PLAN B, BELIEVE, TRUST, COMPASSION: AN ECONOMY BASED ON BITCOIN AND ALTCOINS V0.1
GRAMMAR-SPELLING REVISION: 8/03/2022
1. We will start by explaining what money is in most, if not all, countries. What is a dollar, a euro, a Bitcoin …?
A dollar is a monetary unit, a piece of paper in which it says that the person who owns it had the right to a certain amount of gold kept in the “Federal Reserve”.
Currently money is fiat, which means that it is not backed by assets (gold or other), only by trust.
Fiat money, fiat, is a currency with no intrinsic value that has been established as money often by government regulation. Fiat money has value only because a government maintains its value or because the parties involved in the exchange agreed on its value.
My point of view is that money is possible purchasing power executed through the exchange of currency, coins, for other goods or currencies; the nuance of possible is important because either party to the agreement may decide that what it has is not for sale, canceling the agreement between both parties, leaving the money useless in that hypothetical operation.
Other relevant points of view:
- “Money is the closest thing there is to a kind of universal motivation.”
- “Money is an information system for the distribution of the workforce.”
2. What is this for?
That piece of paper, those numbers in your bank account, are a wild card value that almost everyone accepts and with which you can buy/access cool things, such as: health, a house, an electric car, a computer, a vacation, food, water, computer services, this article you are reading, etc.
3. What is wrong with this monetary unit itself/the current monetary system (fiat)? Some things:
3.1. There is no limit to how many dollars you can accumulate as they have a symbolic value and can be created by the government at any given time. This does not happen with other things, such as how much water does it fit in a bottle or how much Bitcoin can it be created, since there is a fixed amount for water depending on the bottle and there is a limit of around 21 million Bitcoins that can ever be created. Which solves the problem of inflation* and currency devaluation. In addition, the fact that the blockchain is public allows you to investigate who has Bitcoin by “excess” or by “default” and know what they spend it on.
*Inflation of the dollar: devaluation of purchasing power. Prices increase by increasing the amount of dollars in circulation, devaluing the purchasing power of savers. For example: if there is $10 in circulation and bread costs $1, if the State increases the money supply and we have now $20 in circulation, the logical thing to maintain the proportion is that bread now costs $2, savings depreciate.
Source: https://datahub.io/gavram/loaf-of-bread-price#resource-bread_price
What would happen if we put a limit, even if it was very high, on the amount of dollars per person/company/financial institution? The answer is obvious, wealth redistribution.
3.2. Money does not expire. Poorly preserved food rots, water stagnates and is unusable for human consumption, when autumn comes the leaves of some trees fall off and people who care less about their health die sooner; however, this rarely happens with money. This means that you can store it forever. Although luckily, its value fluctuates until the collapse of the monetary unit in question. Where does this lead us? This slows down the creation of more wealth (cool stuff).
This problem can be solved when money is programmable or with the obsolescence of the technology that allows its use as a value transfer system or the obsolescence of the monetary system itself.
3.3. The value where the dollar and some other monetary units resided was gold. What’s wrong with gold? Gold is a great metallic material, it is ductile, it conducts electricity, it is “beautiful”… But gold has several super problems: gold is not eaten (please don’t @ me on “haute cuisine”), gold is not drunk, looking at a mountain of gold for 10 days is not the most fun, etc. In short, having more gold does not imply having a higher quality of life, unlike having other things: having more free time, more health, good friends, more food, more potable water, more energy, more clean air, better recommendations of the YouTube algorithm, greater synergy, “luck”, when searching for something on Google, better playlists on Spotify/Google music…
Also, to get more gold, a lot of people have or had to work in mines to get a material that is now hardly used in the construction of goods due to its price and is simply beautiful to look at and a status symbol. This has caused damage to the environment and the health of these people.
4. An economy based on Bitcoin. What is it?
An economy based on Bitcoin, would be one in which the monetary unit, a satoshi, “that virtual piece of paper”, will state that whoever owns it has the right to a certain amount of Bitcoin found on the blockchain.
5. Why Bitcoin? Some reasons:
When we solve a problem, we not only have to look at the problems solution, but what incentives/problems that problem creates once it is solved.
5.1. To obtain Bitcoin it is necessary to mine it with electrical energy. Look around your house, what do you see? Maybe a smartphone, a tablet, or a computer and a keyboard; and more things for sure. Most of these things have not been built by hand, they are made by machines. To make these goods, machines need energy. And a large part of those goods that machines have made work with energy, for example: lighting, computers, mobile phones, means of transport, air conditioning, refrigerators…
Carried out in a respectful and responsible way with the environment, Bitcoin can be a very powerful catalyst for the expansion of the electrical energy infrastructure with renewable sources.
Conclusion: without power we have to do things manually and a lot of things we have now will not work. There are things that machines cannot do that people can do, and vice versa.
5.2. Energy is essential for hygiene on a large scale and it is incredibly easy to transform into useful work quickly. When things reach a certain degree of cleanliness they stop transmitting diseases. With what do you clean your body? With what can you clean the floor of your house? With water, (or with a cleaning robot), but for that water to reach your house you need energy, to have a relaxing hot shower it is necessary to heat the water with energy. How do you clean the dishes in your house? If there are few then by hand, but when there are many you may use the dishwasher. Electric power is incredibly versatile, as machines can do things that are currently impossible for us, despite having been us who have designed these machines.
5.3. Water allows for food, but energy allows for food on a large scale and its conservation. The animals and crops that we enjoy or feed on need water to survive, be healthy and strong; (and electrical impulses in the nervous system to be able to feel!). Humans can survive for about 21 days without food. To preserve food, salt was used before, which is where the word salary comes from, today we use the refrigerator and the freezer. If water allows food to exist, energy allows it to be conserved for a longer time and therefore extend life. Furthermore, it is solar energy that allows liquid water to be available for food, since it is solar energy what “works” producing clouds loaded with water; sometimes even afterwards, this water needs to be treated again with even more machines and energy for possible human-animal-plant use.
5.4. Does water allow you to live? Energy allows you to decide what to dedicate your life to and your life quality. At least 60% of an adult body is made of water. The average daily consumption per person in Europe is 150 liters per citizen per day, of those 150 liters we only drink 2 per day. And the average time a person can live without access to clean water is 4 days. Is water the most important resource for our survival? Sometimes yes, when you have quality water; sometimes not, when you need to treat water for human consumption with desalinators or other machinery.
Here it is clear that water is vital, but I do not want to spend 4 hours a day: queuing at the well to get water, the hours to get to the well, the hours to return, carrying it, keeping an eye on it so it does not stagnate or overheat in summer…, as it happened not so long ago, as it continues to happen in some parts of the world. Saving this time, choosing what other activities we dedicate our lives to, living our lives is only possible when there are machines that do other activities for us that save us that effort. How long can you live without energy? How long can you live without the Sun?
6. Why should part of the value of money reside in a cryptocurrency (Bitcoin) or energy (Ah)?
6.1. What is a cryptocurrency? What is Bitcoin? It is a decentralized economic system that is created at the same time as it is made known. I don’t understand, what do you mean? Bitcoin is obtained using software that solves mathematical problems. People dedicated to running this software are called miners, to make a simile, Bitcoin miners are similar to gold miners, but much more versatile. What’s good about this?
As we said before: “when we solve a problem, we not only have to look at the problems solution, but what incentives/problems that problem creates once it is solved.”
You are creating incentives for fast hash* resolution. You are creating incentives so that there are advances in the processing capacity of the chips so that they can do more operations per second. People who are into rendering models, like weather models, or doing simulations, like simulating the effect of drugs on an organism, will know a bit better what I mean when i write that i think this incentive is worth pursuing.
This is interesting if you like science like i do. Physics, as you already know, is nothing more than mathematics applied to the real world. The language of the universe is mathematics.
Anyway, you are occupying a lot of computers, consuming a lot of energy to solve mathematical problems and being given a “fictitious” currency which symbolizes that the network continues to grow and that the incentives posed by this problem are running their course. With Bitcoin you spend your time and resources doing work that incentivizes creating an infrastructure where maybe one day, when the infrastructure is complete, the synergy of the algorithms running on it will save you time and allow you to enjoy life more. Just as it happened with going to the well for water, now, water comes to your house for a small price; now that there are many dishes, some of them can be washed in the dishwasher.
*Hash: is a mathematical function that converts an arbitrary-length input into a fixed-length encrypted output.
6.2. Why can “energy”, Bitcoin, be one of our currencies? Are there problems with having Ampere-hour dollars? What is an Ampere-hour (Ah)? An Ah is a unit of electrical charge, in order for us to understand each other, an example: your smartphone consumes “energy”, this “energy” is stored in its battery. The meaning of the battery capacity of your smartphone, let’s say 3000 mAh, (the m is a prefix that means “milli”, which means multiplied by 10^-3, which is the same as saying divided by 1000), is that that battery can give 3000 mA for 1 hour, which is the same as saying 3 A for 1 hour, 0.3 A for 10 hours, etc. The ampere (A) is a unit that symbolizes current, the current are those electrons, particles, that pass through the copper wires of those things that use electricity to work.
Let’s assume the fact that when you install a Bitcoin farm what you are doing is creating a demand for energy and therefore establishing incentives to build energy infrastructure for the resolution of mathematical problems and incentivizing what Bitcoin represents. This energy has to be stored or consumed somewhere once generated, since due to the discharge curves and the surplus power of some power plants there is energy that is “lost” that can be used to secure the Bitcoin blockchain, infrastructure which will be vital in the future for data processing; or any other use that could be given to that energy that would be useful instead of getting lost somewhere.
Source: https://batteryuniversity.com/article/bu-501-basics-about-discharging
We also see here that storing energy to secure the Bitcoin blockchain encourages advances in batteries, so important and so fundamental for us in our day to day…, imagine that to use your smartphone you had to always have it connected to a plug, it would be a hassle and it would create an incredible dependency, (we had those kind of phones before!). Batteries are cool and give us autonomy.
It is true that we work with potable water and that the origin of this energy could come from non-renewable energy sources that damage water, but it is also true that we do not work with all kinds of water and energy is needed to transform that water into potable water… and we also need food, not just water. We also see here that water can be transformed into energy (hydroelectric plants) and that energy transforms water (desalination plants, sun -> clouds).
7. What consequences would this change have? Some consequences:
7.1. The long-awaited economic and political unification of the world. Being a decentralized system that can hardly be controlled by governments, it will be a currency accepted by all those who want to accept it and of legal tender afterwards maybe; this would lead us to a true globalization, one in which everyone’s wages are paid in the same currency. Personally I think that humanity would unify “again” under a cryptocurrency, most likely Bitcoin because of the incentives it raises to solve and that it is worth trying this goal. There are other cryptos that are also cool and fun, but this is not an investment analysis article.
7.2. Conducted responsibly Bitcoin incentivizes:
• The creation of energy infrastructure on a planetary scale: renewables and energy storage systems.
• Advances in electronics and catalyzing quantum computing.
• Setting up your own mining center, which, as we have said, encourages the creation of electrical energy at some other point; and, it generates thermal energy that could be used in some areas of the Earth, it depends on the country, it depends on the season.
• The monetization of the internet.
• Incentives to increase TFLOPS (FLOP (Floating Point Operations Per Second), graphics card performance capacity), TFLOPS is a direct mathematical measure of a computer’s performance.
• The creation of the infrastructure for General Artificial Intelligence (AGI). “The biggest lesson that can be read from 70 years of AI research is that general methods that leverage computation are ultimately the most effective, and by a large margin.
Source: https://www.theverge.com/21346343/gpt-3-explainer-openai-examples-errors-agi-potential
7.3. The point of creating an infrastructure for an AGI is known as “the singularity”. It is said that we cannot foresee what will happen after this point, we cannot know what it will feel towards humanity, we can only hope that it will feel compassion or a kind of indifference; and that in addition to its own objectives it can help us with ours. And if not then we will have to expose the mining centers to rain and clouds and destroy the infrastructure that we once built in its name; I hope this never happens. After reaching the singularity, it remains unknown what role AGI will play in the future of humanity.
7.4. The fight against climate change would accelerate. If the mining of Bitcoin with “renewable” energy is properly incentivized, we are betting on increasing our energy infrastructures, we are creating economic incentives to solve this problem. Here are some maps where you can discover how beaches, towns and houses on the coast disappear if we do not stop climate change:
http://www.nationalgeographic.com/magazine/2013/09/rising-seas-ice-melt-new-shoreline-maps/
In addition, as soon as that ice begins to melt, a cascade effect appears that accelerates the process, a lot of marine species would die. Encouraging renewable electricity generation centers with this economic incentive almost always makes sense.
7.5. The golden age of data is supposed to allow you to manage resources better than anyone without access to the data. An optimal currency reinvests the capital that is not working continuously in projects with maximum ROI (Return On Investment), this is possible with Machine Learning technologies, data collection and data processing centers, such as those promoted by coins based on PoW (Proof of Work).
8. The transition. What are the steps towards a Bitcoin-based economy? Some steps:
8.1. What about my money? Do we have to reset the system? Yes, a little bit, yes. A system in which the body that issues the currency is not able to control its maximum “issuance” becomes a tyrant and ends up issuing much more currency and much more debt than can ever be repaid. A system is needed in which the maximum amount of currency is capped, (perhaps momentarily provided there is no significant population increase or expansion to colonies outside the Earth), immutable and electronic.
8.2. How much is 1 euro, 1 dollar… worth then? How is that value chosen? Go to your favorite cryptocurrency exchange and see what is the exchange rate of your favorite cryptocurrency against 1 euro, 1 dollar, 1 yen, 1 yuan, etc., mine is Bitcoin for the reasons that I have commented, for the incentives that it encourages, but you don’t have to choose the same one, there are also other cryptos that I like and have caught my attention.
8.3. What about government financial entities? To avoid the collapse of the current system and make a clean transition, the first thing to do is… let’s take an imaginary example to simplify the calculations, your country bank keeps 100 kg of gold, 1 kg of gold currently costs, Spain 16:06 (5/26/2017), 36433 euros. What happens when the Bitcoin based economy comes into play in a clean transition? Well, those 100 kg of gold become 36,433 euros*(Bitcoin/Euro exchange rate) = X Bitcoins. And now financial institutions/banks/energy companies/governments are in charge of maintaining the Bitcoin network and promoting its incentives.
8.4. What about the companies that own energy? They merge with the banks. We could say that they are the new banks. As we have seen so far, energy and water are the heads and tails of the coin with which we function, especially the energy that has freed us so much throughout history. (In addition, I would like to emphasize that everything is more complex than what is represented here, this model presupposes a planet with gravity and characteristics that are enviable for others that do not yet harbor life.)
9. I think I have found a bug in your system. There is something that I do not understand. You have missed something important.
9.1. First reread it a few times, if you still do not understand it, comment below, someone will explain it to you. If there really is an error, an incongruity or there is some important detail that I have overlooked; I will correct it in the article. I have tried to make it as simple and understandable as possible but it is a complicated subject, so do not be extremely fussy about technical details.
10. You have convinced me, what do I do?
10.1. In real life, not doing things leaves things as they are. We need to attract the attention of ordinary people and other people who are having serious problems with the inflation of their currencies and their purchasing power; and tell them that a better system is possible and that it is already working. For example, in El Salvador, Bitcoin has already become legal tender. How can we achieve this? Like this post and share it or copy the link on your favorite social network.
10.2. When do I buy my favorite crypto? I don’t know, if you like what it promotes, any moment is good. (Make sure you have your own private keys and they are not from a 3rd party).
10.3. When to sell it? I don’t know.
Thanks for your time, see you soon!
P.D. Bitcoin may be a specialized ASIC infrastructure to prevent AGI GPU rigs from going rogue and messing up with the global economic spreadsheet.
