The adoption and therefore price of Bitcoin might accelerate faster than most people realize.

What is game theory?
How does it apply to Bitcoin?

You probably heard the ideas thrown around but let me break it down for you 👇
Game theory is the study and analysis of the strategy used by rational actors within some environment.

In its simplest form you can think of as analyzing how each player should play in a board game.

The ideas can be applied more broadly to all types of ‘games’.
So what games are going on in Bitcoin?

There’s actually many separate but related games being played within the Bitcoin ecosystem.

There’s the mining ecosystem, development process, individuals, company treasuries, and even nation state games at play.
While they are all interesting in their own right, let’s focus today’s thread on the one that will force an accelerated global adoption of Bitcoin.

The idea is actually pretty simple to understand and is basically the same for individuals, companies, and nation states.
Let’s use a simplified example to illustrate the idea. Let’s say there are three people: Alice, Bob, and Carol.

Alice is currently the wealthiest and has a net worth of $100.
Bob is the next wealthiest with $60 and Carol is the poorest with $25.

The price of Bitcoin is $1.
It’s important to understand that because of Bitcoin’s fixed supply the more people that adopt or demand Bitcoin the higher the price will go.

In our example if Carol converts her wealth to Bitcoin she is able to acquire 25 Bitcoin but she consumes all the supply at $1.
The price of Bitcoin is now $3.

Bob sees what Carol did and decides he should also convert his net worth to Bitcoin before Alice does.

Bob is able to acquire 20 Bitcoin and consumes all of the supply at $3.

The price of Bitcoin is now $6.
Alice wants to trade with Bob and Carol but they’re only operating in Bitcoin now.

Alice is forced to convert her net worth to Bitcoin and is only able to acquire 16 bitcoin.

The price of Bitcoin is now $10.
Before hyperbitcoinization happened the standing was:

Alice: $100
Bob: $60
Carol: $25

After hyperbitcoinziation the standing is:

Alice: 16 BTC (~$160)
Bob: 20 BTC (~$200)
Carol: 25 BTC (~$250)

The entire situation has flipped based on the order they adopted Bitcoin.
This is exactly what can happen with individuals, companies, and nation states.

The billionaires, S&P 500, and the richest countries can all be leap-frogged by early adopters in the race to adopt and acquire Bitcoin.
Back to the game theory.

If you understand this is what happens if you are late to acquiring Bitcoin then strategy says you should acquire Bitcoin early as possible.

This is what people like you, companies like Microstrategy, and countries like El Salvadore all realized.
@nayibbukele , the president of El Salvadore, predicts at least two other countries will adopt Bitcoin in 2022:

This is the beginning of the theory playing out. As nations see what is going on they will quickly realize they can’t afford to wait.
As more and more nations adopt Bitcoin others will be forced to adopt or be left behind in the transition to a hyperbitcoinized world.

The same thing will happen at the company level and even the individual level until the transition to a Bitcoin standard is complete.
I hope this helped you understand what people are talking about when they reference the game theory related to the adoption of Bitcoin by individuals, companies, and nation states.

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More from @JohnCantrell97

Jan 31
I’ve been studying Bitcoin for a decade.

I distill what I've learned into threads that explain Bitcoin using simple language.

I’ve covered the lightning network, supply schedule, mining, game theory, difficulty adjustment, proof of work, keys, utxos, htlcs, and so much more 👇
Onboarding 7.753 Billion People to Lightning
Read 25 tweets
Jan 30
Today is day 30 of my journey to develop a writing habit. It was successful then I ever imagined it could be.

Threads I wrote were viewed over 2.5 million times and over 7K new people decided to follow along.

Let me break down my process and what I learned on this journey 👇
You must make the habit a priority.

Schedule time on your calendar for it and don’t let it be interrupted.

For me I chose to write early in the morning. I would set my alarm for 6am, grab a cup of coffee, and go write uninterrupted for an hour.
Do not feel the need to over edit or stress out about what people will think.

Just write for an hour about the topic, read it over a couple times, hit publish and walk away.

This process is about building a new habit while breaking down old barriers to content production.
Read 11 tweets
Jan 28
I’m sure you’re aware that the main purpose of the lightning network is to help Bitcoin scale by enabling faster and cheaper payments.

Did you know it’s possible to use it to send arbitrary data along with a payment?

Why might you do that?

Should you?

Let me break it down 👇
Normally when you make a payment using the lightning network the receiver has to create an invoice for the specific amount and then get that invoice to you somehow.

You then instruct your wallet or node to pay that specific invoice and the money is routed to the recipient.
There’s a feature called ‘keysend’ that allows you to send money directly to a node's public key without an invoice.

This means instead of having to communicate with the recipient in order to send a payment you can now do so spontaneously as long as you have their public key.
Read 14 tweets
Jan 27
To truly understand why we need Bitcoin it’s important to understand money itself.

What is money?
Why do we need it?
Why Bitcoin?

There’s many books written on these topics but let me try to break it down for you:
At the core of any economy are people who perform work that produces value for other people.

A farmer grows food for us to eat.
A painter creates art for us to enjoy.
A mechanic fixes our car so we can travel.
A teacher educates our children so they can prosper.
Without money the mechanic can only eat if the farmer needs his car fixed.

Each person needs to want what the other is producing at the same time.

A teacher only needs their car fixed so often but the mechanic needs his children educated all of the time.
Read 19 tweets
Jan 26
Did you know that Bitcoin maintains a 10 min avg time between blocks regardless of the amount of hash power that on the network?

It’s possible because of a mechanism called the difficulty adjustment and it’s incredibly important to understand.

Let me break it down for you 👇
The difficulty refers to how hard it is for a miner to find a hash that would be considered a valid block on the network.

A higher difficulty translates to more hashes needing to be calculated on average whereas a lower difficulty means less hashes are needed on average.
If we recall from my previous thread on how mining works we know that a miner is hashing random values in search of an output that is less than some target.

When they find an input that produces an output below this target they are able to produce a block and claim the reward
Read 14 tweets
Jan 25
You’ve done your homework on Bitcoin and are learning about Lightning or just set up a node. You aren’t sure how it works and are nervous about losing funds

What’s involved in backing up a lightning node?

I’ve been using lightning for years, let me break it down for you 👇
Your Bitcoin is in cold storage. You stamped your mnemonic into a piece of solid steel.

It won’t be destroyed in a flood, fire, or acid bath.

You can finally sleep at night knowing your Bitcoin are safe.

With Bitcoin covered, you are excited to experiment with Lightning.
You fully expect a similar security model when booting up your lightning node for the first time.

I’ll get a seed phrase and stamp it into another piece of steel.

Unfortunately, it won’t quite be as simple.

What makes lightning more difficult to backup and secure?
Read 13 tweets

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