A Bull Case For Bitcoin

TLDR below. This is not financial advice.

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Introduction

The growth of GDP historically and the availability of energy historically are pretty much one to one. Universal basic income is the idea that everyone gets some amount of money to be used and spent in whatever way they want. In this article, we see how we allocate people energy instead of some form of currency as universal basic income.

Economy is Energy

If you overlay charts of the growth of GDP historically and the availability of energy historically, you will see that these things are pretty much one to one and the economy grew very slowly over millennia. This is because we were fundamentally limited. We figured out how to harness solar but really only in the form of crops. We could harness wind but really only for transportation and for manufacturing, and similarly for hydro. Then fossil fuel came along and changed the game through providing cheap, abundantly available, storable and transportable energy.

Traditional Energy Sources

Money evolved as a form of energy storage long before bitcoin came on the scene. A farmer stored energy in the form of crops in the field which they then took to the market and delivered that energy to somebody else who gave them money for the crops. In effect, the money that the farmer was then holding in their hands was essentially a form of storage or exchange of stored energy for money. Initially, you could only use the energy you generated for yourself. But this evolved, because it is obviously way more useful to be able to swap, barter, trade or sell that energy to other people and then be able to get something in return and re-exchange for energy down the road.

Renewable Energy and Bitcoin

Today we are transitioning our economy to being essentially all-electric and therefore need to generate vastly greater amounts of electricity. Electricity generated from renewable sources like wind and solar has by far the cheapest cost of production today, but for the electric grid to function it has to be balanced, meaning that supply and demand have to be roughly equal at all times. You also have to consider sources of available generation. For example, the central plains in the U.S such as those in western Nebraska and northwestern Texas, have abundant wind resources. You could build windmills in Nebraska that generate lots of electricity but there’s no grid really to connect it to. There is not enough economic activity and infrastructure in that part of the country to make that investment pay off. However, what you could do is to attach mining rigs and build that infrastructure and mine bitcoin in that part of the country to create money for the miner, and then that money can turn around and be used to purchase energy in other places and maybe even in other forms but most likely in the form of electricity somewhere else.

Bitcoin Mining and the Grid

Essentially for an electric grid to stay up and for it not to blackout or burnout or for transformers to start exploding on the line you have to keep the supply and the demand in pretty close to perfect balance. The grid is basically like a matching market to match all the suppliers with the people who are demanding. This is more of a physical property of electricity and not an economic rule or a regulatory rule. The reason is that electricity simply will not tolerate being imbalanced. The sum total of what all the suppliers are putting out at any moment in time (whether they are wind farms, solar panels, coal plants, or nuclear plants) has to closely match every consumer’s television, every factory’s assembly machines or every office building’s lighting demands. What is on the left side of the equation has to be pretty much equal to what is on the right side of the equation.

Batteries

Charging batteries is going to be an increasingly common use of that supply and as a form of storage for a later time.

We can tap into the abundant creation of energy through solar, wind, and hydro. What we are looking at right now is to increase the energy capture and energy storage so that we can use this energy in the future.

However, solar, wind, and hydro (to some extent) are less predictable. If the sun goes behind a cloud or if the wind dies or picks up then it makes this balancing act more challenging. The grid operator has to work harder when their electricity supply is coming from renewables because they are less predictable and so as a result you want to have more batteries or more ways of storing excess in times of excess, and you want to be able to discharge that storage in times of deficit to keep the equation balanced. You really have to open your mind to see it this way, but, in a sense, bitcoin can be thought of as a battery or as a form of storage. While there is excess supply being generated bitcoin miners can run their rigs at full steam and soak up all that excess and then when there is a need for shortage, like when the sun goes down or the wind dies, they can then stop doing that which allows the loads that are less discretionary like people running their homes or offices to take priority. This is called balancing resources and they’ve already become important on grids particularly in California and Texas where there are so many renewables already.

Universal Basic Income

Universal basic income is the idea that everyone gets some amount of money to be used and spent in whatever way they want. It is just issued to them every month.

Stored Energy and Distribution

If you think about money as a particular form or storing of economic output, could you not just allocate people energy directly like you can with a universal basic income which consists of a currency of some kind? After all, any given currency is just one form of storage of value so you could give people pretty much any form of store of value as a universal basic income. That allocation of energy could be used for whatever you want. If you have a machine shop that you need to power you can use it for that, or if you want to mine bitcoin or want to allocate that energy to someone who will mine bitcoin on your behalf, then you can do that.

This is intended to be more thought-provoking than practical but again it really drives home the point that energy is money, and if you want to maximize the value of a universal basic income then make it in a form that has more optionality and has a greater variety of ways that it can be applied or used.

Using Bitcoin as a form of Energy Distribution

There are times when the renewable grid is generating more electricity than can be used and this is happening more frequently. There is a concept called grounding where all the excess electricity that is being generated has to be jammed back into the ground and goes unused. What if you were to simply take all of that grounded electricity that is literally of no value to anyone and is being thrown away and use it to mine bitcoin and then distribute that bitcoin to people based on some allocation of need or however you want to allocate it.

If people get the bitcoin allocation then they could convert that into a stablecoin that is tied to their country’s currency so that they do not have to deal with the fluctuation in purchasing power that might come from continuing to hold bitcoin.

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