Bitcoin, Pokemon Cards and the Lindy Effect

Bitcoin is a digital currency. This means that it is not really something you carry around in your wallet but instead is something you have in an online account. Bitcoin is very different in that it is a decentralized currency. There is no central bank or central government in charge. This makes it very different from the traditional currencies, which are called fiat currencies. This means that there is a central bank that controls how these currencies, such as the dollar, operate. Besides, Bitcoin is also not subject to conventional forces of inflation and deflation that impact traditional currencies. This is because there is only a set number of Bitcoins that will ever be released onto the open market. As a result, many people are wondering what the future holds for Bitcoin. To take a closer look at Bitcoin, it is helpful to analyze one unique metaphor. Many are comparing Bitcoin to Pokemon cards. How are these two related to each other? What does this mean for the future?

Let’s Take a Trip Back in Time

Now, let’s hop into a time machine for a second. Pretend that everyone is sitting on the playground. The year is 1999. Everyone pulls out their Pokemon trading cards. Of course, people find duplicate cards in their lots of Pokemon card packs. As a result, people want to trade cards they have for cards that they do not have. For a trade to get carried out, the two cards have to be of roughly equal value. There’s nothing particularly tricky about trading Pokemon cards. As long as the two cards are of equal value, both parties agree that the trade is fair. After all, everyone wants to become a Pokemon Master, and this means collecting all of the cards. When a trade is agreed upon, the two cards are swapped, and everyone is happy.

Of course, everyone knows that elementary school children are incredibly responsible when it comes to their Pokemon cards. There’s no need to ask the teacher to supervise the swap. It is obvious who physically owns each card. People keep their cards and their Pokemon decks. No one would be careless with something so valuable.

So, this trade was relatively straightforward. Everyone gets what they want. No tears are shed.

Let’s Move Our Metaphor to the Digital World

At the same time, what happens if these Pokemon cards went to the digital world? What would the transfer entail?

Of course, there’s only one card in the world of Pokemon that has the most value. This is a holographic, shadowless, 1st edition Charizard. This fire breathing monster was undoubtedly the best Pokemon card in the game. It could light you up with its fire spin. If I send it to you by email, how can you be sure that I didn’t merely make a copy of it on my computer? Of course, if I did make a copy of it, it would be much less valuable to you. And, if I could make one copy, I could make a thousand. Then, I could sell them all as if it were the only one. What would this mean?

This would mean that there is a dramatic oversupply of shadowless, holographic first edition Charizards on the market. This would influence not only what the trade meant for you, but also what it meant for the trading card community as a whole. Cards that used to be rare but now be incredibly common. They’ll be worthless. There would be an oversupply of holographic, shadowless, 1st edition Charizards.

It turns out, and this problem has a name to it. This is called the double-spending problem. When digital goods are exchanged, how can you possibly know the same card has not been sent to different people at the same time?

This is where Bitcoin comes back into our metaphor. The way to do this is to use a ledger. This is a record of transactions. In our Pokemon card metaphor with holographic, shadowless, 1st edition Charizard, Nintendo would have to control the ledger. Of course, this presents another problem. Now, there is a third party involved in our trade. Nintendo’s acting as a middleman. It isn’t just you and me in the schoolyard (or on our phones in our digital metaphor) anymore. Now, big brother is watching.

Of course, if there is a third party, then we cannot be 100 percent sure that nobody has tampered with our ledger. So, how do we address this problem? Instead of keeping the ledger in our digital metaphor at the headquarters Nintendo, what if we gave everyone a copy of the ledger?

The Universal Bitcoin Ledger: Pokemon as a Metaphor

When we are talking about Pokemon, it is no secret there are hundreds of millions of fans in the world. Everyone will be notified that I send my super rare card to you. Then, the ledger would reflect that only one of these super rare cards exists. Therefore, if I duplicated it either once or a thousand times to keep it and trade it again, everyone else’s trade will be rejected, making them sad and angry.

So, what if I tried to beat the system anyway? What if I did duplicate that holographic, shadowless, 1st edition Charizard to try to swap the same card a second time? This is where we introduce the concept of blockchain technology. Remember how everyone has a copy of the Pokemon card ledger? Let’s say they’re all connected. We will call them nodes. All of these nodes have a copy of the transaction record. They are all running software that allows them to talk to all other computers on the network. Why would this be the case? This is because they have a vital job to do. Their job is to validate every Pokemon trade independently. All of these nodes have to agree on what the shared ledger has to say about transactions that happened on the network. For example, if I were to make a trade with you and swap that first edition, holographic, shadowless Charizard for, let’s say, a Pikachu, the computers would have to validate this trade. Now, it would not be the job of these computers to evaluate whether or not a Pikachu being swapped for a holographic, shadowless, first edition Charizard is a fair trade. In reality, the job of these computers is to make sure that the same card hasn’t been swapped already.

This is where Bitcoin mining enters the metaphor. The Bitcoin miners are actually in a race. They’re racing try to be the first ones to validate this group of transactions. Bitcoin miners have to solve a string of mathematical algorithms to validate the trade. Then, once the trade has been validated, a new block is produced. This is why this technology is called a blockchain. The blocks contain the record of every trade that has ever been made. Then, Bitcoin miners are awarded a transaction fee. In our metaphor, let’s say it is a Pokemon card booster pack. They are paid for their efforts. In our analogy, the history of every Pokemon trade that has ever taken place is stored as a chain of blocks. The blockchain is our ledger.

What About Swaps for Something in the Real World?

Of course, everyone knows that Pokémon trading can take many forms. What if I wanted to trade in one of my cars with you for something in the real world? Suppose I am ready to branch off on my 1st Charizard Edition for our exchange. What happens if I give you this card? In the world of Bitcoin, these transactions will enter a pool of unconfirmed transactions. Then, they are usually taken back to be placed in the blockchain. Sometimes it doesn’t happen quickly.

This is why additional layers are added to the Bitcoin blockchain. The most popular is the Lightning Network. Currently, the Lightning network is still in an experimental stage, and some would argue that even Bitcoin is still in an experimental phase, after all, Bitcoin has only been around since 2009. At the same time, Bitcoin has survived several events, which creates more and more substantial support.

Much like with Pokemon cards, it takes generations before a monetary value is assigned to a tradable good. Of course, Bitcoin is even more unique in this situation since it has a self-managed transaction system built-in in the currency. Besides, its scarcity is much more secure and integrated. The algorithm is designed never to exceed 21 million bitcoins and always to be completely transparent about the amount currently available in the system of this unique asset.

The Lindy Effect Applied

The Lindy Effect is an idea that the future of items that are non-perishable, such as an idea or a new technology, is directly proportional to their current age. In this manner, the longer it survives, the longer it will also be expected to survive. In this manner, every additional period of survival implies that the idea has a longer life expectancy. So, what does this have to do with Bitcoin and Pokemon?

The first Bitcoin block was created back in 2009. As mentioned before, Bitcoin is not a fiat currency. It has a predetermined inflation schedule as well as a maximum supply that has been locked in. Bitcoin has survived numerous threats during its lifetime. Despite all of these threats, it has lived for more than ten years. This is important because many people were predicting the demise of Bitcoin. This has not come through yet. Because Bitcoin has taken all of its threats in stride and is still standing, this implies that it should last longer.

Fear

One of the biggest threats that Bitcoin has had to put up with is fear. When it first arrived on the market, there was a significant amount of fear that it would not survive. People were worried that they would lose all their money if they invested in Bitcoin. Others thought Bitcoin was simply a scam that was designed to take all of their money. Some people were also worried that Bitcoin was going to destroy their retirement savings somehow. This uncertainty was the first and biggest threat that Bitcoin faced. It was able to overcome this, which only made it more robust.

Hacking

Of course, once people realize that Bitcoin had value, hackers got involved. They were people who were wondering if there was a way they could somehow game the system and use it to their advantage. The good news is that Bitcoin is a self-sustaining network. There are security mechanisms that are already built into place to prevent people from trying to do this. For those who want to make money using Bitcoin, the best way is to play the game fairly. With so many people, nodes, blocks, and others watching every transaction that takes place in the market, it is nearly impossible to hack Bitcoin. Therefore, Bitcoin continued to live on.

Governments

Another threat that people have to acknowledge is that Bitcoin has been targeted by governments as well. Numerous governments have wanted to try to control or limit Bitcoin in some way. China is the most prominent example. As mentioned repeatedly, Bitcoin is not a centralized currency. There is no Central Bank or government that controls it. Therefore, the Bitcoin traders found ways to avoid the watchful eyes of the government for the most part, and the network continued to exist in its current form. Because Bitcoin was able to withstand the threats of some of the most significant governments in the world, this added to its strength.

Pokemon Cards and the Lindy Effect Says Bitcoin Will Survive

Many people who work with Bitcoin enjoyed Pokemon as children. Maybe they still do. For those who are looking to learn more about Bitcoin, using the Pokemon card metaphor is a great place to start. There are numerous ways in which trading Pokemon cards is similar to trading Bitcoin. Even though people weren’t trading Bitcoin out on the playground, the two still go hand-in-hand. Even though Bitcoin is still young when compared to other currencies, it already demonstrated that it has a tremendous amount of malleability and flexibility. Bitcoin can adapt as the world continues to change. Therefore, according to the Lindy Effect, Bitcoin and Pokemon Cards Trading should both continue to live on. The question is how Bitcoin is going to live on and what form it will take. It will be interesting to see what happens next for this global digital currency.