Bitcoin is a store of energy, which changes everything.
This is an opinion editorial written by Shane Neagle, the editor-in-chief of “The Tokenist.”
It’s common to see the mainstream media exploiting Bitcoin’s perceived vulnerability in terms of energy consumption. The Bitcoin network has become all too familiar with this. For instance, in May 2021, Tesla announced that it would no longer accept BTC as payment, citing environmental concerns, effectively causing a nearly $8,000 drop in the price of a single bitcoin in just two hours following the announcement. There are countless similar cases as well.
The main takeaway is that it’s obvious that the perception of Bitcoin’s fundamentals goes beyond the security of the network, the soundness of the code, and the asset’s limited supply. Bitcoin’s energy consumption also plays a significant role, impacting not only the price of bitcoin but also its regulatory framework. This fact cannot be disputed, for better or for worse.
But what if Bitcoin’s energy consumption was actually a positive thing? What if Bitcoin functioned as a “store of energy” that provided an excellent alternative to any monetary system we’ve seen?
Fortunately, the idea of an energy-backed currency isn’t as radical or new as people may think. This concept has been around for more than a century. However, the technology necessary to facilitate such a game-changing development for civilization did not yet exist.
- BlackRock’s Bitcoin ETF is significant.
- AI tools harvest your data.
- Politics interested in crypto despite lack of interest vice versa.
The needed technology now exists and it’s called Bitcoin. Let me explain.
Money And ‘Life Energy’
The evolution of human civilization has mostly revolved around answering one key question: how do we appraise the genuine value of goods and services?
More specifically, how do we assess such value in the most uniform and effortless manner possible?
Consider the era of ancient barter systems, when a uniform system of fiat currency had not yet been conceived. Exchanging crops or livestock for services was common. However, this system was heavily reliant on the mutual coincidence of wants. Consider a fisherman looking to trade his fish, but only for salt which he needed to preserve his future catch from spoiling. Any individual looking to trade for fish must have precisely what the fisherman wanted: salt.
In such a scenario, it’s easy to see how the principle of supply and demand is skewed.
Determining an equitable exchange for unique, non-fungible items poses a distinctive challenge. How do we ensure that both parties are duly rewarded for the energy they’ve invested — their “life energy” — in producing the product or service they’re selling?
This concept of “life energy” refers to the time, effort, and creative energy that individuals pour into their work. Every human has a finite time span that they convert into tangible, productive output — a measurable form of energy.
But in this bartering system, life energy isn’t accurately accounted for. Rather, external factors heavily influence the value of a product or service, frequently to the detriment of the life energy devoted to its production.
Ideally, we need a system that allows for the accumulation and storage of this expenditure of energy — which we can refer to as “surplus energy” — and its associated value.
The advantages here go far beyond the individual who expended such energy. The metaphorical lifeblood of any economy is this concept of “surplus energy.” If this flow is impeded or clots, it leads to a less vibrant, stagnant economy. If it’s properly stored and fluid, it can lead to innovation and breakthroughs that benefit society at large.
If we don’t establish accurate mechanisms, capturing and storing surplus energy or value becomes impossible.
Thus, it becomes crucial to measure this energy output in the most streamlined manner possible, to ensure fair compensation for — and the ability to capitalize on — the energy expended. In this respect, a significant landmark in civilization’s journey was the evolution from bartering to commodity money, eventually leading to the use of portable, interchangeable, and standardized metal coins.
A Historical Devaluation Of Life Energy
The Roman Empire built itself on economic efficiency by minimizing money friction. Its blood was the denarius currency, molded out of the limited supply of precious metals. The limited nature of the denarius allowed for it to serve as a store of value.
Concurrently, the denarius’ portability as a store of value allowed it to spread across every corner of the empire, easily transported and traded by various merchants. Consequently, the economic circulatory system overflowed with energy. As the friction within the exchange of goods and services was minimized, new specialized labor markets could form, which increased productivity and innovation.
During the time of the Roman civilization, they achieved a standardized currency that helped with economic expansion. This currency was portable, limited, and efficiently captured Roman energy into productivity and economic growth.
However, this changed when each Roman emperor desired to expend more energy than the currency allowed, causing them to erode the denarius’ store of value. As a result, the denarius began to falter in its ability to represent people’s life energy outputs accurately, and the silver content of each denarius became smaller and smaller, eroding the currency’s ability to maintain value and purchasing power.
Today, we refer to this as inflation, which is similar to what’s happening with the dollar’s purchasing power today.
The United States can export domestic inflation due to the status of the dollar as the global reserve currency. However, with the increase in debt ceilings, no one knows how long this will be sustainable.
To measure life’s energy outputs accurately, a gauge needs to be fungible and standardized, store value, and be portable. These elements provide people with a tool to transform their limited time and energy into a productive, well-compensated energy output.
Central banks have replaced emperors in controlling the currency’s supply and issuance schedule, negatively impacting people’s ability to capitalize on their expended energy. This is where energy currency comes in, as it removes trust from centralized entities that control monetary systems.
Intellectuals like John Maynard Keynes and Henry Ford have proposed backing money with units of energy, which would help maintain the currency’s store of value.
Bitcoin: An Energy-Secured System Of Energy Transference
Bitcoin utilizes energy to secure trust and create a new form of currency. It is digitally portable and complements the current digital era. Unlike Henry Ford’s vision of an energy-backed currency, Bitcoin leverages energy from any source available, making it decentralized and resilient. The Bitcoin network uses cryptographic proof to secure this new component of trust. Despite the ongoing absence of proper framework when it comes to Bitcoin’s energy consumption, it has the potential to properly capitalize on the use of life energy and benefit society at large. Bitcoin is poised to endure technological revolutions and existential threats, and represents something of a vocation rather than just an asset for speculation and profit. This is a guest post by Shane Neagle, and opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or blockchain.