WARNING: Bitcoin Will Eat the World

I used to think that Bitcoin was a poor currency, and if someone just made one that was actually scalable and better, then this whole first-gen system would fizzle out, like Friendster or AskJeeves in the presence of better technology.

But no. You see, Satoshi had us all fooled with the title of his paper: “A peer to peer cash system.” FORGET about Bitcoin being a currency. It is a store of value. And it has all the features you’d ever need to store value and not have it be diluted. There is nothing that needs to be improved over and above those features, and that is its killer app: being a black hole of value. Constantly growing versus fiat.

You see, just like gold, Bitcoin is a store of value becaus others say it is. It has reached critical mass and mindshare for “storing value” even from companies now. From here on out, even if a better system arises, if it becomes a sidechain of bitcoin that locks up the coins, then there will be less and less “unlocked” coins, and therefore each coin will be more valuable. Also, bitcoins are constantly lost as dust or misplaced private keys or other things. And so the supply shrinks.

But bitcoin is divisible into extremely tiny pieces (satoshis) so this merely helps one bitcoin get more and more valuable. You can’t kill bitcoin by making something better because even if 1/1000th of it remains, it will actually just be more valuable. The scarcer bitcoin gets, the pricier bitcoin gets, like the Hulk.

Ok so what does it mean for electricity consumption? Here is where the sad part comes in! You see, bitcoin miners are rewarded in bitcoin, and as long as the price of bitcoin outpaces the halvings, mining rewards will grow.

Think about what this means for the cost of electricity. Currently the costs in large parts of the USA are 10x what they normally are. With Bitcoin miners consuming more and more electricity, this will become the norm for nearly everyone hooked up to the national grid.

(Continued in comment below.)