Analyzing Bitcoin and the Lindy Effect

It's time to investigate why it is quite likely that Bitcoin will continue to live and grow well into the future given that it is rapidly approaching its teenage years.

The Lindy effect is examined in this article. In regards to Bitcoin, we discuss the Lindy effect, its relationship to Bitcoin, and whether or not Bitcoin has passed the Rubicon.

What impact does lindy have?

According to Wikipedia, the Lindy effect, commonly referred to as Lindy's Law, is a postulated phenomena wherein the anticipated lifespan of certain non-perishable items, such as ideas or technologies, is directly related to their current age. According to the Lindy effect, an object is likely to have a longer residual life expectancy the longer it has lived to exist or be utilized in the present. A resistance to change, obsolescence, or competition, as well as a higher likelihood of continuing to exist into the future, are all implied by longevity.

Human nature lies at the heart of the Lindy effect. The longer something has existed, the more faith we as humans have in it. For instance, when the Wright brothers created and piloted the first airplanes in the early 1900s, the majority of people believed they were nuts. We take flying for granted these days. Bitcoin, computers, and mobile phones all experience the same thing.

What is the relationship between Bitcoin and the lindy effect?

Now that we know the basics of the Lindy Effect, let's look at how it applies to Bitcoin. On January 3, 2009, the first Bitcoin block was appended to the blockchain. Thus, we may determine that Bitcoin has been around for twelve, almost thirteen, years.

We might then question ourselves, "Has Bitcoin crossed the Rubicon as it relates to the Lindy effect?" bearing in mind that the Lindy effect indicates that "the longer a period something has survived to exist or be used in the present, it is also likely to have a longer remaining life expectancy." We look at the following aspects to try and provide an answer: the pace of expansion of Bitcoin users, the rate of development of its mining activity (hash rate), and the resilience of Bitcoin to competition and change.

The rate of growth in bitcoin mining

The proof-of-work mining method of Bitcoin protects the network. The quantity of hash rate generated by miners equals the overall security of the network. The hash rate of the Bitcoin network since its start is displayed in the image below. As we can see, for the course of Bitcoin's 12-year existence, the hash rate has grown tremendously (the 2020 decrease was caused by China's prohibition on Bitcoin mining).

The spread of mining is growing together with the hash rate (security) of the Bitcoin network. In the early stages of Bitcoin's existence, a small number of participants in a limited number of nations controlled the bulk of the hash rate. The hash rate of Bitcoin is being boosted by thousands of miners worldwide, and as a result, the network's security is progressively strengthening. Furthermore, major organizations and even nations like El Salvador are becoming involved in the Bitcoin mining industry. For the foreseeable future, it is reasonable to assume that the Bitcoin network will keep becoming more and more secure.

The rate of growth in bitcoins

The capacity of a technology to produce network effects determines how quickly it grows. According to Wikipedia, "a network effect is the phenomenon whereby the number of users of compatible products determines the value or utility a user derives from a good or service." As additional users join the same network, a particular user will usually benefit more from the product due to network effects, which are usually favorable.

Let's look to Facebook to illustrate the effectiveness of network effects. Facebook started with zero users in 2004 and has since grown to have about 3 billion members globally.

If you were among the original few Facebook members, you were limited to interacting with the other people on the network, which meant that the value was little. When we compare it to the modern world, in which users may instantaneously connect with 3 billion other users worldwide, we can clearly see the immense value that network effects offer.

Let's now investigate the pace of increase of Bitcoin users (wallet addresses) to see if a substantial network effect has been attained. The graph below displays the rise of Bitcoin wallet addresses since their creation. It is evident that the quantity of individuals entering the Bitcoin network has grown exponentially. Early this year, the expected user base exceeded 100 million.

The resistance of bitcoin against competition and change

Additionally impervious to competition is Bitcoin. Numerous thousands of rival cryptocurrencies exist. It seems like a new cryptocurrency is produced every day. Thus, what makes Bitcoin the most popular cryptocurrency even now? Because Bitcoin has accomplished something that no other cryptocurrency has, and probably never will, when you combine its security (hash rate) growth, user growth, and ideal monetary policy. In spite of its rivals, the majority of whom have either already failed or are in the process of failing, Bitcoin has managed to endure and prosper.

Additionally impervious to competition is Bitcoin. Numerous thousands of rival cryptocurrencies exist. It seems like a new cryptocurrency is produced every day. Thus, what makes Bitcoin the most popular cryptocurrency even now? Because Bitcoin has accomplished something that no other cryptocurrency has, and probably never will, when you combine its security (hash rate) growth, user growth, and ideal monetary policy. In spite of its rivals, the majority of whom have either already failed or are in the process of failing, Bitcoin has managed to endure and prosper.

Now let's get back to our original query: "Has Bitcoin crossed the Rubicon in relation to the Lindy effect?"

Now that the Lindy effect is applicable to Bitcoin, it is evident. Both the network's security (hash rate) and user base have increased during the course of the Bitcoin network's extended existence. The number of users and hash rate have increased, but they have done so at an exponential rate. The Lindy effect along with network effects account for Bitcoin's superiority over other cryptocurrencies.

Final Verdict

It's crucial to comprehend the Lindy effect. To put it simply, anything has a greater chance of surviving into the future the longer it has survived. Bitcoin has been around for about 13 years. It has significant network effects that have grown during that period and will support its survival and growth for a very long time.

We'll witness an increase in Bitcoin's security (hash rate), a rise in its user base, and the demise of its rivals over time. The Bitcoin network will continue to grow as more and more people, organizations, and countries join it; this will amplify the network effect and heighten the Lindy effect. This is going to be one incredible journey, so grab a seat.