What is Bitcoin’s price rise based on? Own world, own rules

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Every new industry initially faces a lot of hate, resistance and at some point also restrictive regulation. It is therefore good to understand how much it means to create a strong basic structure and its ensuing own rules. So in other words an own world and its ensuing own rules. The stronger the basic structure for any operation is, the stronger this structure will endure time.

Cheek

Let’s taken an exemplifying case from the Finnish music world. Cheek, who was perhaps one of the biggest entertainment stars of the 2000s, had a career inspiring both love and hate, but nonetheless changed the entire industry in Finland. The artist tended to sing about his own world and own rules.

In contrast to mass culture, Cheek or Jare Henrik Tiihonen was regarded as overly arrogant and too capitalistic for Finland, since he believed one can become rich and successful with one’s own work. While Cheek’s music irritated many, everything was still based on a strong basic structure.

Cheek always managed to fill Finland’s biggest arenas. His name was seen in all kinds of music industry publications, his own movie, books and many sold records. He was also the most famous Finn internationally despite singing in the native tongue. Cheek even surpassed historical Finnish figures such as Mannerheim, Sibelius and Kekkonen.

Why was Cheek so popular then?

1. The basic things were in order: Excellent maternal tongue skills, exceptional sense of rhythm as well as voice control and its use.

2. Cheek also excelled in more than one genre, combining elements from the 90s, gangsta, comedy, bling, chopper, west and east coast as well as screaming sounds familiar from rock and heavy music. 

3. In terms of production the quality was top notch even on international standards.

4. Additionally the lyrics were also approachable, timely and often very personal, so listeners could easily relate to them and be affected.

5. Cheek also had very good skills in marketing and sales.

6. And the foremost: He wasn’t alone. Cheek had a very capable network in the background, which enabled the birth of a brand and successful business.

This nature of Cheek which could even be characterized as megalomaniac led to an own world, in which high criteria applied to the artist, entertainment and music production. For the Finnish music business this meant new rules which just had to be accepted. The domestic music markets were never the same after the birth of this new world and its own rules.

Bitcoin, its world and its rules

What about Bitcoin then, which in its own market has provided continuous entertainment? At the time of writing Bitcoin’s dollar price has already surpassed $24 000 and in euros above 20 000. However, the central thing is not how much Bitcoin’s price has risen. The more important thing is Bitcoin’s basic structure, which can enable growth and new procedures with higher criteria.  

So does Bitcoin have a strong basic structure with its own world and rules?

Next we will answer the question by checking a few of Bitcoin’s own rules:

1. Decentralized decision-making

In contrast to many companies, the Bitcoin network does not have a board of directors or CEO. Therefore Bitcoin’s future development and its direction is not decided by a small leadership, since such a centralized management does not exist. Instead Bitcoin’s decision-making is decentralized. This means Bitcoin’s peer-to-peer network does need a centralized authority to decide over the network’s future development goals. Instead Bitcoin is developed in the best way possible simply by the network’s inbuilt features. In other words Bitcoin has no need for a centralized third party, since the network works consistently without any need to trust in third parties. The currency called bitcoin also has an essential role in settling Bitcoin’s consensus mechanism and blocks, which ultimately represents Bitcoin’s complete event history (or blockchain).

In relation to the Bitcoin network’s function, it is good to understand this decentralized decision-making process a little better. Anyone who partakes in the Bitcoin network by operating nodes independently checks every event and every block. In this way every node gathers its own independent version of the blockchain, resulting in what can be called decentralized decision-making. Unity in decisions is achieved when every node verifies every event based on the basic rules and the longest chain wins. If in turn the node sends an event or block that does not abide by consensus rules, it will be rejected as invalid by other nodes. Therefore the best solution for the Bitcoin network always wins. This rule has worked exceptionally well so far in history.

2. Block reward halving

One of Bitcoin’s most central own rules is the block reward halving. The halving refers to a feature programmed in the Bitcoin protocol, which is meant to keep the bitcoin supply stable and also protect against inflation. In practice this means that miners who maintain the Bitcoin network are awarded half the bitcoins compared to before. At the beginning of 2020 bitcoins were born in groups of 12.5 units roughly between 10 minutes, but after the halving in spring only 6,25 units were born in the same time.

Shielding oneself against inflation, meaning money losing value, has been a critical question for many investors especially in modern times with low interest rates. As a result it has been hard to yield profits exceeding inflation for invested deposits. Bitcoin has at least so far been a very positive exception to this.

When Bitcoin’s supply has halved every four years it has also every time resulted in Bitcoin’s demand growing. Every time.

3. Network effect

You’ve probably heard of how a common goal where everybody wins creates good conditions for the success of almost any project. Therefore every part of the community benefits from the development of such a common project.

The Bitcoin community has common goals and achieving them benefits all parties of the community. Such goals are for instance the undisturbed operation of the Bitcoin network, developing a functioning payment system, protection from inflation and expanding the community in numbers. Other goals particularly for investors and traders are bitcoin commerce and sufficient volatility, which both enable reaching better profits. Also holders, or so called hodlers, have an important role, since they stabilize the market. Hodlers regard Bitcoin as a store of value, which forms a kind of bottom level below which the price can not fall for longer periods. At least theoretically.

The increased use of the Bitcoin protocol also increases the workload of devs, or developers responsible for the Bitcoin network’s technical development. The opportunities for such challenging and rewarding projects attract even the most skilled developers to join Bitcoin. Therefore Bitcoin’s surprisingly durable basis for technical development has been enabled. Bitcoin’s price rise in turn has led to a lot of visibility, which in turn attracts further interest to join the industry.

It is still worth noting that Bitcoin’s price rise also attracts other kinds of actors on the markets. While these actors may not have the community’s best interest in mind, they are usually weeded out during bear markets. At least so far this has been the case.

Bitcoin’s own rules have remained relatively unchanged already for ten years, so they have had time to create their own world. Opinions may vary on the strength of its basic structure, but Bitcoin still undoubtedly has its own world and own rules on the market.

It’s good to remember that all people and businesses built by people have a story involving both rises and falls. And sometimes it also ends. Cheek ended his music career relatively young referencing back problems as one reason. Many also thought his standards were too high for one person to upkeep. And perhaps it was so. But Bitcoin is not a person, nor is it completely controlled by people. Rather it is a combination of machine and human, a kind of hybrid. And that is something completely different which we have not yet seen.

Maybe Bitcoin will never fill arenas full of cheering people like entertainment stars, but it has definitely created its own world and its own rules within our world. The future will reveal how well this world and its rules will last. The past has certainly demonstrated that nothing is certain.

Hopefully these tips were helpful!

This article does not present any investment recommendations nor should it be interpreted as such. Gaining profits on the markets often requires deep-rooted knowledge and several years of experience.

The writer is a board member of cryptocurrency organization Konsensus Ry and has years of experience in different investment fields, including cryptocurrencies.

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Yuru
Yuru
08/01/2021 07:40

Interesting

Lupe
Lupe
13/01/2021 16:28

Evil lurks in high places…..

 

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