Energy Beacon

If you’ve spent more than a few minutes reading about Bitcoin or cryptocurrency online, chances are you’ve seen someone criticizing Bitcoin on the basis of its energy consumption. “The network uses too much electricity” or “Proof-of-work is wasteful” are common variants of this theme.

This is a tempting and reasonable-enough-sounding perspective, at least at first glance. It’s also, surprisingly enough, totally backwards and complete bunkum. Once you understand what Bitcoin as a technology actually is, this can be recognized as a criticism as nonsensical and toothless as lambasting water as “too wet” or circles as “too round”. What initially might have seemed to be a reasonable perspective can suddenly be seen for what it truly is: a subtle badge of ignorance and a sign of “not having quite gotten the point yet”.

So what exactly is this “point” that these critics haven’t grasped? In short: the nexus of Bitcoin, and the ultimate source of its value.

 

The Nexus of Bitcoin

Proof-of-work has the nice property that it can be relayed through untrusted middlemen. We don’t have to worry about a chain of custody of communication. It doesn’t matter who tells you a longest chain, the proof-of-work speaks for itself.[1]

Bitcoin, like any money, is a value encoding mechanism. Unlike the monetary technology that predates it, Bitcoin was built to encode value directly in an open energy-based ledger, integrating the specific allocation of value units (coins/UTXOs/satoshis) at any given moment in time with an objective, incontrovertible, self-attesting beacon of   energy   costliness commitment investment    work    . What’s more, it does this in an autonomously-scaling and niftily self-balancing way; the difficulty adjustment algorithm is able to account for exponential technological progress, providing a universal template and deeply rational framework for the open market to compete upon and operate within. Energy is directly linked to value without involving some middleman or broker in the coupling. Truly leaderless digital money is thus made possible, with the power and authority disseminated through objective, self-attesting competitive encoding.

The profundity of this architecture is subtle, easy to miss, and mindbending. Instead of authority figures unilaterally steering or shaping the future, the system itself behaves autonomously, according very carefully to the rules stipulated at launch. This implies that there’s no “head” to cut off. Yet even without a singular nexus of control, the network is able to reliably converge on a single ledger-state without any out-of-band communications or coordination whatsoever. Once you have a Bitcoin-compatible client and have established a connection to the network, there’s no need to “phone a friend” or involve subjective interpretation in any way; the “real” chain speaks for itself, with wholly-glorious mathematical precision.

This is one of the pillars of Bitcoin and a critical source of its magnificent gravity.

Beacon

 

Apex Synergy and Inherent Convergence

What makes this particularly remarkable (and lucrative, to those paying attention) is that Bitcoin takes this principle to another level by exuding focal gravity across multiple dimensions at once. In fact, this is arguably an entirely unique competitive advantage and value-add of Bitcoin; by being the biggest and most well-known cryptocurrency, it represents “the natural choice” to prospective adopters. In tandem with other irreplicable distinctions (e.g. the Immaculate Conception backstory), these properties of Bitcoin mutually reinforce one another; tabula rasa, the first choice is Bitcoin.

 

Satoshi’s Take

In 2010, when accusations of “thermodynamic perversity” were levied against Bitcoin, Satoshi pointed out with characteristic sageliness:

It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange.

I think the case will be the same for Bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste.[2]

 

Others’ Takes

In this cosmically uniform, common energy-value system for all humanity, costing will be expressed in kilowatt hours, watt-hours, and watt-seconds of work.

Kilowatt-hours will become the prime criteria of costing the production of the complex of metabolic involvements per each function or item.

These uniform energy valuations will replace all the world’s wildly intervarying, opinion-gambled-upon, top-power-system-manipulatable monetary systems.

The time-energy world accounting system will do away with all the inequities now occurring in regard to the arbitrarily maneuverable banker-invented, international balance-of-trade accounting.

~ Buckminster Fuller

 

Bitcoin is the first example of a new form of life… It lives and breathes on the internet. It lives because it can pay people to keep it alive. It lives because it performs a useful service that people will pay it to perform. It lives because anyone, anywhere, can run a copy of its code. It lives because all the running copies are constantly talking to each other. It lives because if any one copy is corrupted it is discarded, quickly and without any fuss or muss.

~ Ralph Merkle

 

You could metaphorically describe Bitcoin as … the first closed energy system to transmit energy across time and space that doesn’t suffer from loss, line loss, or from battery drainage. It’s a battery plus a network.

Money is stored energy; it’s the apex of all energies, because you can convert anything into money.

Bitcoin is a masterpiece of monetary engineering.

~ Michael Saylor

 

Further reading