Thinking About Bitcoin's Value: An Educational Journey into 'Digital Scarcity'

Recently, a viewpoint has sparked widespread discussion in tech and financial circles: if Bitcoin is considered a long-term asset, its value could experience significant growth over the next two decades. This bold projection has left many curious, even perplexed. What does it truly mean? What is the analytical logic behind it? This article does not aim to predict the future, but rather to peel back the layers and explain, in an easy-to-understand way, the logic and vision behind this perspective.

A Thought Experiment: What Does an Annual Growth Rate Mean?

Some analyses project Bitcoin's long-term value growth based on a hypothetical average annual growth rate. You might wonder, what exactly is the concept of a specific annual growth rate?

Simply put, it's a hypothesis about compound growth. Imagine a snowball effect: in the first year, your snowball increases in volume by a certain percentage; in the second year, it grows by the same percentage, but based on its new, larger size. Over time, the snowball gets bigger and bigger, and its growth rate appears increasingly astonishing.

This number itself is not a promise or a guarantee, but rather an inference based on a specific analytical framework. It invites us to consider a core question: over a long period like the next two decades, what forces could possibly drive a technology or an asset to achieve such a significant change in value? This is precisely what we need to explore next.

The Cornerstones of the Hypothesis: Digital Scarcity and the Macroeconomic Backdrop

Every grand hypothesis has its supporting logic. For Bitcoin, the core analytical logic is primarily built on two cornerstones.

1. Digital Scarcity: A Cap Locked by Algorithm

   
   Imagine if the total amount of gold in the world was fixed and no more could ever be mined. How would its value change? Bitcoin's design is based on a similar concept. Its total supply is permanently locked at 21 million coins by a public algorithm—not one more, not one less. This scarcity, which can be publicly verified through code, makes it a unique digital asset, standing in stark contrast to traditional currencies that can be issued based on policy needs.

2. Macroeconomic Backdrop: The Search for a Value 'Anchor'

   
   In recent years, the global economic environment has been filled with uncertainty, prompting some investors and institutions to search for ways to preserve and transfer value over the long term. Against this backdrop, some have turned their attention to Bitcoin, which exists outside the traditional financial system, and have begun to explore its potential as a store of value. As more people recognize its characteristic of 'digital scarcity' and bring it into their consideration, this growing attention is seen as a significant force that could drive its value evolution.

A Comparative Look: Where Does a Specific Growth Rate Stand in the Investment World?

To better understand what a high annualized growth rate (e.g., over 20%) truly means, we can compare it with the long-term historical performance of other traditional asset classes.

• Global Stock Markets: Taking the broad-based U.S. S&P 500 index as an example, its long-term average annualized return (including dividend reinvestment) over the past several decades has typically been around 8% to 11%.

• Gold: As a classic store-of-value asset, gold's annualized return over the past two decades has been approximately between 9% and 11%.

• Venture Capital (VC): VC offers high return potential but comes with extremely high risk and uncertainty. VC returns follow a 'power-law distribution,' meaning a few successful projects from a handful of top-tier funds contribute the vast majority of the industry's returns. These top funds aim for returns exceeding 20%, but the industry average is much lower and highly volatile.

Through this comparison, it's clear that a sustained, high hypothetical annual growth rate is an exceptional expectation, far exceeding the historical average of most traditional asset classes. This also explains why such viewpoints attract so much attention—they describe a future possibility that is extraordinarily unique within existing cognitive frameworks.

Ideal vs. Reality: Potential Bumps on Bitcoin's Development Path

Of course, the path from a grand technological concept to a widely accepted social reality is never smooth. On its journey to becoming a global digital asset, Bitcoin also faces several 'bumps' that must be acknowledged.

First is the well-known value volatility. As an emerging technology, its price often experiences drastic fluctuations. This high volatility is a prominent feature of its growth process and an objective reality that all observers and participants must fully recognize.

Second is the evolving global regulatory environment. The attitudes and rules of countries worldwide regarding digital assets are still being actively explored and formulated. A clear, reasonable, and sound regulatory framework is widely considered a crucial step toward its maturity, and future policy directions will profoundly impact the breadth and depth of its acceptance by mainstream society.

Finally, the technology itself is constantly evolving. Since the Bitcoin network's inception, discussions on how to improve network efficiency, reduce transaction costs, and enhance scalability have been ongoing. The exploration of Layer 2 solutions like the 'Lightning Network' is one response to these challenges. These technological upgrades and improvements are crucial for its future use cases and value-bearing capacity.

Facing the Future: How Should an Ordinary Person View a New Technology?

Faced with a field full of opportunities and challenges, how should an ordinary person position themselves? The key may not be to chase short-term information, but to build a solid, independent cognitive framework.

• Return to First Principles, Learn First: Before being surrounded by various opinions, it's wise to calm down and understand what it is and what problem it solves. Take the time to read its whitepaper and grasp core concepts like 'decentralization,' 'peer-to-peer electronic cash system,' and 'consensus mechanism.' The accumulation of knowledge is the only foundation for making any wise judgment.

• Focus on the Long Term, Understand Technology Cycles: Any vision for the future, regardless of its nature, is usually framed in terms of years or even decades. This reminds us that when looking at a potentially disruptive technology, we need sufficient patience and a long-term perspective, avoiding being swayed by short-term market sentiment or noise.

• Start with Education, Build Understanding: For any emerging technological field, learning and understanding are the first steps. Before making any decisions, having a sufficient knowledge base and a deep understanding of the technology's fundamental principles is crucial. This is not only being responsible for oneself but also the most prudent approach to exploring the unknown.

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