Bitcoin is money for energy
In this section I will talk about How gold, fiat, and bitcoin arise. And how each of them is attributed its value. It is important for us to understand the value of each currency and its origin, as well as how it is stored and transmitted. This allows us to find out how volatile its purchasing power will be over time.
Deficit, resistance to digital censorship and purchasing power of energy are three attributes by which each currency will be judged.
Gold
The earth is endowed with a finite amount of gold. To get the valuable metal, we humans dig it out of the ground. Then we take the mined gold ore and process it into shiny ingots and jewelry.
Gold mining has evolved over time. In the beginning, people used their own muscles to dig it out. Then we started using horses and oxen for certain mining jobs. Then our technology improved. We were able to go underground to mine more gold. We started using steam and then hydrocarbon-powered machines for mining.
Gold is definitely an energy derivative, but the energy source is not constant. It used to be people or animals burning kilocalories. Then there were cars that burned diesel fuel instead, they “create” more gold. There is no single energy derivative that is directly related to the price of producing the precious metal.
Gold is a physical commodity. To use it as money, you have to carry it from point A to point B. However, in the digital world, we can create certificates or derivatives representing gold while the metal itself is stored somewhere in a warehouse. The problem with gold certificates is that you have to be sure that the person who issued you the certificate will really have your gold when you go to redeem it. It is impossible to constantly audit whether an issuer has the gold it claims to have.
Hence, for gold to be digitally effective, you must rely on a trust cartel member (e.g., banks and governments). In that sense, digital gold is not immune to censorship.
Fiat
Fiat is created when the government decides that a previously worthless thing is now money. U.S. government (USG, US government) issues dollars (USD). The dollar is pure fiction printed on paper cloth. But authorities have mandated that all legal transactions within America’s borders be conducted in dollars, and this creates a demand for the currency. Since most of the new dollars are created virtually – t. е. government digitally credits and debits commercial bank accounts – not by physically printing banknotes, its creation itself requires almost no energy.
The value of the dollar or any fiat currency depends solely on the credibility of the government issuing the invented money. The problem with trust is. It does not guarantee that if energy consumption per capita increases, the level of reliability of the authorities will increase.. A government can spend a lot of energy or have a lot of natural wealth, but be extremely corrupt. So it would be foolish to trust the government to be able to maintain the value of fiat currency in energy terms. There are two examples of extremely rich countries with extremely insecure currencies – Myanmar and Zimbabwe. Politics are more important here than the material wealth of a government when it comes to valuing its currency.
This means that fiat currency will not have any energy value over time. And it is impossible to predict objectively which political form has the greatest longevity.
Large-scale human civilization is only a few thousand years old. This period of time is not even a speck of dust compared to the history of the universe. And during this time we experimented with various forms of political organization. None of them has yet been proven to be infallible.
Fiat can be stored physically or digitally. The world is now in a transition period where we have paper money and digital fiat tokens. I believe that most countries will give up paper money within the next decade. All fiat currency would become digital and move instantly across some payment network. It would be managed either exclusively by the government (e.g., CDBC), by private banking institutions (e.g., JPM coin), or by public blockchains (e.g., ERC-20 or Tether). Digital fiat is just as impervious to censorship as paper money. That’s because, in practice, the government controls its issuance and terms of use. A country can change its rules whenever it wants.
Bitcoin
Bitcoin is mined by computers solving complex puzzles. Miners buy ASIC chips and, using electricity, mine the coins. It’s that simple. There is no other way to create bitcoin other than by consuming electricity.
The network has set and continually confirms that there will be a limit of 21 million coins on the network. Bitcoin is the ultimate digital commodity. Being purely digital, bitcoin has no mass. Whether I have 1 Satoshi (1 Satoshi = 0.00000001 Bitcoin) or 21 million Bitcoins, they weigh the same: nothing.
All Bitcoin participants must agree to the rules of the network, otherwise transactions will not be processed. Network rules are publicly available and transparent to all. They can change, but this requires the consent of most miners when checking blocks. And the economic game theory behind Bitcoin helps ensure that participants using the network do not do anything that is detrimental to their own interests. For example, the network will not vote to increase the number of bitcoins because it would destroy one of the key principles of its value (t. е. the fact that it is the ultimate resource). Bitcoin is resistant to censorship because the only way to change the rules is to submit a public proposal to the entire network and pass a majority decision. There is no single entity that can arbitrarily change network rules.
Now let’s summarize these three forms of money and their attributes.
Deficit:
Gold is a limited quantity on Earth, but an unknown quantity outside of our planet. When we start mining asteroids, the recoverable gold reserves will increase dramatically. What will happen to the value of the precious metal at this point in the not-too-distant future?
Fiat – has an infinite supply. The issuing government can create as much as it wants, virtually for free.
Bitcoin – has a finite supply forever and ever.
Digital censorship resistance:
Gold is a physical commodity. The only way to use the digital representation of gold is to trust a centralized entity to issue gold virtual certificates. Digitally, the asset is not resistant to censorship.
Fiat – can be either physical or digital. Digitally, because of government oversight, it is not protected from censorship.
Bitcoin is an exclusively digital asset that is resistant to censorship.
Powerful energy:
Gold – can be created with a variety of energy sources. Consequently, there is no single energy derivative that exclusively determines the value of gold.
Fiat – requires almost no energy to create and retains value based more on the policies of its government than on its natural energy wealth. Consequently, it is impossible to know exactly what determines its value now or at any time in the future.
Bitcoin – created only by computers consuming electricity. The cost of electricity determines the value of bitcoin.
The AI Decision Tree
Let’s look at some of the questions AI would ask itself in order to choose a currency and network for transactions.
Can a currency be used in a digital format that is resistant to censorship?
As I explained above, neural networks will need a currency that can run on a blockchain that is resistant to censorship. Only Bitcoin has these qualities.
Bitcoin wins.
Will the currency retain value over time compared to the costs of AI?. AIs must ensure that they can always eat at an affordable price. Bitcoin is the winner here because the value of paper money and gold is not tied to anything specific or calculable. Bitcoin is essentially just a derivative of the cost of electricity.
Bitcoin wins.
Currency is provably scarce?
On Earth, gold reserves are finite, but on a global scale, reserves are virtually infinite. Fiat is not a deficit, because the issuing government can create any volume it wants without any cost. Bitcoin supply is cryptographically provable and limited.
Bitcoin wins.
Does the currency have a proven longevity?
The potential longevity of AI is far greater than that of human civilization. Theoretically, if properly reserved for survival in a hard vacuum, AI could exist for several trillion years before the thermal death of the universe. Human civilization in its present form can only survive on planet Earth. And there is no guarantee that we can prevent the various disasters that will lead to human extinction.
Artificial intelligence should not be trusted by any institution that requires it to be run by humans. After all:
- humans are prone to error;
- It is more likely to outlive human civilization.</nbsp;
In the future, gold and bitcoin mining may be performed by a robot with artificial intelligence. But fiat currency requires the management of governments made up of people. A neural network is unlikely to allow itself to rely on anything run by a human government, so only gold and bitcoin fit it.
The tie between gold and bitcoin.
So Bitcoin is the logical choice of currency for any AI. It is a purely digital, censor-resistant, provable deficit, and its intrinsic value depends entirely on the cost of electricity. There is nothing today that can challenge bitcoin in these aspects.
