First party hats... and now bitcoin?

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Mar 12 (edited) in Great Videos

I was first introduced to the idea of Economics through a game called Runescape when I was 12 years old.

Runescape features an in-game economy containing money (coins) and items that have prices which are set by the players who build or acquire the items.

You can collect coins by doing stuff and then buy items with your coins from other players.

Party hats (featured below) are one of the few "finite" items in the game, but the coins are infinite, and easy to come by.

As a result of the coins being infinite and easy to come by, and the party hats being finite, the party hats quickly became worth billions.

Why?

1 word: Inflation.

When there's more and more money in circulation over time, players have more and more money to spend.

This increase in available money means players are willing to pay more for the items they desire, including rare and prestigious items like party hats.

And party hat sellers, knowing that buyers have more money, raise their prices accordingly.

What does this remind me of?

Bitcoin.

Bitcoin is a finite item (there will only ever be 21 million of them) like party hats, and fiat currency is infinite (our government has a literal money printing machine) like the coins in Runescape.

Because bitcoin is a finite item like party hats, bitcoin can only grow in price like party hats.

If you watch the video below you can learn more about how the party hats in Runescape grew to be so valuable.

As you watch, you'll see the similarities between party hats and bitcoin.

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