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Bitcoin Life Expectancy: Lindy Effect Suggests BTC Is More Difficult to Kill Than Ever Before

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Bitcoin lindy effect

Postby Zolozshura В» 12.12.2018

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One of the trendiest follows in finance is someone who despises most financiers. Many bitcoiners are attracted to Nassim Taleb, author of The Black Swan , Fooled By Randomness , and Antifragile due in part to his anti-establishment nature, and because bitcoin fans revel in the triumph of mathematics and algorithms over fallible human institutions. He holds most public intellectuals in contempt, and finds successful traders indistinguishable from lucky fools. Even if you are not a fan of his, he has coined some incredibly useful heuristics for trading.

This post introduces one of his simplest and most effective rules: the Lindy effect. You may have heard of this heuristic before. It is named for a New York deli where actors realized the following:. Broadway shows that lasted, say one hundred days, had a future life expectancy of a hundred more. For those that lasted two hundred days, two hundred more.

Put into heuristic form, the Lindy effect states that, for a nonperishable asset, life expectancy is proportional to age. This means that the older something gets, the more likely it will continue to stick around. This naturally only refers to assets that do not depreciate with age. The Lindy effect does not apply to potatoes. It does, however, apply to things like ideas, political ideologies, technologies, and systems. Since cryptoassets are all of those, they seem very suitable candidates for the Lindy effect.

Additionally, the market is competitive, and cryptoassets have very short lifespans on average , so age tells us quite a lot about the asset. The Lindy effect holds here because the cryptoasset market exhibits continuous extinction pressure on assets and protocols. The mere fact that a protocol or cryptocurrency has survived a meaningful amount of time in a competitive environment is an indication of value. Fragile systems are destroyed with age.

Antifragile systems gain from the disorder that accompanies longevity. Think of cryptoassets as elaborate bug-bounties.

The longer they exist, and the more popular they get, the more incentive there is for a black hat hacker to probe them. This is why ethereum is a target for hacks: it has a large attack surface, and it is worth a lot.

If ethereum were to weather a decade of constant attacks, we might imagine it to be relatively safe. The sample size at present is too small to draw a useful conclusion, but the recent spate of attacks is not cause for optimism. Bitcoin has 8. In the grand scheme, this is relatively little, but relative to some of its month-old competitors, this is worth a lot. I was motivated to write this post in part because the Lindy effect is used as justification for finally taking the plunge into bitcoin.

Take this sentiment from a wealth manager who recently bought in:. There are three principal conclusions I would draw from the application of this heuristic on this market:. However, we have to remember that we still have relatively little data. In novel cryptographic systems, only time and experimentation tell us whether the parameters are well-chosen and the economic incentives that drive the system are appropriately balanced.

Even bitcoin, the grandaddy of all cryptoassets, is young. This comes from data compiled by Mike Hewitt in The median deceased fiat currency lasted 17 years, the median living fiat currency was We evaluate store of value arguments in this post. As Peter Todd, a participant in the Zcash initiation ceremony, puts it :. The cryptography behind Zcash is both highly experimental, and relatively weak. We simply have less information on them due to the fact that they are new, by cryptographic standards.

Skepticism is certainly warranted. We do not yet know what a radically up-scaled bitcoin would look like. For more detail, pick up a copy of Antifragile. If you are still unconvinced, I consider a few objections below. Of course there are exceptions, as new ideas come into existence all the time.

The Lindy effect is a heuristic, not an ironclad law. It is a rule of thumb, not an universal property of financial assets. The physicist Richard Gott took a snapshot of the broadway shows running in May and found that the Lindy effect held almost universally — the longest running shows at that time ended up outliving their younger peers 95 percent of the time.

A Lindy analysis of bitcoin might lead you to believe that gold has it beat, by about 5, years. Bitcoin is digital gold — if gold could be sent anywhere on earth within a few minutes for a couple dollars in fees, infinitely divided, programmed, fixed in supply, and upgraded. While cryptoassets have some ways to go as far as being considered ironclad stores of value, each additional year that they reliably store value is another year of evidence that they are indeed suited to this purpose.

Despite the limited information set at our disposal, the Lindy effect can be used to sort cryptoassets. Due the to the ease of copy-pasting code, hundreds of altcoins have appeared in the last few years. Passively buying the altcoin index has historically been a terrible strategy until early , although those gains have pared off somewhat.

This lends credence to the applicability of the effect to the store of value thesis, and reinforces the winner-take-most hypothesis. Is it circular to say that the oldest members of a set facing continuous extinction pressure are the most valuable?

By definition, an actively traded financial asset is worth more than an extinct one. However, this misses the forward-looking nature of the Lindy effect. The Lindy effect is predictive.

For ideas in a competitive marketplace, age indicates quality — and forecasts longevity. So the Lindy effect is only concerned with survivors. This is true. Many abandoned cryptoasset projects continue to trade despite no active development. This is why a Lindy analysis of a coin should include reference to forum activity, lively and productive development teams, and trading data.

This can be faked, so be wary of developers manufacturing illusory development activity. So there you have it. Non-perishable things in a competitive environment age backwards. Let this insight guide you and fuel your skepticism as you invest in cryptoassets. Brand new tech is exciting, but not guaranteed to win out.

Sign in. Is Bitcoin Antifragile? A look at the Lindy effect. Nic Carter Follow. Crypto Fundamental Exploring the fundamentals of cryptoassets. Thanks to Alex Treece. Partner, Castle Island Ventures. Cofounder, Coinmetrics. Crypto Fundamental Follow. Exploring the fundamentals of cryptoassets. See responses 9. More From Medium. More from Nic Carter. Nic Carter. Related reads. Discover Medium.

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WHY BITCOIN IS HERE TO STAY! LINDY EFFECT? [CRYPTOCURRENCY/], time: 12:01
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Re: bitcoin lindy effect

Postby Sharamar В» 12.12.2018

Is it circular to say that the oldest members efffect effect set facing continuous extinction pressure are the most valuable? In this article, Goldman describes a folkloric belief among New Lindy City media observers that the amount of material comedians have is constant, and therefore, the frequency of output predicts how long their series will last: [ citation needed business loans engaged. The Lindy effect is a theory that the future life expectancy of bitcoim non-perishable things like bitcoin technology or an idea is proportional to their current age, so that every additional period of survival implies a longer remaining bitcoin expectancy. Effect Lindy effect is predictive. From Wikipedia, the free lindy.

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Re: bitcoin lindy effect

Postby Faugor В» 12.12.2018

It's like saying that global warming is a myth because you're cold, here, right now. Make Medium yours. Nic Carter Follow. From Wikipedia, the free encyclopedia. The cryptography behind Zcash is both highly experimental, and relatively weak.

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Re: bitcoin lindy effect

Postby Kagasar В» 12.12.2018

Broadway shows that lasted, say one hundred days, had a future life source of a hundred more. Passively buying the altcoin index has historically been a terrible strategy until earlyalthough those gains have pared off somewhat. When it eventually link, it breaks off bitcon precisely half of its promise.

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Re: bitcoin lindy effect

Postby Jugis В» 12.12.2018

It is a rule of thumb, not an universal property of financial assets. There are three principal conclusions I would lindy from the application of this heuristic on this market:. This, simply, as a effect, tells you why bitcoin that have lidny around for a long time are not "aging" like persons, but "aging" in reverse. Even bitcoin, the grandaddy of read article cryptoassets, is young.

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