Bitcoin has the potential for a positive feedback loop

[Accardo]

A positive feedback loop is a biological term Satoshi used to classify bitcoin, 14 years ago, which convinced me that Satoshi was/is a Full-time scientist; other than just cryptography, he knew all sciences, the human brain, neurology, etc. Because, he studied how the human brain works, he exited his product without fear, understanding that it'll strive without his presence or marketing efforts.

What is a feedback loop? According to biology online; feedback loops are biological procedures that help to maintain homeostasis in the body. This occurs when a product or event occurs, and it alters the response of the body.

Feedback Loop is classified into two parts; Negative and Positive feedback.

In Satoshi's statement, he mentions only one, positive feedback, which is defined in simple terms as an increase, while negative feedback is a decrease. In this thread, I want to imagine what Satoshi was thinking before making his statement, was he only bullish? No, and partly YES. He only made things simple for us to understand that when purchase decrease, the value of bitcoin would decrease too. So, Satoshi saw bitcoin as a body that changes when an event occurs. Linking back to the definition of the feedback loop. In simple terms; bitcoin responds to what happens in the world. The same applies to the people that invest in bitcoin.

For instance, when a hack occurs in the market, bitcoin perceives the danger, and a negative feedback loop is triggered. What does negative feedback mean in contrast to positive feedback? Negative feedback shows resistance to the alterations because it works to maintain the mechanism of the body to its actual state and reverse the change. The market would drop in price, and bitcoin would try to stabilize its price again. In the same way, people would stop purchasing bitcoin, which helps to even the write-up by Satoshi, it'll increase in value as more people keep purchasing. Contrarily, it'll decrease in value when the number of buyers decreases.  


Positive feedback Loop

A simple example is given using the ripening process of fruits to explain positive feedback loops. This helped me with the reality of why Satoshi grouped the market into seasons, bull and bear, just like in fruits. A tree like a Mango has its season of bearing fruits then it ripens and overripe. Aside from the positive feedback loop that sends ethylene to help the ripening process of fruit, one thing happens with humans, nobody nears a mango tree when the fruit is unripe until it ripens, a lot of people would be under the mango tree trying to plug it.

Fewer people care about bitcoin when the price is trying to stabilize, but once it triggers and hits a new ATH the world will start talking about bitcoin and lots of investors rushing to buy and hold. Meaning that the human brain is also waiting for more people to buy bitcoin before they can buy. "Which could attract more people to take advantage of the increasing Value"

In a nutshell, Satoshi already studied the human system and the emotional intelligence of people and then moved on without being bothered if his invention would progress or not. And it worked as he said it, more people more value. He didn't see a bitcoin that would experience Negative feedback, that's why he stated positive feedback, it'll keep increasing without stabilizing; WHY I SAID PARTLY YES ABOUT SATOSHI BEING ONLY BULLISH. But, centralized bodies and other factors like war, pandemic, bans, etc now caused negative feedback to occur, and still, bitcoin is working hard to resist and stabilize the alterations. What an innovation!

Share your ideas, What do you think about the keywords "positive feedback" Satoshi used to explain bitcoin.

Cheers.


https://www.biologyonline.com/dictionary/positive-feedback

Photo was taken from @Rizzo twitter handle

[Baofeng]

Regardless of the term though, and if we are going to quote a source, it's better be directly from Satoshi himself.

And to put everything in perspective, here is Satoshi's post about "positive feedback loop". He uses this term as a reply to this 2 questions, and there subsequent back and forth discussions.

http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source

[tranthidung]

Satoshi Nakamoto thought that Bitcoin will have a dead ending or very huge successful ending. Since 2009, it seems that we have been witnessing a second scenario in the prediction of Satoshi Nakamoto.

It is another expression of opinion you shared.

Right.  Otherwise we couldn't have a finite limit of 21 million coins, because there would always need to be some minimum reward for generating.  In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes.  I'm sure that in 20 years there will either be very large transaction volume or no volume.

[franky1]

that quote was based on the solo mining of single user= single CPU
where by the more users = more hashing = more competition for units of coin. thus increasing cost thus increasing price

however. now we have asic farm mining (users with multiple devices)
the cost and thus the price can increase without needing "more users"

thus if there are more users and more miners and more miners with more rigs. the cost can move up even more(multiplier effect) compared to the olden days of solo mining on 1 cpu=1 user philosophy the olden days

[DdmrDdmr]

It may be good to see the comment reference in the OP in its original context, whereby the quote is part of a larger post where Satoshi tries to explain why bitcoin is limited in terms of ulterior amount, and conforms part of a narrative used when comparing bitcoin to precious materials.

See:
http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source?commentId=2003008%3AComment%3A9562

The description probably has long term in mind, rather than a short term hype. The term "users" seems to suggest that the core value may be increased as a by-product of usage made by users, as opposed to hodl and or trade which seems to be the main driver now.

[Accardo]

Regardless of the term though, and if we are going to quote a source, it's better be directly from Satoshi himself.

And to put everything in perspective, here is Satoshi's post about "positive feedback loop". He uses this term as a reply to this 2 questions, and there subsequent back and forth discussions.

http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source

Nice for your contribution, I read through the link you shared and Satoshi was more concerned with the privacy cryptography brings to e-currency, contrary to what the bank offers which affects the monetary system of this world. However, it seem his goal of maintaining a decentralized atmosphere for the ecosystem failed despite cancelling the employment of a centralized database to trace double spending, yet the centralized bodies like exchanges who joined the ecosystem, have ruined the precious idea of Satoshi, now our documents are at the mercy of hackers, and transactions controlled by a central body; exchanges can decide to lock a customer's account or block a specific coin from being transferred from the exchange to another wallet. It's a nice read, but I didn't figure out how it's related to positive feedback loop, can you brief me?

[Yatsan]

Quite true BUT consider the idea that people engage with this industry when there's a hype or news positive towarda this industry. This somehow breaks the idea. Perhaps right now, many people are just observing how the market will behave on the next days to come. They qon't continuously engage to this industry in a consistent manner. Domino effect is more obvious; market prices will be hyped then possible investors will be interested. Consistency still is lacking simply because volatility is its nature. Profit from riding the waves, is simply the idea which keeps investors coming for it. If we would based on its long time run, then that is indeed true; the market price is continuosly growing.

[mk4]

Quite true BUT consider the idea that people engage with this industry when there's a hype or news positive towarda this industry. This somehow breaks the idea. Perhaps right now, many people are just observing how the market will behave on the next days to come. They qon't continuously engage to this industry in a consistent manner. Domino effect is more obvious; market prices will be hyped then possible investors will be interested. Consistency still is lacking simply because volatility is its nature. Profit from riding the waves, is simply the idea which keeps investors coming for it. If we would based on its long time run, then that is indeed true; the market price is continuosly growing.

While there are definitely lots of speed bumps and hurdle along the way, it's technically still a positive feedback loop when you stretch it to a longer time frame. We can't really expect markets to act efficiently all the time; there will always be overhyped events, black swans, fear, etc. It even happens to traditional markets — whereas both overly positive or negative events can be taken advantage of.

[summonerrk]

All the theories you described above are perfectly confirmed by the fact that earlier there was a trend that the price of bitcoin was growing by the New Year. Is it possible to find a more euphoric holiday for the whole world? It happens everywhere at the same time (not counting Asia). People are more optimistic than ever. Obviously, traders have noticed this and now the market is not so predictable. But the fact remains a fact.

[kryptqnick]

Satoshi's words make sense. Of course, it's not the full picture, as sometimes there can also be negative feedback loops (as the op correctly points out), with people worrying that the price will go down, selling coins, causing the price to go down and others to worry about it more.
I don't know about Satoshi being into neurology and stuff, though, as this seems to me that it's a basic understanding of economics that accounts for human actors and their motives. I also wouldn't concentrate on the idea of a feedback loop and its origins here, to be honest. To me, it's just a phrase to help others understand how Bitcoin's value can grow with the growing demand.

[Accardo]

Quite true BUT consider the idea that people engage with this industry when there's a hype or news positive towarda this industry. This somehow breaks the idea. Perhaps right now, many people are just observing how the market will behave on the next days to come. They qon't continuously engage to this industry in a consistent manner. Domino effect is more obvious; market prices will be hyped then possible investors will be interested. Consistency still is lacking simply because volatility is its nature. Profit from riding the waves, is simply the idea which keeps investors coming for it. If we would based on its long time run, then that is indeed true; the market price is continuosly growing.

While there are definitely lots of speed bumps and hurdle along the way, it's technically still a positive feedback loop when you stretch it to a longer time frame. We can't really expect markets to act efficiently all the time; there will always be overhyped events, black swans, fear, etc. It even happens to traditional markets — whereas both overly positive or negative events can be taken advantage of.

In other words it's a network effect, which works with more people joining the network because others are using Bitcoin. Quite true, the market can be manipulated with pump and dumb to attract investors, it still zeros down with the fact that investors are just concerned about a progressive market. Neglecting the negative feedback caused by real life events, which can be taken as a plus to profit from while waiting for the market to stabilize again. In 2021 I've not experienced before the high rate of people that got interested in Bitcoin just in few months that it held at 50-60k. A good example of what positive feedback does and how it helps the value if Bitcoin.

I don't know about Satoshi being into neurology and stuff, though, as this seems to me that it's a basic understanding of economics that accounts for human actors and their motives. I also wouldn't concentrate on the idea of a feedback loop and its origins here, to be honest. To me, it's just a phrase to help others understand how Bitcoin's value can grow with the growing demand.

Indeed, Positive feedback loop is an example of what Bitcoin looks like which Satoshi used as a term to help people understand better how his innovation works, but he didn't just say it without defending or backing it with subsequent explainations on the network. So, I guessed not sure, but from his level of actions and innovation you would notice that he is a man with not only high IQ but he has a good level of EQ. If he can understand how the people behave and created an e-currency that'll work in relation with the human attitude and how the body works, he must have done a good research on the human brain before embarking on his journey. Definitely, Bitcoin works in similar ways how feedback loops operates in the human body.

It's my response.

[Noruka]

In other words it's a network effect, which works with more people joining the network because others are using Bitcoin.

There is a number of factors involved that can be related to Bitcoin's price. This is where in my opinion you are right. With an increasing number of users does utility increase. With increasing utility, the number of potential use cases increases, which in turn attracts more users who increase utility and so on and so forth. I have observed that myself repeatedly. People sometimes asked me what they can do with Bitcoin. My answer used to be very short as you can imagine, but by now there is a number of things you can do with it and with the number of things constantly increasing, more and more people decided to hold at least a little bit of Bitcoin.

Although this is not a use case anyone has been looking forward to, being able to pay for VPN services in Russia these days still is a use case of great importance. The same counts for other countries that are trying to shut down VPN services. The easiest way is to block traditional payment methods from facilitating transactions for those services. That's not possible with Bitcoin. There are several use cases where political control or oppression is involved. Especially when you live in areas with uncertain social, economic and political conditions, I think it makes a lot of sense to hold some Bitcoin. Doesn't even have to be a lot, but maybe enough to preserve some flexibility just in case.

[Ucy]

This is incomplete without mentioning the head who controls the body.

There are one or few people that control the response to news/events, and what happens afterward. For example, if the general News says bearish but Satoshi pushes a contradictory sentiment with good reasons, then it may not go bearish. These few people are typically the heads. They have the greatest effect on the price movements.
During satoshi days the humans who use Bitcoin were collectively in control, with him or few others(the most intelligent of them all) having greater control. They could determine where they want the price to go. Same is applicable today but the current head has so much power to move the price that nothing on earth can stop it.

So, the positive feedback is basically what the head uses most of the times. If the subjects are reasonably complaining about lack of money/uptrend he makes the price to increase for them to take care of themselves.

To be the head you have to understand Bitcoin really well or better than the rest

[goldkingcoiner]

It would seem we are headed towards a good ending. I agree. Perhaps we have already crossed the main line to a good ending and are already there.

We would still see many people holding the network together in exchange for transaction fee rewards. The question is: can the transaction rewards for Bitcoin fall so low that it would become unprofitable to continue and the entire system would grind to a halt? And can that happen to Bitcoin, realistically?

I think no. As long as people have an incentive to transact their Bitcoin, we do not have to worry. The biggest incentive is total financial freedom. From the government, regulations and banks. Especially if you live in a dictatorial country, you can offer services in exchange for Bitcoin without revealing your identity (as long as you stay away from centralized platforms like banks or exchanges) and nobody can take your money away from you. This way, The government becomes forced to comply with the wishes of their people. Paying taxes becomes optional. It all becomes a question of: do you want your country to prosper? If you live in a good country, yes. But if you live in a dictatorship, you have the choice to stop funding the governments actions. You take the power away from the dictators by refusing taxation and regulation. The governments are forced to bow down to the wishes of the people, not the other way around. Total democratic, anonymous and financial freedom.

Worst case scenario Bitcoin switches to PoS or something else, which is yet to be discovered. The good news is we have over 120 years left until we have to worry about that. More than enough time to plan for eventualities.

[Fivestar4everMVP]

Most times, I wish satoshi was still around on this forum atleast, it would have been a great advantage to not just users of this forum, but also bitcoin and the entire crypto currency market, if satoshi was still around here, I believe this forum would have been much bigger than it currently is, and bitcoin on the other hand would have been far more expensive than it currently is.

But anyways, the entire community will continue to appreciate him. And also learn from all that he wrote before his exit from this space, I've never seen or heard of the term "feedback loop" before, but today, I've seen, and learnt what this is.

[Noruka]

Most times, I wish satoshi was still around on this forum atleast, it would have been a great advantage to not just users of this forum, but also bitcoin and the entire crypto currency market, if satoshi was still around here, I believe this forum would have been much bigger than it currently is, and bitcoin on the other hand would have been far more expensive than it currently is.

But anyways, the entire community will continue to appreciate him. And also learn from all that he wrote before his exit from this space, I've never seen or heard of the term "feedback loop" before, but today, I've seen, and learnt what this is.

How do you know that Satoshi isn't around anymore? That's an interesting point of view and maybe you can tell me why you know that he isn't around anymore?