Bitcoin Is The Ultimate Representation Of Energy

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“‘But how is [Bitcoin] digital energy; how do you get it back to being energy?’ The answer is, I send a billion-dollar block of it to Tokyo, I run it through an exchange … I convert it back into yen and I take the yen and I buy electricity from the Tokyo Power Company.” — Michael Saylor (WBD431)

While I think most Bitcoiners generally agree with the concept of bitcoin as digital energy, I have seen some pushback that this is not consistent with physics, is just a metaphor or is just plain false. This paper was written with the intention of arguing that all money is a storehouse of energy, and that bitcoin is the best money. I began to see interesting parallels between violence and love as alternative ways of channeling energy. So I expanded the scope of my paper to include these thoughts.

First, let’s start with energy. What is energy? According to Britannica:

“Energy, in physics: the capacity for doing work. It can be found in a variety of forms, including thermal, electrical, chemical and nuclear. All forms of energy can be associated with motion. If a body is moving, it has kinetic energy. A tensioned device such as a bow or spring, though at rest, has the potential for creating motion; it contains potential energy because of its configuration.”

When it comes to what things humans typically think of as energy, there is certainly something to say for our ability to control or direct that energy. Before the invention of electricity, electricity was not considered a form energy. The energy conversion device is as important as the energy.

Modern humans have invented devices that allow us to use and scale all sorts of different types of energy. Our original energy conversion device was the ability of our bodies to convert chemical energy from our food into kinetic energy, which we can control. Even though we have access to many other sources of energy, human energy is still extremely valuable.

Despite our rather limited energy output, humans have evolved to be wildly efficient. With the assumption that an adult human worker uses 2,000 calories (food) per day, we can calculate the rate at which we can control our own energy:

Love, violence and money are interrelated through their connection to energy. As the digital representation of energy, Bitcoin offers a better store of energy.

Human energy calculation

At a rate of 98.5W, a human who works 40 hours per week, performs approximately 200 kWh of work for their employer in one year. This is a very small amount of work compared to the electrical energy conversion devices. However, if this human has an annual salary of $50,000, the value of their energy output would be $250/kWh. Human energy has a high value due to our ability learn, adapt, engineer solutions, and harness other forms to provide valuable solutions for society.

Note, however, that the energy delivered by each human is exclusively controlled by the individual. I am the only one who can raise or lower my arm. Therefore, I have complete control over my chemical energy conversion device (body). Because of this, humanity is continuously looking for answers to the question: “How do we convince other humans to channel their energy to a specific application?”

Our species has discovered many ways to motivate humans to channel their energy toward a specific task. In this article I will be discussing the following three broad categories:

  • Love (family, friends, God)
  • Violence (force, threats, war)
  • Money (barter, metals, fiat, bitcoin)

Love

Love has evolved as part of human society and is the reason that parents choose to use their energy to meet the needs of their children. Because people who are motivated by love to work together to achieve the best outcome for their children’s lives, love maximizes human energy efficiency. Love is a voluntary, decentralized way to channel human energy. Each person in society has the right to choose to love or not. Love cannot be forced.

However, love is very challenging to scale. One possible reason for this could be related to Dunbar’s number, which is a suggested cognitive limit to the number of people with whom one can maintain stable social relationships. I believe that humans can scale love beyond Dunbar’s number through a connection to God. However, I will save my thoughts on this topic for another day.

Violence

Violence, or the threat of violence, can also be used to channel human energy. The evolution of life on the planet has seen violence used to control energy. Violence scales is one of the most effective ways to force human cooperation. Engineering weapons that harness human energy or include more powerful forms can help to reduce violence, such as gun powder, fission and fusion. Violence, unlike love can be stored and stored for future use. This allows you to channel human energy into scaling the threat of violence.

However, violence is a non-voluntary, centralized solution to scale cooperation. Violence centralizes power because they favor those with the most powerful weapons. This gives them access to the most human and innovative energy, which increases their ability to create even more powerful weapons. This centralization has resulted in non-optimal outcomes and is generally an inefficient way to direct human energy. Forcing labor is not as efficient as voluntary labor and centralized decision-making will not be more efficient than decentralized decision-making.

Money

Which brings us to money. Humans were able to collaborate beyond Dunbar’s limit without violence or love thanks to the invention of money. Money encourages people to put their energy into achieving other goals by promising them that they can use the money they earned for their work in the future to help others. Money can be stored and stored for future use, just like violence. Money is a battery that stores human energy. It is charged when you work for someone else and discharged when someone else works for it. Money is therefore a store of human energy.

Unlike violence, money allowed for systems of decentralized decision-making to develop. Money allowed for economies to develop where all humans could participate in determining the labor value. Markets can be used to decide what society needs. Each person decides how much they will pay for a product or service. Money is a much more effective scaling solution than violence for motivating people to work towards a particular goal.

However, all forms of money can be corrupted through violence. Violence can also be used to steal money and life. When violence or the threat of violence is used to control human behavior, decentralized markets can become centralized. In order to gain wealth through violence, governments had to physically seize money from citizens or other entities. After the discovery of nuclear weapons, the threat of violence and the costs of war began to reach unimaginable levels, governments began to rely more heavily on money printing to continue acquiring wealth. The ability to print paper money changed the way governments could acquire and use money. By increasing the number of monetary units, all existing money in an economy is devalued and transferred to the entity that controls the money supply.

Note, however, that the amount of work that can be done with this stolen value will decay over time due to price inflation. The decentralized market pricing mechanism will take the new money into consideration and raise prices according to how much each individual values their human energy. The opportunity to influence the value of each person’s labor by forcing them to price goods and services on an ongoing basis is also available to participants in an economy. For example, if a population is depressed, it may result in participants putting less value on their work. This will lead to lower relative prices for goods and services following an inflationary event. If wages don’t keep pace with inflation, it can be seen as an indicator that market participants are putting less value on their energy deployment.

Although governments may earn money through taxation by providing services determined to be valuable by their citizens, i.e., protecting physical property rights, the majority of monetary energy controlled by modern governments is stolen primarily using the threat of violence to maintain their control over the money printer.

Enter Bitcoin

Users of bitcoin — like users of all other forms of money — can be subjected to violence, or the threat of violence, as a means of forcibly acquiring their wealth. The violence required to forcibly obtain bitcoin from someone who has their private keys must be used with extreme precision. For stealing bitcoin, bullets and weapons of mass destruction are not effective methods of violence. I argue that the violence required to forcibly obtain bitcoin doesn’t scale as well as traditional violence. Bitcoin is highly resistant to theft via violence. It is also impossible to steal bitcoin’s value via supply inflation. Although bitcoin’s supply is increasing over time, although at an exponentially decreasing pace, the inflation rate is known and can be accounted when pricing goods or services. Further, there is 100% market consensus on what bitcoin’s supply inflation will be used for. The new bitcoin units are used only to subsidize payments to miners for their security and transaction processing services.

During the early stages of bitcoin’s existence as money, all bitcoin holders contribute to Bitcoin’s security and transaction processing budget via an exponentially decreasing inflation tax. Currently, about 98% of miner revenue is supplied by Bitcoin’s 1. 74% annual inflation rate, i.e., block reward, which will be cut in half approximately every four years. The future security budget for Bitcoin will be entirely paid by market participants who transact on the Bitcoin network. The block reward is a temporary measure to subsidize security while Bitcoin’s youth is still young. It would be more accurate to consider this form of taxation a collective payment for a valuable, not theft-related service.

In conclusion, humans have created many energy conversion devices to achieve our goals. Humans are still one of the most valuable, flexible, and efficient sources of energy conversion. Controlling the flow of human-supplied electricity remains an integral part of human civilization. Each person controls their own energy but we can all be motivated to work together using love, violence, and money.

Historically, love has failed to scale in comparison to violence and money. Although violence has been proven to scale, it is not efficient and does not optimally guide human progress due to the centralization of power. Money is a more efficient way to channel human energy. However, it has been vulnerable to violence at scale. Inflation can also make fiat-based monetary units easily stolen. Bitcoin is a new type of money that can’t be forcibly obtained using violence at large scale and cannot be stolen by inflation.

Bitcoin represents an opportunity to protect money from the influence of violence, abolish inflation without consensus and restore high quality decentralized market signals. These benefits will take time to be realized by society as bitcoin is still relatively young in comparison to other money forms and is not widely used across the globe. I believe that if more people understand that money is energy, then they will demand better money. When they do, bitcoin will be there for them.

This is a guest post by Freedom Money. Freedom Money has guest posted this article.

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