Thread by @alpha_pls

1/ What is the Lindy effect?

And do $BTC and $ETH have it?

A thread 🧵👇

2/ The Lindy effect is a theorized phenomenon by which the future life expectancy of some non-perishable things, like a technology or an idea, is proportional to their current age.

3/ The Lindy effect proposes the longer something has existed the higher the chance it will continue to exist.

Every year that passes without extinction doubles the additional life expectancy. The robustness of something is proportional to its life.

4/ Longevity implies a resistance to change, obsolescence or competition and greater odds of continued existence into the future.

5/ The concept is named after Lindy's delicatessen in New York City, where the concept was informally theorized by comedians. The Lindy effect has subsequently been theorized by mathematicians and statisticians.

6/ When we apply the Lindy Effect to something like technology we’re explaining two different statistical phenomena which are both pretty intuitive and straightforward.

7/ The first is that without any additional information about a particular lifespan, you want to shoot for the average if you’re guessing.

8/ Mandlebrot, the statistician who first developed the Lindy Effect, describes it in the parable of the receding shore.

9/ Imagine you’re out rowing on a lake and you don’t know how far the opposite shore is. You’ve gone out 5 km and want to guess how long the lake is, your best guess is you’re in the middle of it and the lake is 10 km long.

10/ So you get to 9 km and you should be coming right up on the shore, right? Nope, now you’re in the middle again and the shore just “moved” 9 km away to 18 km.

11/ The second statistical property the Lindy Effect is referencing has to do with survival rates.

12/ Basically, perishable things like people and toasters have bathtub survival curves. A lot of toasters end their lives in the factory in a pile right after quality control.

13/ The rest go out to live long and fruitful lives in suburban kitchens toasting bagels for 10–12 years then die out. This analogy applies to humans as well.

14/ Lindy also talks about the things that cannot be explained easily.

15/ Explaining the attraction of the Mona Lisa is incredibly difficult.

16/ Time is a great purifier of ideas, well-intentioned or not.

17/ You could also say that the Lindy Effect says something is safe from a risk perspective. Not only on an individual level, but also on a societal level.

18/ From a crypto perspective, tokens that have withstood the test of time have earned the trust in their protocol through surviving hacks, forks, regulations and every other kind of fear, uncertainty and doubt. This makes them better long term investments.

19/ Has Bitcoin crossed The Rubicon as it relates to the Lindy effect?

20/ The total network security of Bitcoin is equal to the amount of hash rate produced by miners.

The hash rate has increased exponentially throughout Bitcoin’s 12-year life (the dip in 2020 was due to China banning Bitcoin mining.)

21/ Today, thousands of miners all around the world contribute to Bitcoin’s hash rate, and thus the security of the network is becoming more robust over time.

22/ The number of users joining the Bitcoin network has increased at an exponential rate. The estimated number of users topped 100 million earlier last year. It is safe to say that Bitcoin has achieved impressive network effects in its first 12 years.

23/ Bitcoin is resistant to change. In order to change the Bitcoin network consensus rules, the majority of users running the protocol’s software must agree to the update.

24/ The fact that Bitcoin is decentralized, and millions of people around the world run versions of the software on their own computers, it is very difficult to achieve consensus, thus making it very difficult to change the rules.

25/ Bitcoin is also resistant to competition. There are many thousands of competing cryptocurrencies. New cryptocurrencies are created literally every day.

26/ Bitcoin has survived and thrived despite its competitors, many of which have already failed.

27/ We can see that the Lindy effect applies to Bitcoin.

28/ Does the Lindy effect apply to Ethereum?

29/ Ethereum is now seven years old, having survived hacks, forks and price crashes, so the probability says it will likely be around for another seven years at least, by which time one could assume Ethereum has achieved true mainstream adoption.

30/ $ETH acts as the reserve asset for many of the activities you can carry out on the network, giving the token strong utility.

The demand for Ethereum blockspace is demonstrated by the protocol generating nearly $15B in annualised revenue.

31/ $ETH was also the first collateral in DeFi. If Ethereum and DeFi do become the financial layer of the future, $ETH may very well remain as one of the major collaterals because it was the first collateral at scale and the DeFi ecosystem was built around it.

32/ Solidity is still the dominant developer language for smart contracts, and EVM has strong network effects.

33/ We think Ethereum has the Lindy effect, but we can see the argument that it must prove itself capable of securely scaling via PoS/rollups/sharding/ to deliver on the goal of EVM/smart contract scalability.

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