Lotus Flower in the Pund

July 4, 2018

Today, I want to take the reader’s through a small puzzle.

Imagine a pristine beautiful lake. Since I am from Oregon, I can think of no other pond like Crater lake. It is beautiful and bright blue clear water surrounded by tall mountains on all sides. In this beautiful lake, there are lot of weeds that grow. But one day, a lotus blossomed in this lake filled with weeds. These weeds, which I like to call them ‘Fiat currencies’. These horrible weeds are controlled by corrupt politicians and central bank governors who are corrupted by the same politicians. This beautiful lake was ruined by these noxious weeds eating and spread every where in the world. These horrible weeds will suck up the hard-earned money via the hidden tax called inflation. Since this tax is hidden from people’s eyes by continuously reducing the purchasing power of your money. But it is more insidious than regular income tax, because you don’t even see it being taken away from you. You are wondering where is the puzzle here?

One fine day in 2009, along comes a beautiful gift to the mankind, called Bitcoin comes in the form of a lotus flower into this placid lake filled with toxic weeds everywhere. This ephemeral lotus flower was brought into this world, just like Lord Brahma, from a mystical figure Satoshi Nakamoto. This magical flower is immaculate and only controlled by the laws of mathematics. It is rigid and not at the whim of any corrupt politicians. In fact, its strength is that it is NOT controlled by any human or government, but only mathematics. It derives all of its anti-fragile characters and trust from mathematics. It was build on the supremely solid foundation of Elliptic Curve digital signature algorithm and mathematics to ensure that it cannot be counterfeited.

Assume this beautiful Lotus flower has a magical property to double every day. First day, there is only one lotus flower. Second day, there are 2 lotus flowers. Third day, there are 4 lotus flowers. 4th day there are 8 lotus flowers, then 16, then 32 and 64 and so on. If it takes 30 days to fill the entire pond, and take over all the weeds, how many days does it take for the pond to be Half full?

Think.

Most people answer 15. They reason that if it takes 30 days to fill up, it should take 15 days for it to be half-full. But the correct answer is 29 days. It takes 29 days to get to half-full state and on 30th day, it doubles to fill the entire lake.

So the point of this puzzle is that, it took the lake 29 days of growing for the lotus flowers to become half-full. But on the 30th day, it grew as much as the last 29 days PUT TOGETHER. That is the power of exponential growth. We all know that the number of users in bitcoin are doubling every 9 months and it is getting faster. The Lotus flower, which represents Bitcoin and the lake is the economy of the world. In a boxing match between ALL the fiat currencies in the world, Bitcoin will keep winning. In fact, it is impossible for it lose, because of the rigidity of mathematics which protects this blooming lotus flower. No fiat currency in the world can guarantee that they will fix the supply of that currency. In fact if you were to look at the M2 supply of dollars is growing at an exponential rate, let alone being fixed.

On the other hand, bitcoin supply will almost become a flat line after year 2024. Even though coins will continue to get released, the mathematics will force the SHA-256 algorithm to get so complex that only a tiny fraction of bitcoins will get released over time.

Bitcoin issuance

Gold over the history of the world, has increased much more and we don’t know whether we will be able to find a huge gold mine in the future. Once a huge gold mine is found, it is possible for gold price to fall significantly. But in case Bitcoin, the mathematics is the shelter protecting this supply. Mathematics is rigid and incorruptible by any one, which is what you need for a currency in order to be a good store of value.

I think people are going to be surprised how fast Bitcoin has taken over the world when it happens. Let us say in 2022, if it is 25% of the world’s population, in 2023 it will be 50% and in 2024 it will reach 100% of world’s usage. It will be shocking for people to see that it went from 25% of the world to 100% of the world in just 2 years. But it is expected, because you need to remember this lake puzzle, on 30th day it grew as much as the last 29 days put together. That is the power of exponential growth which follows geometric series instead of arithmetic series of numbers.

Every year there will be a boxing match between Fiat currencies of the world with Bitcoin. I guarantee you despite all the crooked politicians in the world, Bitcoin will overpower everyone of those Fiat currencies with one supreme weapon against ALL of them, Mathematics !!

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