The shelf life of digital assets

When I drive in the morning, I'm in a daze while driving. When I'm dazed, I let my mind fly. As a result, from driving to exchanging cars, the actual cost of buying a car should be far higher than the price paid when buying a car. Of course, the reason is the reverse application of the cash flow discount model for financial asset valuation.

The cash flow discount model says that the money earned next year will be discounted to this year's value, and the money earned in later years will have to be discounted even more this year... the longer it takes, the lower the discounted value. As a result, we get a converged sequence of numbers. By summing this sequence of numbers, we get a finite number. This is the valuation of this asset.

The opposite is true of consumer issues.

Ten years ago, I spent 300,000 yuan to buy a car. If I had to change my car after ten years of driving, it would simply be equivalent to spending 30,000 yuan to buy a car every year.

But the problem isn't as simple as it might seem. The actual purchasing power of 30,000 yuan ten years ago is probably already quite different from 30,000 yuan today.

Assuming that the average statistical inflation rate for the past ten years is 5%, then this is equivalent to:

The first year spent 30,000 yuan.

In the second year, 3 * (1 + 5%) = 31,500 yuan was spent.

In the third year, 3 * (1 + 5%) ^2 = 33,000 yuan was spent.

In the fourth year, 3 * (1 + 5%) ^3 = 34,700 yuan was spent.

...

The tenth year spent 3 * (1 + 5%) ^10 = 48,900 yuan.

As can be seen by substituting the equal-ratio equation, the total cost for ten years is:

S10 = 3* (1 - 1.05^10)/(1 - 1.05) = 377,300 yuan

This figure is smaller than another commonly used estimation method, that is, to directly assess how much 300,000 yuan ten years ago was equivalent to how much today. 30*1.05^10 = 488,700 yuan.

The problem is that it doesn't make much practical sense to revalue 300,000 ten years ago. When there was a demand for cars ten years ago, it was bound to be impossible to invest money elsewhere to hedge against inflation and achieve the goal of adding value of 488,700 yuan ten years later.

However, if this is an interest-free installment, compared to a one-time payment of 300,000 yuan, assuming that the car buyer can sign a ten-year payment contract, only pay 30,000 yuan a year, so there is no need to sell the anti-inflationary assets (such as BTC) in one go, but instead monetize a little every year to pay the installment, then it may eventually achieve a better financial result.

It's important to note that there is one area that is very easy to misunderstand. What I'm talking about here is that car buyers have enough realizable assets, but for the purpose of financial planning, they deliberately don't make a one-time payment. These are two completely different operations; don't confuse this with many people who clearly have no money in their hands, but are forced to pay in installments or even take out a loan to buy a luxury car that exceeds their ability to pay.

Installments are just a financial instrument. There are different uses, and the effects vary widely. It's like a kitchen knife. Some people use it to make a good dish, but others only cut off their fingers.

In the example above, the core difference is that the former's assets are inflation-resistant and will outperform inflation over time; the latter can only be repaid by expected future wage income, yet their wage increases are often fricted by inflation.

Statistics on inflation are not enough to reveal the truth. Perhaps we should look at the growth rate of social money in the broad sense of the word. Over the past 20 years, our broad monetary growth rate has basically been above 10% per year.

By replacing 5% in the above equation with 10%, we get another data:

S10 (M2) = 3* (1 - 1.1^10)/(1 - 1.1) = 4781,000 yuan.

The direct assessment is 30 * 1.1 ^ 10 = 7781 million yuan.

Nice guy. In other words, if you held an asset ten years ago to preserve and add value (such as real estate), if today's market price is no 1.6 times higher than ten years ago, it's all considered a loss-making transaction.

This means that a house bought for 10 million dollars ten years ago is considered a loss if it is not sold for 26 million today.

And if you open your eyes and take a look, it looks like housing prices have returned to the level they were ten years ago?

Also, take a look at the BTC price in September 2015. It was about less than $250. Today it's $111,000. A 443-fold increase. The compound annualized growth rate is 84%, far exceeding the broad monetary growth rate of 10%.

So I thought more about shelf life.

We usually learn that one of the most important abilities of money, as a store of value, compared to other commodities, is that it is not perishable. (And the overspending of money is just a kind of corruption)

In other words, it can be stored for a long time, and the shelf life is very long, even, almost infinitely long compared to the limited life of humans.

But the teaching chain thought of another meaning of shelf life from cars. Not only is it like food that can't be produced for a few days, it will spoil, and the shelf life will be fueled. Things that have value for use, such as cars and even houses, will come out with better products to replace the old products of the older generation, thus achieving the effect of speeding up expiration.

Just like the new energy car I bought ten years ago, compared to the latest mainstream models introduced today, it's simply something that should be thrown in the recycle bin.

Suddenly, it seemed even more understandable why Buffett didn't dare to touch technology stocks for many years.

From the perspective of user thinking, it's really cool and powerful to update every year and launch new products frequently.

However, looking at it from the perspective of investment thinking, introducing new products every year to speed up the expiration of old products is simply a disaster.

This means that once the value “stored” on the old product cannot be successfully transferred to the new product, then it is a cliff-style disaster of extinction.

From the perspective of value storage (SoV, storage-of-value), a blockchain digital token that is passionate about continuing to hard fork, continuously upgrade, and even change the core economic model, a story with various technologies and variations that are constantly being introduced, although often interpreted by the media and KOLs as an exciting major benefit, it is difficult to call it a good thing; on the contrary, it is a bad thing.

Instead, it's a digital asset like BTC, clearly positioned as a new store of value in the digital age. From the beginning, as Satoshi Nakamoto said, “Once version 0.1 is released, its core design will remain the same throughout its life cycle” (Satoshi Nakamoto, June 17, 2010; Liu Jiaolen“Bitcoin History”(Chapter 14, section 73). Having the super stable ability of the core design to resist change is the most reliable store of value.

Digital isn't as corrupt as physical goods, but digital assets also have a shelf life. The shelf life of a digital asset lies precisely in the length of time it can stay the same.

It can only have an infinitely long shelf life if it remains the same.

The biggest misconception is that BTC is software. As a result, other blockchains that are easier to improve and introduce more cool features will be mistaken as better software than BTC.

BTC isn't software at all. The greatest value of BTC is not its ability to upgrade software and become better and better at all. The greatest value of BTC lies precisely in its ability to resist change.

The opposite is a move.

People who don't understand this reverse thinking can't understand BTC for the rest of their lives.