Bitcoin related economic Laws (explanations are not my own, sources are attached).
The Nakamoto Consensus, as its name implies, was created by Satoshi Nakamoto, Bitcoin’s pseudonymous founder. The Nakamoto Consensus is a set of rules that verifies the authenticity of a blockchain network.It can be considered the solution to the Byzantine Generals Problem. Which describes a problem in computer science: is it possible to form a consensus in a distributed computer network ? Imagine several Byzantine generals camped around an enemy city who communicate with each other only via sending messengers. They have to make a collective decision on whether to attack the city or retreat. However, some of the generals are traitors and may actively work against reaching a consensus. Is it possible to create a system that will ensure that the loyal generals (representative for honest actors in a computer network) decide on a common plan of action regardless of available knowledge on which generals are the traitors? Prior to Satoshi’s creation of the Nakamoto Consensus, a voting system for consensus was used. In the case of Bitcoin (and for the idea of a digital currency in general) through a voting process would pose a huge problem when it came to scaling. Satoshi’s solution was to add the idea of a proof-of-work consensus mechanism, where nodes had to mine to create a fully trustless, decentralized network.
Proof-of-work, in simplest terms, is the idea that miners support the (Bitcoin) network with literal “work,” i.e. their computing power. The fastest miner receives the block reward, thus creating new Bitcoin, as well as an incentive to keep participating in the network. In other words, it creates an environment where honest nodes thrive and malicious nodes are discouraged. In the Nakamoto Consensus, there is no voting” process, instead, the miners compete to solve a cryptographic puzzle, and the winner (and their new block) is then accepted as valid across the entire network of miners. Another aspect of the Nakamoto Consensus comes from Satoshi putting a hard cap on the amount of Bitcoin — there will only ever be a total of 21 million of the cryptocurrency in circulation. This creates artificial scarcity, which again adds to the incentives for miners to participate in the network. (Source: coinmarketcap)
Gall’s Law states that all complex systems that work evolved from simpler systems that worked. If you want to build a complex system that works, build a simpler system first, and then improve it over time.
Formulated by Gordon Moore of Intel in the early 70’s – the processing power of a microchip doubles every 18 months; corollary, computers become faster and the price of a given level of computing power halves every 18 months.
Proposed by George Gilder, prolific author and prophet of the new technology age – the total bandwidth of communication systems triples every twelve months. New developments seem to confirm that bandwidth availability will continue to expand at a rate that supports Gilder’s Law.
Attributed to Robert Metcalfe, originator of Ethernet and founder of 3COM: the value of a network is proportional to the square of the number of nodes; so, as a network grows, the value of being connected to it grows exponentially, while the cost per user remains the same or even reduces (Source: http://www.jimpinto.com/writings/techlaws.html).
Murphy’s First Law: Anything that can go wrong will go wrong.
Murphy’s Second Law: Nothing is as easy as it looks.
Murphy’s Third Law: Everything takes longer than you think it will.
Gresham’s law is a monetary principle stating that “bad money drives out good.” It is primarily used for consideration and application in currency markets. Gresham’s law was originally based on the composition of minted coins and the value of the precious metals used in them. However, since the abandonment of metallic currency standards, the theory has been applied to the relative stability of different currencies’ value in global markets. In the absence of effectively enforced legal tender laws, such as in hyperinflationary crises or international commodity and currency markets, Gresham’s law operates in reverse. In the absence of effectively enforced legal tender laws, Gresham’s law tends to operate in reverse; good money drives bad money out of circulation because people can decline to accept the less valuable money as a means of payment in transactions. But when all currency units are legally mandated to be recognized at the same face value, the traditional version of Gresham’s law operates.In cases of hyperinflation, foreign currencies often come to replace local, hyperinflated currencies; this is an example of Gresham’s law operating in reverse.
The best way to get the right answer on the internet is not to ask a question; it’s to post the wrong answer.” The concept is named after Ward Cunningham, father of the wiki. According to Steven McGeady, the law’s author, Wikipedia may be the most well-known demonstration of this law.. “Wiki” (pronounced [wiki][note 1]) is a Hawaiian word meaning “quick.” https://meta.wikimedia.org/wiki/Cunningham%27s_Law
The Lindy effect is a theorized phenomenon by which the future life expectancy of some non-perishable things, like a technology or an idea, is proportional to their current age.”Each day that bitcoin doesn’t fail, its survival becomes more and more likely (Lindy Effect).
In relation to Bitcoin, the Lindy Effect suggests that Bitcoin will continue to exist in the long term, because it has successfully existed for some time.In addition, the longer Bitcoin remains in existence the greater society’s confidence will be that it will continue to exist long into the futurehttps://en.m.wikipedia.org/wiki/Lindy_effect
The Cantillon Effect
The Cantillon Effects indicates that money is not neutral because inevitably it is injected unevenly, creating economic distortions. These distortions are important to the long run and the Austrian theory of the business cycle. Economists agree that money matters, but that agreement stops when it comes to how money matters. For example, some say it only matters in the short run while others believe that it matters in the short and long run. Austrian economists hold that money matters a great deal in concrete terms in the immediate short run and has permanent long-run effects. Given that the world economy has experienced more than a decade of radical and unproven monetary policy by central banks and half a century of fiat currencies, the effects of money are more important than ever.https://mises.org/library/money-inflation-and-business-cycles-cantillon-effect-and-economy
A Minsky moment is a sudden, major collapse of asset values which marks the end of the growth phase of a cycle in credit markets or business activity. According to the hypothesis, the rapid instability occurs because long periods of steady prosperity and investment gains encourage a diminished perception of overall market risk, which promotes the leveraged risk of investing borrowed money instead of cash. The debt-leveraged financing of speculative investments exposes investors to a potential cash flow crisis, which may begin with a short period of modestly declining asset prices. In the event of a decline, the cash generated by assets is no longer sufficient to pay off the debt used to acquire the assets. (https://en.m.wikipedia.org/wiki/Minsky_moment)
Applied to income taxes by Arthur Laffer: as the tax rate increases, the amount of revenue increases, but at an increasingly slower rate than the tax rate, due to increased avoidance, evasion, and most of all disincentive to engage in the taxed activity. At a certain rate due to these reasons tax revenues are optimized. Hiking the tax rate beyond the Laffer optimum results in lower rather than higher revenues for the government. Ironically, the Laffer curve was used by advocates for lower taxes, even though it is a theory of tax collection optimum to government revenue, not a theory of tax collection optimal to social welfare or individual preference satisfaction.
In theoretical computer science, the CAP theorem, also named Brewer’s theorem after computer scientist Eric Brewer, states that it is impossible for a distributed data store to simultaneously provide more than two out of the following three guarantees:
 Consistency: Every read receives the most recent write or an error
 Availability: Every request receives a (non-error) response, without the guarantee that it contains the most recent write
 Partition tolerance: The system continues to operate despite an arbitrary number of messages being dropped (or delayed) by the network between nodes (https://nakamotoinstitute.org/shelling-out/).
In cryptography, the avalanche effect is the desirable property of cryptographic algorithms, typically block ciphers and cryptographic hash functions, wherein if an input is changed slightly (for example, flipping a single bit), the output changes significantly (e.g., half the output bits flip). In the case of high-quality block ciphers, such a small change in either the key or the plaintext should cause a drastic change in the ciphertext. The actual term was first used by Horst Feistel,although the concept dates back to at least Shannon’s diffusion.
The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies (like the US dollar). This dilemma was identified in the 1960s by Belgian–American economist Robert Triffin, who pointed out that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfil world demand for these foreign exchange reserves, leading to a trade deficit. (Wikipedia)
There are three things that governments want to influence.
1. They want to keep the exchange rate stable. So that import and export prices do not fluctuate
2. They want to have an autonomous monetary policy, controlling the interest rate. A low interest rate for example motivates people to borrow money, which stimulates the economy.
3. They want to allow money to flow freely with no fixed currency exchange rate in and out of the country. To allow international trade (import and export).
However, there is a problem with allowing all three to happen at the same time. For example, if the Eurozone lowers its interest rate to stimulate the economy, as people may lend money from the bank, with which they could build business, buy real estate and subsequently create jobs, – money will flow outside the country to earn higher interest rates somewhere else. Because of this the Euro exchange rate will drop, which causes the Euro to lose value (inflation). As a result, the euro interest rate is forced back up again. A country may either fix its exchange rate and let money flow free across international boarders, but have no control of the interest rates. Or a country can control its interest rate, but can’t stop the money from flowing in and out. A country may never control all three at once. (https://www.youtube.com/watch?v=oLbfAfCVG_4).
Triffin Dilemma Explained (Triffin Paradox)
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