Is Lindy’s Law Applicable to Bitcoin’s Longevity

The Lindy Effect was first popularized by Albert Goldman in his 1964 article titled ‘Lindy’s Law’. This principle was first used when analyzing the longevity of a comedian’s career. Goldman concluded that “the life expectancy of a television comedian is proportional to the total amount of his exposure on the medium.” For example, if a Broadway play is performed for ten years, it is much more likely that the play will continue to be performed for ten more years. Conversely, a play that has been performed for only a year is much more likely to be performed for only one additional year. The Lindy Effect was also popularized by Nassim Taleb in his books The Black Swan (2007) and Antifragile (2012). Lindy’s Law can be applied to accurately predict the longevity of certain concepts. Throughout history, the Lindy Effect has been exemplified through the printing of certain books, non-perishables such as technology, and many other philosophical ideas. Another example is the book Huckleberry Finn (1884). It would be very unlikely for Mark Twain’s novel to become unpopular at this point because it is already considered to be one of the greatest masterpieces in American Literature.

So how does Lindy’s Law apply to Bitcoin and other technologies? Bitcoin as a concept is money, and money requires social coordination and trust in order to be functional. But how can one measure trust? The longevity of something can be an indication of how long it has been trusted, and it can be a heuristic to predict if something will continue to be trusted. Gold is an example of trust displayed over a significant period of time. This is also true of Bitcoin relative to other cryptocurrencies. One could argue that since Bitcoin is ten years old, it has a much better chance of surviving a bear market than a cryptocurrency that is only one year old.

Above all, nothing in the cryptocurrency space has a track record like Bitcoin. No other cryptocurrency has been tested at Bitcoin’s level of scale and from a social coordination standpoint, Bitcoin has survived more catastrophic market conditions than any other coin. In 2011, Bitcoin dropped from roughly $30 to $2. In 2013 and 2014, Bitcoin’s public persona became associated with the criminality of the Silk Road, in addition to the hacking of the Mt. Gox Exchange. These catastrophic events led users to question the reliability of Bitcoin. In effect, the price of Bitcoin plummeted from around $1,000 to $200. Bitcoin has proven its resilience overtime by recovering from multiple price drops along with other catastrophes. Very few alt coins have recovered from +90% drops. Therefore, certain alt coins may have a lesser chance of recovering than Bitcoin does, simply because Bitcoin has already experienced these conditions before.

Bitcoin and money have a network effect because it is more convenient to transact in a currency that is used by more people. In a YouTube video, Bitcoin Developer Jimmy Song described how the Lindy Effect may play out in Bitcoin from a social coordination perspective:

“Say ten years from now, you’re going to have people alive and most of their lives they will have had Bitcoin around. It will become a part of their consciousness. It will be an idea that was embedded in them since they were very little. There are people like that now, half of their life Bitcoin has been around and they have been following it.”

When thinking long-term, how can one predict which coins will be used and which ones will not? The Lindy Effect would indicate that coins which are five years old have a better chance of lasting ten more years than coins which are only one year old. Throughout Bitcoin’s lifespan there have been coins which have come and gone yet Bitcoin has continued to survive. Above all, the Lindy Effect is one of the primary reasons Naval Ravikant said, “All Bitcoin has to do to become the premier store of value is survive.”

In all fairness, there are many flaws within Lindy’s Law. For one, it is closely linked with the survivorship bias and the selection bias. For example, Lehman Brother’s was a firm founded in 1850, yet it was still forced to close operations during the 2008 crash. While there were other factors which determined the fate of Lehman Brothers, the Lindy Effect was not applicable in that scenario. When evaluating a portfolio, the Lindy Effect may not be applicable in the short term, but in the long-term it may be a rational heuristic to consider when predicting and financially preparing for the future.

Disclaimer: I am not a financial advisor. This is not financial advice. Please do your research independently and make objective decisions. This article is intended to educate readers on Lindy’s Law. The author of the article trades cryptocurrency.