These days I was watching a really interesting video on YouTube, a discussion of Prof. Jordan Peterson with Dr. Saifedean Ammous about Bitcoin. Incredible story, but one segment left me confused.
Dr. Saifedean Ammous is an expert on Bitcoin with a PhD from Columbia University, and he is the author of The Bitcoin Standard, a book essential to understanding the economics of Bitcoin. I started watching the 2-hours long video by chance, after midnight, and could not stop until the end.
I have learned a lot, this is a fascinating story about money and about crypto currencies in general, but the focus is on Bitcoin. The man speaks nicely, and Prof. Peterson was summarizing his main points for the audience. However, there is a part that left me confused.
Here are a few sentences from the video, these are perhaps not the exact words, but I am sure I have captured the meaning:
JP: …does that mean that bitcoin is a very good of … making cheap electricity much more available?
JP: That is a weird thing.
SA: It is very weird.
Then the conversation continues:
SA: For the first time in history… we have a way to sell the energy that is location-independent. … A lot of places have a lot of energy, but it is expensive to get that to population centers…
JP: So you do need wires?
JP: Jesus, that’s weird.
SA: With Bitcoin you just need an internet connection, you get bitcoin miners to where that energy is and you can monetize that energy and turn it into bitcoin…
JP: …Is that deflationary with regards to electricity cost?
SA: I think so…
JP: ….I just can’t believe that is true…I think I must be misunderstanding because it seems like you can move the value of electricity magically without any problems with transportation…
SA: Yes exactly.
So you do not need wires? This is where I became lost. What on Earth was he talking about? The whole story is fascinating and he presented it so nicely, yet it looked to me that he ruined everything with this energy episode. Or is it just that I did not understand it properly?
But here is the video, it is best that you watch it yourself. If you really do not have time, the part dealing with energy is after 1:19, so have a look:
It took me some time to understand a bit because I was not aware of the fact that these all computer networks running Bitcoin consume lots of power. So he was not speaking about selling energy to the usual buyers.
This is about energy that Bitcoin needs itself. So it is enough to have a power source anywhere and then run computers in the usual way. He says ‘you get bitcoin miners to where that energy is’. This means in the middle of nowhere.
The scenario may not look so practical, you need infrastructure for people. But I guess most of miners would do the job remotely, and computing machines with a relatively small number of operators would be close to the power source.
More or less the same is explanation of Michael Saylor in a YouTube video, it is long, but you have this part at 1:22. All in all, this sounds really great.
But what is Bitcoin?
I guess everybody has some idea of what Bitcoin is, but if you really start digging, it may be hard to understand it. According to Wikipedia, Bitcoin is a decentralized digital currency network, so there is no central bank or administrator and it operates as an open-source software. Bitcoins can be sent from one person to another on the peer-to-peer bitcoin network.
As Dr. Saifedean Ammous nicely says in the video, nobody has a master key to control it, there are only users. It is immutable, decentralized, and the amount of Bitcoins is limited.
The most mysterious part of the story is related to the person who invented it in 2008. The person’s name is Satoshi Nakamoto, yet nobody knows if he really exists or if he existed. Some speculate that this is about a group of people because the whole system is so genius that people cannot believe one person could have it invent all.
Dr. Saifedean Ammous says in the video that it does not matter, even if he would suddenly appear he would not be able to control anything. The system works with or without him.
Now, this is unrelated, but it reminds me about Grand Inquisitor story from Dostoevsky. He arrested Christ in Seville and then he had a long monologue with Christ in a prison cell. Its final point is very roughly something like this “Why did you come back. We are doing fine without you. Go and do not come ever again”.
In case you want to hear more about Bitcoin, here is a video from the Bitcoin site, my understanding is that this is not an official site of Bitcoin. Confusing, as usual with Bitcoin.
If you want it directly from the source, here is the original paper by Satoshi Nakamoto where the basics of the Bitcoin are described. Thank you for reading. It will be great to hear from you, there is a comment box below, so let me know what you think. Have a nice day.