Why Bitcoin Is Antifragile
Collective Skin In The Game
According to Nassim Nicholas Taleb in his book, Antifragile, antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. Definitively, Bitcoin is antifragile.
Bitcoin, a cryptocurrency released in 2009, operates by a decentralized authority that increases in capability as a result of stressors, shocks, and volatility. Volatility means that an asset is risky to hold — on any given day, its value may go up or down substantially. As Jacob Kleinman from Lifehacker stated, “In 2017, Bitcoin’s value soared from $1000 to just under $20,000 before dropping down to around $13,000 at the end of the year. Since then, its value has risen and dropped sporadically from day to day, dragging smaller cryptocurrencies like Ether and Ripple along with it.”
Bitcoin trading is non-stop, 24/7. With a current market cap of $144,350,290,233 USD (as of when this was written) and a circulating supply of 16,923,037 BTC, Bitcoin is gaining from disorder.
In comparison, fiat money is backed by the central bank or government. Centralization makes systems fragile and incentivizes rent-seeking behavior.
“The centralized incumbents are not going to innovate faster than the open-source community who have more collective skin in the game. I’m betting on the pace of innovation accelerating. You’re free to take the other side.”- TwoBitIdiot, Founder of Messari
Which is why Bitcoin is not only antifragile but also an excellent idea. It fulfills the needs of the complex system, not because it is a cryptocurrency, but because it is owned by its users. The ones with collective skin in the game are those who take the downside risk while also owning the upside. These individuals include:
- Miners
- Investors
- Engineers
- Consumers
- Developers
- Entrepreneurs
“Bitcoin will go through hick-ups (hiccups). It may fail; but then it will be easily reinvented as we now know how it works. In its present state, it may not be convenient for transactions, not good enough to buy your decaffeinated expresso macchiato at your local virtue-signaling coffee chain. It may be too volatile to be a currency, for now. But it is the first organic currency.” — Nassim Nicholas Taleb, Bitcoin
Bitcoin is still relatively new and with its popularity comes a lot of criticism. A single person buying massive amounts on an exchange or an abrupt press announcement can swing the entire market in a second. It doesn’t mean the Bitcoin skeptics are wrong, but they are completely detached from the negative results if they have nothing to lose. Let those with skin in the game define Bitcoin’s value for themselves.
