The Bitcoin is the Telescope, that Discover new laws of Economy
Dr. Asher Idan
Satoshi: “Bitcoin has a behavior of a positive feedback loop. As the number of users increases, the value of Bitcoin increases, and the increased value attracts even more users, who want to profit from the increasing value.”
A, Introduction
In my book “The Fifth Power, The Power of the Network” (2014), I showed that the social networks at the beginning of the 21st century are like a telescope and a microscope that allowed us to see “new galaxies and stars” in the field of social sciences: economics, finance, politics, etc. But more importantly, they provided huge amounts of data that made it possible to discover new laws. Just as Galili and Kepler’s telescopes provided vast amounts of data that made Newton’s universal laws of physics and astronomy possible. But the Bitcoin social network is the most accurate telescope of all and therefore erases all the economic teachings of the last 6,000 years.
B, the two fundamental laws of Bitcoin are power laws
This year Giovanni Santostasi discovered that Bitcoin is governed by a cycle of two power laws of the form 2^n, and N².
• When Moore’s law of the chips doubles the power of the computer chip that mines the bitcoin (like the hoe or the bulldozer that mines gold) every two years and operates according to the formula 2^n. This law is similar to the gas pedal in a car, in terms of increasing the supply of the number of bitcoins.
• Whereas Metcalfe’s law of the networks multiplies the power of the networks, including the Bitcoin network, according to the number of network members squared according to the formula N². This law is also like the gas pedal in a car in terms of increasing demand.
Moore’s law doubles (2² = 4) the reward of Bitcoin miners every 2 years, and 8 times every 4 years (2³ = 8). That is why the inventor of Bitcoin Satoshi determined in the Bitcoin software that the reward of the Bitcoin miners will be cut in half every 4 years (halving), which will reduce the reward of the miners from 8 times by 4. If Moore’s law is like the gas pedal in a car, the law of halving the reward is similar to the brake pedal in a car.
If halving the reward is the brake that offsets the gas pedal of doubling the power of the mining computers, then another law called difficulty adjustment is the brake that offsets the increase in the square of the demand of the members of the Bitcoin network, therefore it offsets the increase in demand. But unlike the law of halving which operates once every 4 years, the law of the difficulty adjustment operates continuously, like an air conditioner that when the heat rises it cools, and when the cold rises it warms. When the difficulty of mining increases, it “brings the gold closer to the hoes”, and when the difficulty of mining is low, it “moves the gold away from the hoes”.
The 4 years cycle
C, Bitcoin reveals a new history to us
The combination of Moore’s Law of technology as an amplifier of efficiency and supply, with Metcalf’s Law as an amplifier of demographics and demand. is a law that has dictated history for 6,000 years. History does not repeat itself, but it rhymes (from rhyming language). This changes all our knowledge of history in the fields of the military, politics, economy, finance, etc.
Moore’s Law and Metcalf’s Law are power laws that remain the same in different orders of magnitude, regardless of scale (Scale Free). Just as the metabolism between the input and the output in all animals remains in the same constant ratio from the frog and the mouse to the elephant and the whale, so the metabolism between the input and the output of the energy remains in the same constant ratio from the Bitcoin that was worth $7 among a million users, to the Bitcoin that is worth $70,000 among 100 million users within 15 years. The input is the mining energy and the output is the number of bitcoins issued.
Not only in the evolution of animals, from a frog to an elephant, the input/output ratio remains constant, and not only in the evolution of Bitcoin, but also in the evolution of a city, of a firm, and more. But the ratio is different in different entities: the input/output in animals is about 0.75, while in organizations it is 0.85 (sub-linearity), and in cities it is 1.15 (super-linearity).
“Infrastructural measures, such as numbers of gas stations and lengths of roads and electrical cables, all scale sublinearly with city population size, manifesting economies of scale with a common exponent around 0.85 (rather than the 0.75 observed in biology). More significantly, however , was the emergence of a new phenomenon not observed in biology, namely, superlinear scaling: socioeconomic quantities involving human interaction, such as wages, patents, AIDS cases, and violent crime all scale with a common exponent around 1.15 capita basis, human interaction metrics (which encompass innovation and wealth creation) systematically increase with city size while, to the same degree, infrastructural metrics manifest increasing savings. Put slightly differently: with every doubling of city size, whether from 20,000 to 40,000 people or 2M to 4M people, socioeconomic quantities — the good, the bad, and the ugly — increase by approximately 15% per person with a concomitant 15% savings on all city infrastructure-related costs.”
Now we will try to apply all of the above to a new understanding of history: history as a result of the interaction between “Moore’s Law generalized to every technology”, and “Metcalf’s Law generalized to every demographic and network”.
Private Moore’s Law precisely defined the evolution of digital-network civilization. General Moore’s Law defines the evolution from an agricultural-horizontal economy (based on tools such as a hoe and a knife), to an industrial-mechanical economy (based on machines such as a textile machine, and a shooting machine), to a digital-network economy (based on networks such as neural networks and social networks).
The transition between these three civilizations was conducted according to power laws that do not depend on the scale, such as the transition from a frog to a cat to an elephant:
A, the agricultural technology upgraded the gathering-hunting technologies (generalized Moore’s Law), and this made it possible to increase the organizational unit from a family of nomads to the river civilization such as the Euphrates and the Tigris (generalized Metcalf’s Law).
b. Industrial technology upgraded the overall agricultural technology, and this made it possible to increase the organizational network from citiy-states and river states, to
Oceanic states (the Atlantic Ocean controlled by Europe), and then the Pacific Ocean (controlled by the USA).
C, the network digital technology upgraded the industrial-mechanical technology, and this made it possible to increase the organizational network from oceanic countries to a global village. i.e. the Network-State Bitcoinia.
https://asheridan.medium.com/bitconia-c022a3ce0e03
https://medium.com/p/490073408645, translation
https://medium.com/sfi-30-foundations-frontiers/scaling-the-surprising-mathematics-of-life-and-civilization-49ee18640a8, Joust’s article
