Lindy effect applied on crypto
Today I would like to look upon cryptocurrencies via Lindy effect. Can some crypto have value and utility at the same time? Can any altcoin outperform Bitcoin? Can any other altcoin be a better Store of value than Bitcoin?
Source: Pixabay
What exactly is the Lindy effect?
Lets see what Wikipedia says first:
The Lindy effect is a theory that the future life expectancy of some non-perishable things like a technology or an idea is proportional to their current age, so that every additional period of survival implies a longer remaining life expectancy. Where the Lindy effect applies, mortality rate decreases with time.
How to apply Lindy effect to crypto?
Bitcoin
In terms of analogy, Bitcoin is like Gold in the crypto world. It has proven in the more than 11-year history, that it is going to outlive.
If we see Bitcoin using Lindy effect, so this means that Bitcoin will stay here for a long time. Yes, something might happen, people can lose trust, higher hashrate might lead up into higher and higher centralization of mining pools power, etc. But until now, Bitcoin stayed here.
There's no obvious connection between utility and value. Bitcoin, the same as Gold, is more valuable than other precious metals because everybody agrees upon that and agreed within the thousands of years of history (for Gold).
Altcoins
Other cryptocurrencies are like silver or other precious metals. For a couple of years, Litecoin was called the silver of crypto. But now, it seems that Proof-of-Work blockchains might not be as scalable as Proof-of-Stake blockchains or Directed Acyclic Graph (DAG) projects. So, the silver might be something different, like Ethereum (2.0 on PoS).
It seems that no other coin will ever be Store of value unless the Lindy effect gets broken in some way or another. Or it could take a long time for some project to reach the Lindy effect of Bitcoin or at least similar.
Therefore, for other cryptos to have some value, they have to have some outstanding utility. Smart contracts, Decentralized Finances are those, which can rule the next bull run, because this is what is the most important. Finances without a middleman and more efficient than those from the "old banking system".
Qualities such as great scalability, a huge degree of decentralization and perfect security are not negligible. I would say they are necessary and important!
Lindy effect in the crypto world
Let me show you a few historical snapshots of CoinMarketCap. Do you even remember projects like Namecoin or Novacoin? Probably not. And there was one of the first crypto projects. From the list, just Bitcoin and Litecoin remained in some respectable role.
Source: CoinMarketCap
From the second snapshot, proven track have already Bitcoin, XRP, Litecoin, Dash, Stellar, Bitshares, and of course Dogecoin, the funny-meme dog coin.
Source: CoinMarketCap
Conclusion
From that point of view, it is clear, that Bitcoin, Litecoin, and also some other altcoins like XRP, Stellar, or Dash has very big chance to prevail in the future. But let us think of that historical snapshots also from some different perspective. Those days, the projects (outside Bitcoin and Litecoin), were testing technologies, new mining algorithms, etc. The projects were not so funded like EOS and other projects benefiting from massive ICO campaigns. So, even from that point of view, the well-funded projects like EOS or Cardano are probably going to prevail in the long-term future.
I wanted to point out, that investment in some projects without proven track of history is not without risk. I would call it merely speculative. Projects from the 2017 ICO bubble might run-out of cash needed for the continuous work of developers and even they could have great ideas and a solid team, the 2017 expectations could broke their necks in the long run, because other projects might over-take them.
I would like to advise you to think twice, when you setting up your long-term HODL portfolio. And think of Lindy effect as well.
20% of the rewards from this post go to @ph-fund to support Project Hope Venezuela, which is an initiative created to grow. For more info click the logo of Project Hope:
