“Better” Bitcoins

This book has focused on Bitcoin and has largely neglected other cryptocurrencies. This was done primarily because Bitcoin stands head and shoulders above the rest of the existing cryptocurrencies. Bitcoin is the clear leader and has the best chance of competing with existing monies like the dollar and gold. It has the strongest brand. It has the longest track record of proven success and security. It has a story of “immaculate conception” due to its release into the world by its pseudonymous creator. It has the strongest network effect. It has the most computational resources dedicated to securing its network. These factors are probably impossible to replicate.

Bitcoin’s history of success since inception makes it the most “Lindy” cryptocurrency out there. As articulated by Albert Goldman in 1964,²⁰⁴ Benoit Mandelbrot in the 1983,²⁰⁵ and Nassim Taleb in 2012,²⁰⁶ the Lindy Effect is the phenomenon whereby the life expectancy of a nonperishable thing like an idea or technology increases with age. The origin of the term is Lindy’s eatery in New York, where actors and critics would congregate and discuss the prospects of shows currently running on Broadway. It was observed that the longer a show had been running, the longer it was likely to keep running. As applied to ideas/technologies, the longer an idea/technology survives without perishing, the longer it is expected to survive in the future. That’s because the longer something’s track record of surviving challenges and attacks, the more confident we can be that it will persist into the future. Things that are Lindy have “stood the test of time.”

One of the key reasons I bought Bitcoin is that it had already been a multi-hundred-million-dollar and then billion-dollar hacking target for years and yet the network hadn’t been compromised even once. This meant it was battle-hardened and evidently quite secure. I can envision scenarios in which Bitcoin fails and one of the other cryptocurrencies succeeds. This could happen due to Bitcoin failing to scale or Bitcoin’s proof of work–based “Nakamoto Consensus” mechanism failing while another consensus mechanism succeeds. Or it could be due to powerful actors such as governments acting in concert to attack Bitcoin while supporting an alternative. It’s also possible that several cryptocurrencies with very different characteristics can coexist and thrive because they solve different problems. The future is not yet written, and although Bitcoin is the clear leader, it might not ultimately be the “winner who takes all.” But unseating Bitcoin is a very tall order, and it seems the risk of Bitcoin losing its crown is rather small.