Knut Svanholm

@knut.svanholm

Bitcoin, 10 years from now

The Lindy effect describes the future life expectancy of a technology or an idea. It states that an idea’s expected remaining lifespan is proportional to its current age, so that every additional period of survival implies a longer remaining life expectancy. The idea of Bitcoin, which is not only an idea but also a technology and a social experiment, is ten years old now and therefore we can expect it to stay around for at least another ten. So what can we expect of Bitcoin in 2028? First, let’s examine some of the facts.

At the time of writing, there are exactly 17,351,287 Bitcoins around and twelve and a half new ones are created every ten minutes. That’s about 83% of the total supply, i.e. the total number of Bitcoins that will ever exist. Ten years from now, around twenty million Bitcoins will have been found, three more block reward halvings will have taken place and the reward for each block found will be 1.5625 Bitcoin. The whole world will have a little more than two and a half million new Bitcoin around. This is to be compared to the almost seventeen and a half million that was created during the last ten years, when they were cheap and relatively easy to come by. In the first couple of years you could acquire several Bitcoin by just claiming them from faucets every once in a while. At the time of writing they’re each worth about 6300 U.S. Dollars. By the way, 6300 USD in 2018 is the equivalent of what 5375 USD was back in 2008. Its cumulative rate of inflation was 17.2 percent during the period. This means that each dollar lost more than one sixth of its value in the last ten years due to quantitative easing, which is the central banker’s way of saying counterfeiting. It is very unlikely that the cumulative rate of inflation for the U.S. Dollar in the upcoming ten years will be any lower than these 17.2 percent since the fractional reserve lending system requires a little more inflation each year to sustain itself. So, 2.5 million new Bitcoins to share and around 20% more dollars than exists today around to buy them with.

Now, let’s look at the internet itself. Metcalfe’s law states that the value of a communications network is proportional to the amount of users on the network, squared. Each new internet user is a potential new internet user especially in those places on the planet where there’s poor internet connectivity because those places often have a weak local currency that Bitcoin functions as a hedge against. In 2008, 23% of the world’s population had access to the internet and now, in 2018, that number is 48%. In the developing world the numbers are 14% in 2008 and 41% in 2018. The global numbers might not double again in the forthcoming ten years but it looks like they’ll keep on rising, especially in the developing countries, where they might just double again. All of these indicators (fewer Bitcoins, more fiat money, more internet users) point towards a rising Bitcoin price regardless of the current price. Yes, Bitcoin has risen in value extremely fast and has added, on average, an additional zero at the end of its price figure every two years. But think about the underlying forces that drive the price up. Every single mobile device could potentially hold Bitcoin yet only a select few do. When more and more people embrace the technology the whole fear of missing out cycle starts again and the price jumps up to the next plateau. Note also that every current Bitcoin user can do three things with his or her Bitcoin — sell them, lose them or hold them. They can also buy new ones. Unless they sell them at a loss, prices go up.

What about the state of the network? Bitcoin is an internet protocol that is very resistant to change. It showed an unprecedented example of this in late 2017 when all of the biggest companies in Bitcoin decided that they were going to implement the proposed Segregated Witness upgrade and then hard fork to 2 Mb blocks a couple of months later. Segregated Witness, which most users wanted, was activated but the network’s users resisted the hard fork. This led to a lot of frustration among the proponents of the hard fork and led to the creation of a copycat altcoin called Bitcoin Cash. Segregated Witness does not only free up block space but it also allows for layer 2 scaling solutions to be built on top of Bitcoin such as the Lightning Network. The Lightning network allows for instant, completely anonymous, nearly free micro transactions that do not take up block space and it is working right now. In addition to this, the number of Lightning Network transactions that can be carried out simultaneously are only limited by the bandwidth of the nodes which makes it a future real competitor to Visa or MasterCard. Many other layer 2 upgrades are in the works but the core network functions the same way as it always has with its inputs and outputs, its public and private keys and so on.

Will some other token ever replace Bitcoin then? After all, more efficient programs are out there. Short answer — no. This can’t be stressed enough. Scarcity on the internet is a one time invention. It cannot be repeated because you could repeat it an infinite number of times. Bitcoin’s history and unique position is what makes it truly scarce and resistant to change and these first ten years will not repeat themselves for any “alternative” token. There is still a lot of confusion about what Bitcoin is and the idea of sound money on the internet is a hard concept to grasp since humans haven’t ever encountered absolute scarcity before. The best path forward is arguably to educate yourself and others about the invention and what it means. Time will tell whether your sources were true or false and Bitcoin is unlikely to achieve mass adoption in the next couple of years. Still, the infrastructure is in place and the user interfaces are getting easier and easier every day. Remember, the iPhone was first introduced to the world in 2007 and smartphones had enormous corporations marketing them along the way. Bitcoin grows organically. Let it breathe and watch it unfold but whatever you do, don’t miss the opportunity and acquire some while you still can at this discounted price. It’s hard to predict the future but I’m still looking forward to reflecting on this article ten years from now.

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