Adoption Phases | Bitcoin Education

Video Transcript:

if you knew what was going to happen tomorrow with a very high degree of certainty and you could trade upon that perception probability today well you’d be a very wealthy person and that is the entire financial sector seeking to figure out what tomorrow is going to look like and that’s not that’s not too different to the Bitcoin world of things everyone’s trying to understand what we believe tomorrow is going to look like on the financial side on the energy side with compute in the middle now what I want to sort of offer is well there is a consensus around us having sort of three phases of the introduction of a new form of money that is the store of value phase sov that is people assigning value to it and comparing it to other things and storing their wealth in it their time their energy and their savings and the second phase would be medium of Exchange now a growing percentage of the population is holding on to this new form of money well they’re not going to hold on to it forever you could you have that choice to make but You’ probably want to spend it and Bitcoin does introduce a mindset around spending on Necessities versus your your wants your needs are more important than your wants why own five homes when you could just hold Bitcoin instead and live in one one one property is the necessity to live somewhere and the extra four are rental cash flow Investments that people have bought real estate portfolios today because there’s no point saving in Fiat money it just dilutes in value so you move your value out of the money into assets and that is one of the problems of today is everyone’s trying to figure out where to preserve their energy their time in things that that hold value over time and store of value phase right now for Bitcoin is well on the mining side block rewards the amount of Bitcoin mined and freshly issued at the rate of consumption of electricity 95 and in fact 98% of that block is subsidy and only five or even 2% of that is fees and fees are the global monetary network of Bitcoin of people moving their their money around wallets and they need to pay a fee to store the information of their transaction in the next block of the chain and to truly comprehend this you’ve got to understand that subsidy is freshly mined Bitcoin it’s monetary policy in some shape or form and fees are more economic activity some form of movement of money Justified and the payment of a fee there’s some justif ific ation of some form of economic activity whether a good or service is moving in the opposite direction of the the Bitcoin moving from one wallet or another or it could just be people moving their own Bitcoin around but subsidy is something different it’s just freshly mined Bitcoin there is no economic activity it’s just being issued into circulation until we reach the full supply of about 21 million now what this means is from the mining side that if 95 to 98% of all of the Bitcoin that is being mined if there’s no economic activity behind it there is an aspect of speculation but what gradually and certainly it’s going to change that the amount of Bitcoin mined per block per fouryear cycle gets cut in half every four years and fees are slowly on the incline the the continual incre inrease of the amount of fees per block and what I believe is that the the Pinnacle of the store of value phase the the race of dollars flooding into price against Bitcoin I think the the Pinnacle of the store of value phase of the majority of people seeing it as digital gold I believe that when we hit the point where it’s about 80% subsidy and 20% fees is the peak of the store of value phase I believe that the the the introduction of medium of exchange people exchanging their Bitcoin into other things using it as a medium of transferring their value to trade I believe that comes from the energy side of the Bitcoin Network compute power sits in the middle that is that you consume electricity in hard in mining Hardware A6 and you produce compute which produces the next block in the chain all of the miners are producing compute power to find the next block in the chain the energy that they consume independently doesn’t produce the blocks the hardware sitting in its box not switched on that’s not producing Bitcoin blocks it’s compute power the combination of energy and compute processing to find the next block that creates a pricing system of energy priced in Bitcoin and if more compute online the price of energy in Bitcoin drops as in you can buy more energy with your Bitcoin now that is a whole different other rabbit hole that we can discuss in another video but the concept here is that that subsidy in Decline continually till there’s no subsidy per block and the complete change over to the entire network running operationally on fees there’s going to be a point that that interconnects that intersects which is to say that the amount of Bitcoin per block that is subsidy may drop to say well lower than one uh Bitcoin per block that’s freshly mined and the amount of fees per block say going above one Bitcoin I believe that when fees are greater the greater percentage per block than subsidy that’ll be the point the intersect in which we shift into the medium of exchange phase because econom I activity of goods and services moving around being priced and traded transferred through Bitcoin um and through its other Comm Commodities of electricity and compute that would be the the the Tipping Point in my eyes as to that next phase of Bitcoin adoption and beyond that when energy and compute are expressed in a quantity of Bitcoin it’s that that in itself will have an acceleration uh hyperscale deployment of computes everywhere and that is not just the latest most efficient machines but also the older versions of trip chips think of your iPhone the next one comes out the next one comes out it’s faster quicker all these other keywords uh and what’s left is a trail of Cheaper iPhones the new one comes out and all the older versions seem to get lower in priced to the point that you can now buy an iPhone that say 10 years ago was worth £500 or dollars or even a, and now you can be buying them for one/ Tenth or 12th of their price so as the mining side of things races to accelerate and make highly more efficient chips and even on the energy side more energy sourced locally and globally they these innovators at the Forefront of making the next best versions of their Technologies and Commodities well it leaves a trail of Cheaper uh older versions of energy and compute and that is going to be the playing field in which society operates and has cheaper more abundant access to energy and the the use of energy through technology microchips and all of that phase is what in my eyes the medium of exchange phase because with comput sitting in the middle of energy and finance it operates as a pricing system if more compute joins the network it means the Network’s using more energy and miners right now are selling energy when they need when the price on the grid goes higher than what they can turn into Bitcoin why mine 10 cents of Bitcoin per kilowatt if the grid is buying it at 11 cents and in fact at that point you can remove the dollar entirely because two identical mining machines deployed anywhere in the planet roughly the same energy consumption will have roughly the same Bitcoin mind so it’s two different computers that could have two different prices of energy but they produce the exact same thing as the final reward of Bitcoin and if the block rewards are more fees than subsidy at this point in time well you you get this new pricing system in which economic activity stimulates a deeper understanding of goods Services energy Transportation all priced uh in Bitcoin on the cost side of things now that’s is this is one of my most important predictions I believe that when Merchants people that sell things when they can understand their costs in a quantity of Bitcoin they’ll be able to define a price that they’re willing to sell their goods and services in Bitcoin and so we’ve got this pricing of dollarized world of well if if block rewards are three for Bitcoin um everyone conceptualizes right now A quantity of Bitcoin as a quantity of dollars and there’s no economic activity behind the majority of it so it’s going to have this intrinsic connection to the dollar more so until fees are more than subsidy but as we reach that point of fees overtaking subsidy that’s more economic activity of the network itself taking over and as the pricing system of the costs of all the different things of our society namely energy being priced in Bitcoin that’s where unit of account comes comes in that’s when Goods Services markets trade employment contracts when we take over the pricing system uh in comparison to say the dollar or the pound the Euro the Yen when prices are replaced by Bitcoin fat currency is uh not going to last too much longer than that potentially purely for the fact that if the money itself that we have is debt-based money and it was disconnected from gold anyway what sustains the delusion of its value is not some fundamental layer but a an accounting trick that is that all of our time and energy is priced in Bitcoin through employment contracts all of our time and energy is priced in dollars through employment contracts and if if that system gets changed into say a an employment contract that prices a quantity of Bitcoin for your time and energy well that that truly takes over the the final the final stage of of This Global monetary phenomena in terms of time scale it’s all about adoption adoption of users adoption on the energy sector and then adoption of all the other layers in between energy and finance it’s like a horseshoe energy and finance are the two edges of the Horseshoe and everything else of of the economy is in the middle and yeah that full final adoption curve could take I believe store value phase is going to take at least another 10 years that is two more cycles of subsidy dropping and fees increasing to the medium exchange phase of the cost side of our economy getting priced in Bitcoin and then goods and services markets and and contracts priced in Bitcoin this could be 10 years 10 years 20 years who knows um but it I feel what I’m trying to communicate provides a sort of clearer path of how it will happen because you can’t just arbitrarily price something in Bitcoin because it doesn’t make sense but right now electricity is mathematically connected to electricity and when you base things on physics and maths the fundamentals make the the path of prosperity much more clearer and well energy is just going to get cheaper and cheaper the price of energy will never reach zero but it will Trend to zero indefinitely because if you price Global energy against a fixed Supply 21 million units well the amount of energy per Bitcoin will just continually go up over time so your purchasing power will increase I hope this was interesting it’s a different sort of video than I like to make on the hash power Academy it delves in a more uh looking forwards versus sort of describing keywords and going backwards in terms of Bitcoin education but I hope you enjoy thank you