Everything in the universe (that can be observed) is ultimately subject to the laws of physics. This includes everything from phenomena that can be observed at the cellular and molecular level to what we can observe in the most distant galaxies. At its most basic level, this is centered around energy and energy as a state of matter, something that cannot be created or destroyed, only transferred between entities (First law of thermodynamics).
One of the least thought about the existence of energy in our world today, until the advent of Bitcoin’s Proof of Work, is how the concept of energy applies to money. Despite this, monetary energy is arguably the most important practical application of energy transmission in the world today because it is a reference to all actions that individuals individually and collectively transmit from our material selves to the world. As a practical example – to build a bridge, it takes work from the people who build that bridge, as they transfer energy in the form of physical labor to build that bridge and expect energy in return in the form of getting paid.
The distinct problem we face today is that the monetary energy of the world is so fundamentally distorted that the signal is completely cut off. Central banks routinely bail out Cantillon insiders and distort the true cost of capital by manipulating interest rates. This has caused all understanding of monetary value to be lost. Monetary energy can function optimally only in a completely free and barrier-free market. The more distorted markets are, the less the ‘realistic’ reference to monetary energy, and thus the more distorted real productivity becomes than that signal.
What this means in practice is that monetary energy can no longer be transmitted reliably through time. Energy sellability is a key factor in not distorting cash energy because I need to know that my purchasing power will be relative to today as it will be tomorrow. Otherwise, it will naturally force me onto the risk curve to try and conserve my cash power.
How do these ideas revolve around physics? As mentioned above, one of the basic concepts of physics is thermodynamics. The third law of thermodynamics It states that the entropy of a system naturally approaches a constant value as it approaches absolute zero, i.e. the lower limit of the thermodynamic scale. Randomness in systems tends to be something that can create order out of chaos. For monetary energy, this means looking for the loudest signal from the noise.
Bitcoin combines the first and third law of thermodynamics. It is a fully fledged system resulting from maximum disturbance. This is not only true in theory, it is true in practice, as evidenced by the state of the monetary world.
Ultimately, Bitcoin will absorb the majority of valuable energy stocks on the planet because it has the toughest monetary properties. Sellability, replaceability, resistance to censorship, and proof of work. The proof of work is most important, as it satisfies the first law of thermodynamics, and thus ensures that the third law of thermodynamics brings the majority of the monetary energy present into the grid.
Bitcoin is not a perfect money system. It is simply the best monetary system the world has ever seen. This is why on a sufficiently long time scale, the majority of the world’s monetary energy will be stored on the Bitcoin network. It is simply the natural laws of the universe that make this inevitable.
The short-term exchange rate will fluctuate, quite often, as the world allocates different possibilities for the eventual accumulation of monetary energy by the most difficult monetary network ever created. But bitcoin does not operate on the basis of a probability function, but rather on a specific basis. The short-term exchange rate represents the discount that the world’s population collectively places on the laws of thermodynamics. However, anyone who understands these basic facts knows that the conclusion is built into the protocol and the emerging systems that develop around the protocol.
While HODLers wait for the world to get busy with them, they can rest easy knowing that Bitcoin’s success is not a human issue, it’s a matter of entropy transfer of energy. The laws we know emanate from these guarantee their ultimate success.
This is a guest post by Mind/Mater. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.