nate on Nostr: Why go up forever? (I cheated in this one. I was struggling putting conceptual ...
Why go up forever?
(I cheated in this one. I was struggling putting conceptual understandings into concise statements, so I used chatGPT. So, totally fair if you want to harange me for not being able to defend my arguments....🤷♂️)
From an economic standpoint, Bitcoin's potential for perpetual price appreciation can be attributed to fundamental principles of supply and demand, coupled with the network effect. Bitcoin's supply is capped at 21 million, creating a scarcity dynamic. As more individuals and institutions adopt Bitcoin, demand increases. Scarcity coupled with rising demand generally leads to price appreciation.
Furthermore, the network effect amplifies this dynamic. As the number of Bitcoin users grows, the utility and value of the network increase exponentially, attracting even more users and, consequently, more demand. This self-reinforcing loop has the potential to sustain long-term price growth, especially as Bitcoin continues to penetrate global financial markets and challenge traditional stores of value. Therefore, theoretically, Bitcoin's price could ascend indefinitely as long as these dynamics persist.
the energy dynamics of Bitcoin mining add another layer of complexity and potential for long-term value appreciation. The Proof-of-Work mechanism, which secures the Bitcoin network, requires miners to expend energy to validate
transactions and create new blocks. This energy expenditure effectively "backs" each Bitcoin, imbuing it with a tangible form of value akin to the labor and capital invested in extracting precious metals like gold.
The energy cost sets a kind of "floor" for the value of Bitcoin; as long as people are willing to expend energy to mine it, it will have intrinsic value. Moreover, as the network grows and more energy is expended, the security and robustness of the network increase, making it even more attractive to potential users and investors. This, in turn, feeds back into the supply and demand and network effect dynamics, creating a multifaceted system that could theoretically drive Bitcoin's value upward indefinitely.
(I cheated in this one. I was struggling putting conceptual understandings into concise statements, so I used chatGPT. So, totally fair if you want to harange me for not being able to defend my arguments....🤷♂️)
From an economic standpoint, Bitcoin's potential for perpetual price appreciation can be attributed to fundamental principles of supply and demand, coupled with the network effect. Bitcoin's supply is capped at 21 million, creating a scarcity dynamic. As more individuals and institutions adopt Bitcoin, demand increases. Scarcity coupled with rising demand generally leads to price appreciation.
Furthermore, the network effect amplifies this dynamic. As the number of Bitcoin users grows, the utility and value of the network increase exponentially, attracting even more users and, consequently, more demand. This self-reinforcing loop has the potential to sustain long-term price growth, especially as Bitcoin continues to penetrate global financial markets and challenge traditional stores of value. Therefore, theoretically, Bitcoin's price could ascend indefinitely as long as these dynamics persist.
the energy dynamics of Bitcoin mining add another layer of complexity and potential for long-term value appreciation. The Proof-of-Work mechanism, which secures the Bitcoin network, requires miners to expend energy to validate
transactions and create new blocks. This energy expenditure effectively "backs" each Bitcoin, imbuing it with a tangible form of value akin to the labor and capital invested in extracting precious metals like gold.
The energy cost sets a kind of "floor" for the value of Bitcoin; as long as people are willing to expend energy to mine it, it will have intrinsic value. Moreover, as the network grows and more energy is expended, the security and robustness of the network increase, making it even more attractive to potential users and investors. This, in turn, feeds back into the supply and demand and network effect dynamics, creating a multifaceted system that could theoretically drive Bitcoin's value upward indefinitely.