The Lindy effect is a theory that tells us that the life expectancy of non-perishable goods (such as technology or ideas) is proportional to current age.
This means that the longer the asset survives or is used, the better its chances of surviving.
This longevity also represents resistance to change, obsolescence, or competition, which gives it a better chance of surviving into the future.
It is evident that the Lindy effect is related to human nature. This is because we tend to trust more in things that have been around for a long time.
For example, some people thought the Wright brothers were crazy for trying to create a machine that would allow humans to fly in the early 20th century, but today, we think it's perfectly normal.
This has been repeated by various inventions throughout history, such as the cell phone, the Internet and the computer, and now we're seeing it with Bitcoin.
This cryptocurrency has started to enter an era that we can consider as adolescence. This tells us that it has been able to survive for many years, which makes us think that it will continue to do so in the future.
In this article, we will focus on analyzing the Lindy effect itself and how it relates to this cryptocurrency, especially if it has crossed the tipping point that allows it to survive over time.
How Does the Lindy Effect Affect Bitcoin?
In general, we have established that this is the Lindy effect, so we can analyze how this theory relates to Bitcoin.
The first block of this cryptocurrency was mined on January 3, 2009, which tells us that it is 13 years old. At the time of writing, it is exactly 13 years and 3 months old.
We know that the Lindy effect tells us that the longer it survives, the greater the expectation that it will continue to do so in the future.
We are interested in determining whether Bitcoin has reached a point where we can already be confident that it will not perish. A point where continued existence is more likely than extinction.
For this reason, it is necessary to analyze three aspects of Bitcoin.
1. the growth of bitcoin mining
The Bitcoin network uses a consensus algorithm called proof of work, which uses Bitcoin mining as its fundamental part.
This part of bitcoin is usually measured using the total counting power of all miners. According to the chart below, it tells us that it has been growing, especially exponentially in recent years.
Interrupted only in 2021 due to China's ban on such activities in its territory, the rapid recovery tells us the importance of this phenomenon.
The increase in this metric is related to network security. As the higher the hash rate, the less likely a 51% attack is. It also tells us that the distribution of mining is greater.
In the beginning, there were very few miners and all the capacity was centralized in certain places. As time went on, more and more miners appeared, and these miners were spread all over the world.
We can expect this trend to continue in the future, making Bitcoin more secure and more decentralized. This is somewhat desirable for a cryptocurrency that seeks to decentralize in the first place.
2. Growth in user adoption rate
In some technology projects, there is often a focus on network effects. This tells us that the more users the project has, the more valuable each of them is, and therefore for their team.
That is, the more users join a network, the more valuable that network becomes. This is the case with Facebook, where the more people use this social network, the more interested its users become because there are more people to interact with.
In the beginning, users didn't find many friends, but today a large percentage of people on the planet have an account on this service.
Joining this network is fascinating because we meet so many people we know and don't know in the real world. Each person who joins adds more value to the equation.
In the case of Bitcoin, the number of users of the network is measured in terms of addresses. This follows the same pattern, because the more users it has, the more valuable it becomes. Not only in price, but also in the possibility of being able to trade with BTC.
According to the chart below, the growth has also been exponential. This tells us about the impressive network effect he has achieved in just 13 years.
3. Bitcoin is resistant to competition and change
Bitcoin is resistant to change, as it has shown over the years.
For some people, this can be seen as a weakness because it is a technical product that should be able to evolve. But in reality it is a very important feature.
For major changes to occur in the Bitcoin network, most users would have to agree.
This is due to the decentralized nature of Bitcoin, with thousands of people running its nodes, and millions more interacting in different ways. That's why it's hard to reach consensus, because all of them have to agree on the direction to take.
If changes are made to the Bitcoin code, it is actually about implementation. It is necessary for the vast majority of people to adopt these changes or run the software in order to make it implementable.
This is a big difference in a centralized project, where one person or company can make changes quickly without the approval of others.
For social networks or search engines, one would hope that this feature is available, but for currencies, the reality is not. Few people agree with the government changing the offer without consulting others.
Bitcoin can also resist competition. There are many cryptocurrencies to compete with. A new project is created every day because it's not that hard. All you have to do is get the bitcoin code and modify it as needed.
Despite this, none of these cottage coins can replace Bitcoin. This is due to many of the reasons we have discussed in the previous article.
In a broad sense, it has to do with all their combinations, which is difficult for the newcomer to overcome. That's why, despite increasing competition, this person manages to survive while others are eliminated.
The Lindy effect is very important here because seniority gives it a greater advantage than others.
With all that we have seen in the article, we can clearly see that the Lindy effect applies to Bitcoin.
It is a cryptocurrency that has been around for a long time, so we can expect it to continue to exist in the future. Its 13 years have allowed it to build significant network effects, increasing its hash rate and getting more users to use it, which helps it continue to grow and dominate the market.
It has crossed a threshold where the chances of it continuing to exist are greater than the likelihood of it disappearing. This will only keep your metrics growing.
In doing so, it enters a vicious cycle of becoming more powerful, which is not good news for competitors.
Anyone who wants to compete with Bitcoin will have to offer something 10x better than that. Whether it's age or functionality, it's not going to happen overnight. In the meantime, Bitcoin continues to enhance the Lindy effect.