Summary: this article is to explore what Bitcoin or crypto generates a new kind of economy. I wrote this article solely from a speculative aspect with a full personal opinion about what mining actually supports Bitcoin or crypto valuation and I had built my model around this assumption.
You can skip and reach my conclusion if you have already known it or you may want to join the journey on the benefit of crypto mining.
Also, this article will link to my shitcoin economy and it helps better understand how crypto may react within its marketplace on the price and valuation.
Again, I am not an expert of any kind but just some random dude who is bored to write out thoughts. So it is a purely observational and purely personal opinion.
Okay, enough and let’s begin.
Economy is unpredictable
If a human is unpredictable, why the economy is predictable? The economy was created and formed by human beings. Therefore, the economy should be unpredictable.
There are two assumptions of Bitcoin:
Bitcoin mining is for the public good and Bitcoin resolved the double-spending issue.
Both axioms rely on a verification process that distinguishes from a centralized system as a trust-based system.
It is a process for miners who may be individuals or organizations that voluntarily contributing computer powers to process payment transactions through solving extremely complex math problems.
It is a method to purposely inflated the quantity of digital currency by artificially increases the supply of digital currency or someone can spend the money twice or more.
Bitcoin creates a blockchain system that can establish a consensus distribution system that is discouraging double-spending while encouraging proper transactions validation.
Verify honestly in a timely manner
Since there is no centralized organization that everyone trusted, it is difficult to only let two parties interact without possible a settlement function to resolve disputes of transactions if any.
You need a reward system that can incentivize honesty.
It requires the system to work fast, everyone is voluntary to work hard to screen out bad characters.
24/7 working days
Unlike stock markets or any fiat system market, Bitcoin works 24/7 unstoppable.
There is a day market that is parallel to the fiat system market and a night market that when the fiat system market was closed.
Buyers’ responsibility in day market
When double-spending happened at the day market, the buyer is responsible for the cost simply the assumption is that buyer needs to verify its balance sheet in case something got lost and the buyer will need to reimburse the seller for the loss.
This assumption simply relies on that Bitcoin is traceable to a certain degree since KYC or Know Your Customer requirements fully implement in wallet or exchange services.
Night market magic trick
When the night market occurs, there will have to lag on each transaction simply buyers offer the price but sellers may take chances to accept the offer due to low energy supply to the network. This time double-spending is most likely will occur.
Since buyers cannot spend other’s payments but themselves, buyers then can promise forward payment but secretly mine a different blockchain while withdrawing payment until successful mining the secret block. That successful mining block then becomes reverse payment to reach double-spending.
Resolution of avoiding night market magic trick
Only if buyers double-spending trick of gain profits less than simply processing the payment. In other words, if the buyer took longer times to secret mining to achieve success and reward is so little.
You need a fast, and competitive network that functioning 24/7!
The more people use Bitcoin, the more valuable it will be
This is very intuitive and obvious. But what is embedded inside is how much mining power that engages in the blockchain
You can see the graph suggests more mining activities, fewer profits for miners but more consumption and utility that benefits the network.
Transaction fees matter
You can also see low transaction costs bring up consumption and utility but mining rewards are slim.
The trade-off of the crypto economy
You can see the benefit of the decentralized system that serves individuals rather than institutional organizations. Mining power will form institutional organizations but their profits depend on individual power that everyone will use Bitcoin and transact daily. Otherwise, no organizations want to invest their money in mining operations.
I just show you a nutshell of the decentralized system that benefits everyone and a trade-off that constrains institutional organizations to do public good for every one of us.
In contrast, a centralized system may be outdated because trust-based assumptions are likely corrupted and there are not incentives for serving everyone in the society.
Stay tuned on my shitcoin economy because this article may help you to understand the coolest every economy I discovered!
Photo by israel palacio on Unsplash
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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose cryptocurrencies are mentioned in this article. This information is only for educational