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1/ Quantum Narratives: the rise and fall of crypto narratives

In quantum mechanics, there is something called “superposition” in which systems can exist in multiple states at once. There isn’t only one reality, but in fact multiple “true” realities

danheld.com/blog/2019/1/13…
2/ Each of these realities would remain valid until they were observed by the external world. At that time, the superposition collapses in on a single version of the possible states. To visualize this idea Erwin Schrödinger proposed a thought experiment called “Schrodinger’s cat”
3/ It is only once we open the box to observe the cat to be either dead or alive that the multiple states cease to be simultaneously true. It is our actions that determine, ultimately, which reality prevails.
4/ Narratives

Nobody can know everything. Markets are inherently chaotic, trying to determine cause and effect is extremely difficult. We use primitive or incomplete mental models to make sense of the world.
5/ Beliefs are not only shaped by reality; narratives define it. These narratives constitute the fabric of the world around us: government, religion, culture, and finance all exist simply because we believe in it (and provides value for those who believe in it).
6/ Market narratives are marketing. The incentives to push a narrative can be financial, like an investor sharing a view of the world that would just so happen to benefit them. In this way, narratives are attempts at self-fulfilling prophecy.
7/ The fact that narratives are marketing is not a bad or malicious thing. Indeed, there is value in an emerging industry enabling a space where people can discuss narratives they see trending.
8/ This is especially true in the crypto space, in which content from investors and builders today has an outsized influence on market sentiment relative to neutral third-party research firms or data-driven journalism.
9/ During the Cambrian explosion more than 500M years ago, the variety of life on Earth grew dramatically. While most species that came about eventually went extinct, we still have this short period of experimentation to thank for the variety of life we experience around us now
10/ Truly bizarre creatures that roamed the planet then were side-effects of Nature showing off its capacity for variegated expression of lifeforms, before settling into a somewhat more sensible pattern.
11/ In an analogous vein, the dotcom bubble was an extinction event that wiped out exuberant companies, but fundamentally sound ideas survived, a large variety of which are to be found today (ex: Amazon).
12/ In the crypto world, we have Potcoin, Bitcoin Cash, Bitconnect, and a string of other cryptocurrencies that were created during the last bubble. In the long-run, many shall die out — much like the numerous species that kicked the bucket at the end of the Cambrian explosion
13/ “Jostling for narratives can be seen as an evolutionary battle to compose the doctrines most likely to attract the next wave of adherents. Coin prices amplify this mess" @tonysheng
14/ Which crypto narratives are gaining steam tomorrow? How will that change next month or year (or 10)? What are prospective catalysts that could change the dominant narratives of today? How does this differ globally?
15/ Bitcoin and Ethereum, the two most popular cryptocurrencies, have had many narratives fade in and out of popularity over the years. In the below sections are two charts which visualize the ebb and flow of these different narratives for both cryptocurrencies.
16/ Only the antifragile narratives will survive. When something is “antifragile” it gains strength as a result of volatility, stressors, or shocks. “Every criticism Bitcoin survives makes it stronger.” — Jimmy Song
17/ Crypto-communities seek for newish narratives or adapt current ones as an exercise of collective strengthening. They also do so to combat critique by isolating some of its premises.
18/ Since there is no objectively correct monetary premium, promoting the superior attributes of a monetary good is more effective than for regular goods, whose value is ultimately anchored to cash flow or use-demand.
19/ The religious fervor of participants in the Bitcoin market can be observed in various online forums where owners actively promote the benefits of Bitcoin and the wealth that can be made by investing in it.
20/ “Religion is the adoption curve we ought to be thinking about [for #Bitcoin]. It’s almost perfect — as soon as someone gets in, they tell everyone and go out evangelizing. Then their friends get in and they start evangelizing. @LDrogen
21/ While the comparison to religion may give Bitcoin an aura of irrational faith, it is entirely rational for the individual owner to evangelize for a superior monetary good and for society as a whole to standardize on it. Money acts as the foundation for all trade and savings
22/ Fiat currency, similarly, is faith based. Per wikipedia: “Fiat money is a currency without intrinsic value that has been established as money, often by government regulation. Fiat money does not have use value, and has value only because a government maintains its value
23/ “Gold’s simplicity is a great feature. But Bitcoin is likewise the simplest cryptocurrency... To the digital native of the future, Bitcoin wallets will probably seem more natural than vaults full of useless metals painstakingly drilled out of the earth.” — @hosseeb
24/ Stable ideologies allow communities to thrive. Ex: in religion is the Christian tenet that “there is one true god”. This belief strengthens the religion because it weakens membership in competing religions. Communities with unstable ideologies eventually collapse @kaykurokawa
25/ "The very ideology that justifies the existence of [bcash], also justifies the use of chain splits to settle any disagreements. It’s easy to see that this ideology, that a hard forked minority chain can be a legitimate successor to the original chain, is completely unstable"
26/ "It is thus reasonable to conclude that Bitcoin Cash will face a never-ending threat where its community members threaten to split off permanently from the main chain.”  @kaykurokawa

This was prophetic. Bitcoin Cash split into two chains late last year
27/ In quantum mechanics, “wave function collapse” occurs when the superposition of several states reduce to a single state due to interaction with the external world; this is called an “observation.”
28/ Narratives can persist in the multiple states for quite some time, until the moment when it comes under critical observation. Narrative wave function collapses only when we believe that everyone else believes the critical observation (common knowledge) @EpsilonTheory
29/ The classic ex: The Emperor’s New Clothes. Two weavers who promise an emperor a new suit of clothes that they say is invisible to those who are stupid, or incompetent — while in reality, they make no clothes at all, making everyone believe the clothes are invisible to them
30/ When the emperor parades around in his new “clothes”, everyone pretends to see for fear that they will be seen as stupid. What changes behavior is when the little girl announces the Emperor’s nudity loudly enough so that the entire crowd knows that everyone else heard
31/ That’s when behavior changes. There’s a lot of ubiquitous private information about powerful ideas trapped in the crowd today, just waiting for a someone to release it as common knowledge.  @EpsilonTheory
32/ What we are observing now in the crypto bear market is the collapse of the narrative wave function from critical observations making knowledge common, ultimately manifested as price.
33/ Some narratives are unraveling. Narratives that conflict will reconcile (ex: utility vs SoV theory of money). Which ones will remain? Which ones will survive? As we’ve seen in previous crypto market cycles, only the most antifragile will endure.

34/ If you enjoyed this tweet storm, please sign up for an e-mail newsletter which will include more of my thoughts like these:

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