. But in today’s age, we take air travel for granted. The same phenomenon applies to mobile phones, computers and digital currencies.
For example, it’s reasonable to think that the Great Wall of China is over 2,000 years old and will last for centuries. However, we can’t say that the same is true for the iPhone 14, because it’s only been a few months since its introduction, and the technologies used in it will be obsolete in the next few years.
The connection between the Lindy effect and Bitcoin
According to the Lindy effect, the longer something exists, the more likely it is to survive. For this reason, we can examine Bitcoin according to the Lindy effect. At the beginning of the launch of Bitcoin, there was a fear that it might be hacked or that the technology would fail. This has not happened so far; But Bitcoin wallets and other storage tools have seen various problems and crashes, but the underlying technology has not.
The first Bitcoin block was added to the blockchain on January 3, 2009. It can be said that this currency is 14 years old. According to Lindy’s work, it was said that the longer the period of survival of a thing and the duration of its use, the longer its life will probably be. Has Bitcoin passed the limit of the Lindy effect? In order to answer these questions, we must examine different aspects.
Bitcoin mining growth rate
Bitcoin network by algorithm PoW It is secured and the security of the whole network is equivalent to the amount of hash rate produced by the miners. Bitcoin’s hash rate has increased exponentially since its inception. In addition, distributed mining is also increasing, and today thousands of miners around the world contribute to the hash rate of the Bitcoin network. As a result, the security of the network becomes more consistent over time. For this reason, it can be said that the Bitcoin network will continue to grow more securely in the future.
The growth rate of the number of Bitcoin users
Technology growth rate refers to its ability to achieve network effect. The number of users who have joined the Bitcoin network has increased exponentially since then. The number of users of the Bitcoin network has reached 100 million people at the beginning of this year. Finally, it can be said that Bitcoin has achieved a very impressive network effect over the past 14 years.
Bitcoin’s resistance to change and competition
Bitcoin is very resistant to change and also to competitors. Thousands of new digital currencies are created daily; But Bitcoin was able to stabilize its position with the growth of security, the growth of the number of users and the perfect monetary policy. Bitcoin has managed to survive and thrive with many competitors, most of which have failed.
Finally, we conclude that the Lindy effect applies to Bitcoin. With the increase in the duration of the presence of Bitcoin and the activity of this cryptocurrency, its security and also the number of its users have increased.
Does the Lindy effect mean Bitcoin stability?
According to the cases we reviewed, there are criticisms regarding the validity of the Lindy effect phenomenon about Bitcoin. Many Bitcoin fans use the Lindy effect as an important proof of Bitcoin’s stability and survival, but they are missing some important points. For example, Bitcoin has a relatively short lifespan, and only a decade has passed since the peak of this cryptocurrency, which cannot be enough time to prove the Lindy effect. It is enough to compare Bitcoin with gold, which has been considered valuable and precious for centuries. Bitcoin cannot make such a claim, and according to Lindy’s work, it will take centuries to even come close to gold’s record as an investment. Bitcoin is becoming a more credible investment with each passing year, although it still has a long way to go compared to established assets.
Also, it cannot be completely true that it is said that the Bitcoin currency will dominate the market forever. Sometimes people are cautious in accepting new assets and wait for other users to identify bugs before jumping in after being fully assured that the network is safe. As a result, older cryptocurrencies are more likely to be safe, but this does not mean that newer currencies lack the ability to achieve a powerful network effect.
Also, being the pioneer and first in the crypto market is not the same as being invincible. There are many examples that show that unless a technology has a competitive advantage, being first does not mean it will last. Yahoo messaging network and Nokia phones are among the first losers who stole the lead from their competitors at the beginning, but they could not maintain this advantage and left the field.
In general, the proponents of Bitcoin duality claim that in difficult situations, the value of Bitcoin is maintained because of its transaction fees. We should not forget that banks deduct more fees from transactions; But studies show that the probability of bankruptcy of 200-year-old banks is not zero.
In general, the energy used to mine Bitcoin is practically wasted and nothing is added to its intrinsic value. Finally, it is better to remember that age cannot prove the value of something. Fiat money is much older than Bitcoin and we have to see the chance of fiat currencies in competition with Bitcoin currency to survive.
The Lindy effect in a changing world
In today’s world, technology and technology are changing at a rapid pace, and the pace of change has never been faster. New businesses and investment opportunities appear every day. New ventures have less chance of survival than long-established businesses. At first, it does not seem that Lindy’s work is correct and logical; But by checking we can understand its effectiveness. This effect explains the higher probability of persistence and does not 100% say that all new firms will necessarily be weak or that all old firms will not dissolve easily. The problem is that the probability of survival of investments and businesses is higher or much higher than emerging options. After the introduction of lindy effect, what is waiting for Bitcoin in the coming years? Can it become a valuable asset like gold? Please share your comments with us.
What is Lindy’s writing? Full introduction of lindy effect and its effect on investment for the first time in Wallex blog. appeared.