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The Relationship Between Number of Users and Price
#Cryptocurrency
### A Mistake
Yesterday, I suddenly realized a previous misconception in my dream. I used to think without a second thought that in the case of Bitcoin, the number of users and the price were positively correlated, and both maintained exponential growth.
### Number of Users vs Price
Let's first look at the first half of the sentence, 'the number of users and the price are positively correlated.' This implies several logical simplifications:
1. The number of users ≈ the demand for Bitcoin. This can be considered basically established.
2. The price is positively correlated with demand. This hypothesis is only basically valid under the condition of constant supply. The actual supply of Bitcoin is as follows:
### A Mistake
Yesterday, I suddenly realized a previous misconception in my dream. I used to think without a second thought that in the case of Bitcoin, the number of users and the price were positively correlated, and both maintained exponential growth.
### Number of Users vs Price
Let's first look at the first half of the sentence, 'the number of users and the price are positively correlated.' This implies several logical simplifications:
1. The number of users ≈ the demand for Bitcoin. This can be considered basically established.
2. The price is positively correlated with demand. This hypothesis is only basically valid under the condition of constant supply. The actual supply of Bitcoin is as follows:
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Why Bitcoin is Valuable
It is just a ledger, an honest, limited ledger. Why is it so valuable? Why is gold so valuable? Like gold, Bitcoin is a 'valuable rarity' (not a currency, at least not at the moment). The rarity is because Bitcoin uses mathematics and game theory to ensure its **limited total supply** and **absolute honesty** (absolutely true). What else in this world is like this? There can be many, such as gold, antiques, Van Gogh's paintings... But first of all, the 'authenticity' of these things requires a high cost to verify. Antiques and paintings can be faked, and verifying their authenticity requires professionals, and training a qualified professional is extremely costly, and the process is highly uncontrollable. The key point is that professionals can also lie, and establishing trust in a particular professional is also very expensive. The authenticity of gold is relatively easy to verify, but today, for most ordinary people, there is no need to verify the authenticity of gold, nor do they need to bring gold home, but can just own paper gold. All of this is based on trust in today's credit system (ultimately trust in the government). Satoshi Nakamoto clearly does not trust the government, believing that the government's unrestrained credit expansion is dishonest behavior. In this regard, both gold and Bitcoin are anti-inflation assets.