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Posted January 22.2020
I can’t stop thinking about the striking similarities and analogies among commodities, energy markets, Bitcoin mining and Bitcoin itself.
If you think about it, every single commodity, in order to satisfy a need, needs to be transported wherever it is demanded, therefore it needs to be transported over space.
But whenever a bottleneck arises in the transportation capacity or if the demand doesn’t match in terms of time that of supply, you need to make it travel through time, that is, to use proper storage, minimizing deterioration of this commodity.
Transportation and storage are two sides of the same coin. If transportation’s throughput is limited, storage will need to be large. With most commodities, this is the case. For example, harbours world wide are packed with warehouses where commodities are stored waiting for an empty ship to be available.
If on the other hand storage is limited, as it is the case of electricity, transportation will need to be large (also known as the grid) otherwise you get blackouts (frequently electricity supply shocks).
Commodity money has the exact same considerations: you need it to be good to travel through space and time (and scale, to follow Menger’s own words)
This is where Bitcoin excels: it’s extremely low cost of storage (taking into consideration its low maintenance, low to zero inflation, zero deterioration, etc…) make it “especially well suited for time travel”. No other kind of money except for gold is as good as Bitcoin for value time travel.
Interestingly, most wealth worldwide demands time travel rather than space travel if you compare how much narrow money is worth (good for space travel) with everything else (real estate, gold, financial products, offshore money, etc…). The latter is orders of magnitude larger. Things that are stored for long periods of time are exchanged less frequently, which means the supply is smaller. If the demand is large enough (and demand for the utility of exchange definitely is), the price will be very large.
But this shouldn’t be surprising as the time of a human life is the most scarce resource of all. Our demand to maximize our well-being has as its most important limitation the time we have to achieve things in life. You could argue that with unlimited time, we should be able to satisfy all our needs without the need for cooperation.
But the fact our time is limited can only be solved with a way to make value travel for as low a cost as possible. That is what money is all about. We have never in history had an opportunity to fight limited human time as we currently have with Bitcoin. Unless you agree with the keynesian views that expenditure is all that matters, the ability to save properly and securely over time should help an unprecedented level of progress.
For energy commodities, it is coincidentally interesting that the competitor for its transportation and storage is precisely Bitcoin mining, which turns an energy delivery standard such as electricity into a value delivery standard such as money. That is, it turns one standard (energy) into another (value)
It should blow your mind as much as if I told you I have a device that turns weight into length for example.
This is a topic I’m most interested in and if you have ideas or even theories on how all of this could be linked together, I can’t wait to read your comments either here or in my twitter account (@acrual)