Knut Svanholm

@knut.svanholm

The economist vs. the mathematician

I’ve noticed a few not so subtle differences in how economists write about Bitcoin in contrast to how mathematicians and computer scientists handle the subject. For the most part the economist is better at communicating with the public and most journalists tend to overvalue the opinions of the economist. The economist speaks of market forces, bubbles, intrinsic value and whether or not this is the right time to buy or jump ship. There are price predictions, analysis of political decisions which could influence the price, comparisons to gold and so on. There’s even a website committed to preserving articles that have declared Bitcoin dead over the years.

The mathematician has little or no interest in these vague concepts. Most mathematicians doesn’t even consider economics a proper science. The so called “quants” of Wall Street converted to jobs in economics only after calculating an estimated probability of themselves being more successful there than in doing whatever they were doing before. To quantify as many decisions in life as possible is embedded in the nature of the mathematician. Therefore, the mathematician doesn’t pay much attention to the petty squabbles of the lesser minded nor do they write as many light-weight click-bait articles.

The mathematician sees this new technology in a different way and that as long as the protocol works there’s something much bigger going on here.

Value as a function of time.

We don’t fully know or understand the size of the variables yet but what we do know is:

  • The maximum amount of Bitcoin that will ever be created is 21 000 000.
  • Since Bitcoin was the first cryptocurrency there will always be at least some demand for it.
  • The amount of Bitcoins in circulation will decrease over time as humans forget things, throw things away and erase hard drives.
  • As long as there is any demand for Bitcoin there will be a network since mining will be worth it.

For the mathematically intuitive the outlines of the equation are easy to see. As long as supply is decreasing it doesn’t matter if demand is rising, staying the same or decreasing. An increase in value is just a matter of time! We just don’t know the scale yet. Unfortunately, understanding this seems beyond most economists. They’d probably be doing something else if they did.

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