Bitcoin [Geometric] Scaling | Hashpower Academy

Video Transcript:

hello there and welcome to the Hash Power Academy your place to learn just about everything to do with Bitcoin Now the topic of this video is I’m going to introduce you to this lovely diagram that I have been scribbling for a little while which is taking Bitcoin’s design and its structure of how it’s mathematically connected looking at the markets on top but also the discussion of scale that all of these six branches of the different topics the energy and carbon grids and electricity the hardware and heating systems uh networks the internet and hash rate as a digital commodity from the physical world and the Bitcoin blockchain this this data market for you and I to trade and transact but constrain it and secure it in a place that allows us to all trade and transact peer-to-peer And then lo and behold last but not least Bitcoin the actual bearer digital data money And what doesn’t change what will not change from the basics of when Satoshi used some electricity in his own computer in his own little network to produce blocks and stack the first 1.1 million Bitcoin that the system has just expanded and exploded You’ve got mining as an entire industry from two lines on the white paper When when blocks come in faster difficulty increases That single It’s not the exact sentence but that single sentence has birthed an entire industry and it’s all based on efficiency That’s the c key fundamental metric that allows you to survive or die as a minor Mining pools would come about because of the limitations of 144 payouts per day And if twice as many people join the network or another 100 it doesn’t the more you scale it you’re distributing all of the Bitcoin per day in 144 payments blocks And what that means is the frequency between your payments If you if you were a minor early on getting one block per day and then the network grew 10 times in size now you’re getting a block every 10 days What if that goes beyond a month or a year as in your percentage of the network revenue the percentage of how much you’re earning from the network diminishes to such a small amount that the frequency of your payouts is misaligned to your energy bill So now you’re paying energy bills whilst no money’s coming in so to speak So mining pulls of birth from the the the com the compute commodity branch where they they pay miners in in shorter frequencies So they’re aligned to their energy bills and they’re scaling into this entity that manages the block templating of what gets added to the chain Now the long-term scale of this trajectory is countries running their own mining pools I’m sorry That’s what I believe is most likely the outcome because as they begin to figure out all of the intricacies of these c core areas of Bitcoin they’re going to realize that that the truth of the truth of the chain is coming from issuance power and they do not have the ability to coordinate large amounts of energy and compute infrastructure and be highly efficient about it It’s a brutal industry but if you can play the game and you know your knowledge it rewards you very very well Now the majority of the discussion around scaling is always to do with the blockchain the Bitcoin blockchain in of itself and the the fee market the mele where you go in with Bitcoin paying to store information and the miners are producing the blocks to be paid to store people’s information in those blocks plus the subsidy So as subsidy gets cut in half over every four years you’ve got this transition onto an active dynamic fee market and it needs to be stimulated And that scaling is the discussion of all the different layers The layer twos which are more transaction velocity and then the layer threes which I argue will be more informationbased where it’s more of a social layer which is the the true humanto human interaction of all different things that the layer two is the convenience of of fast transactions but all of that trade settles to the layer one But the the intricacy there is we also want as many individuals to be able to pay to store in that layer one and not just be able to afford to to trade in the layer two That’s the self-s sovereignty aspect of things that sustaining that peer-to-peer nature of things as this branch of Bitcoin expands and ex and scales and the energy side of things This is never going to change because we’ve got all of this constraint to 21 million units and each it’s about this collective versus individual uh paradigm put put your shoes in how the network the network at a scale views things and then put yourself in the individual If you individually have an opportunity where you know uh a good source of power that’s just local the industry has left and it’s an old hydro dam or something like that Anywhere that there’s excess energy think of Bitcoin as a recycling system a mcelium network that the participants us humans actively go out in the world and find where there’s excess energy and it can be wirelessly transmitted into money That’s it It’s about us plugging in these wastes that are inevitably everywhere in the world because we always have to be producing more energy than we actually consume because the other way round uh is not very good It’s called a power cut in the electrical grid sense And here’s the thing when it comes to energy systems they’re very large and national scale But the whole aspect of this discussion around scaling is if you’ve not noticed there’ll be some of you that will recognize that uh the layout of this diagram is a little bit sacred and geometric that the discussions that we’ve just had in the start of this video is that the the mining machines they’re changing more efficient different calling system everything’s changing but the one thing that doesn’t change is the brute force efficiency that if you’re not a manufacturer producing a better ASIC computer that consumes less energy to produce more hash rate to produce more Bitcoin You’re out of business Goodbye Efficiency name is the name of the game for this branch With the pulls it’s the amount of hash rate because they’re in a race against the next um they’re in little stretches of of two week sprints that who can who can find the many most blocks before u the reality check of more participants joining the network the difficulty adjustment comes into play on the fee market side of things If you are if you are trading transacting as a bank you need block space which means you need hash rate but you don’t want to be involved in the mining side of things So there is a discussion there uh for anyone that wants to reach out to such ideas in the Bitcoin side of things It’s it’s bare asset It’s it’s money that all of these other commodities are going to be continually circulating and pricing against this digital bearer asset And what that does to our world is all of the energy systems being plugged into this new energy based monetary system that’s operating in this new digital domain that we call the internet that that everyone’s got their brains plugged into but their bodies in the real world I feel like I don’t even feel I have this very high resonance that having a digital form of money that is physically constrained to the real world with a cost to produce just might be the thing that helps say the younger people of society that have grown up assigning value to digital things We grew up playing games and Farmville and I’m going back in the years but in-game currencies and tokens and coins and collectibles we we have that mindset of a younger age to assign true value to these things Whether that’s the right or wrong way to go in in life that’s what young people have as a as a mental model that we grew up with these two worlds to operate in And uh there’s a lot of kids that uh they they seem without life if they’re not plugged into a screen which is very sad I hope that a digital form of money that is connected back to the physical world just might help just might help Um and those that take the journey to to understand this interconnectivity of these two worlds I think that just makes an effort towards um bringing them back into the real world so to speak Um I’m on that journey as well Now everything’s changing in terms of scale So how big do you think we can go how how big this this system of producing energy systems the excess energy recycled into compute to add blocks and settle and secure trade on the other side So Bitcoin acts as this yingyang between energy and money and the circulation and chaos and order truly And and there’s there’s circular local economies with all these different sectors Um and here’s the thing It can scale down as small as a mini miner a battery and some solar panels uh with an internet connectiv internet connection your own node and your own wallet And you are self-s sovereign uh operating across all three areas of energy comput and finance So you can have this I believe people I believe that this will all get constrained back to a single device just like Satoshi did He probably had his laptop produced his own Bitcoin stored the information and wallet all in one But because the network has expanded out into these multi-billion dollar going trillion dollar and that old unit of account terms of things it’s expanding into all these massive industries and sectors and integrating into energy systems in the megawatts to gigawatt scale um it can go as big I believe as the planet in terms of it’s already as big as the planet but the the the reason I say planet is because um our financial system innovated at the pace of the speed of communication because right now Bitcoin allows us to communicate with money data and energy so to speak um at the speed of light And if we were to go to Mars we’re going to need energy infrastructure heating systems and everything to keep us alive But we’re going to need a system where you know the money is not going to be US debt dollars from millions of miles away It’s going to be something more intrinsic to the vital things that will be needed to survive in that new environment on Mars which will be these kind of systems And what that means is that if if there was an ability to have uh Bitcoin develop on Mars it would not be able to coordinate with the nodes here in here on Earth because we’re limited by the communication system that the speed of light the the gap of communication if you send a signal from the U I keep saying about to say the UK from from the UK to Mars that gap in time can be 10 to 20 minutes Now if blocks are being added to the Earth Bitcoin chain at every 10 minutes we you wouldn’t be able to coordinate nodes in another planet So I believe that the limitation of Bitcoin is to the planetary scale which I think’s vitally important And that’s the scale on the big side of things in terms of how in terms of how the system builds out like locally to interconnectivity I do believe that there’ll be a lot of people that that they don’t want to economically mine but they use mining as a system that plugs between I want my own community location I need money because everyone’s everyone’s pondering the idea of not disappearing off into the jungle but being able to build out their own self- sustaining way of living growing organics and all these sorts of things and greenhouse farming in a world that the climate could be a little bit more volatile So you need green houses that can stay warm And so you’ve got this system where energy money and all vital commodities for for human living combined with a system where the excess wastes can be turned into a digital form of money where I have my own computer on my site and you have the exact same computer the other side of the planet But if we have the same computer consuming the same local energy connected to the same amount of global finance the pricing system is standardized whether you are deeply integrated into society living in the city or in the middle of the the jungle that we now have a financial system based on energy that standardizes it as a global level so that the local level is priced by efficiency So Bitcoin brings about a system which scales to all different aspects of society as we’re seeing There’s deep complexities in all six directions and it’s all changing But what does not change is the maths and the physics of how these three areas connect and the three core technologies and the three core commodities Um I’m going to add something else as well The other interesting thing is what I’ve been developing is understanding how Bitcoin’s unit of account framework comes into this which these core areas also have markets So the dollar per terahash pricing of machines is based on the efficiency hash rate in of itself that’s a discussion for another day You’ve also got the block space side of things that also you can arbitrage between If Bitcoin Cash has a load of random fees fill up on their mele there will be some hash rate from Bitcoin that will switch to this other chain capture those fees and then sell them into Bitcoin So it’s truly a one to many that now that Bitcoin has scaled it will kill any other proofof work competitor And I truly believe that they will never ever reach the same scale of Bitcoin unless something truly internally has a problem But the structure of this design of this system is truly phenomenal My my educational background is that of engineering and risk management where looking at how systems break uh was how I was paid and I’ve not figured out or even conceptualized how this system breaks There’s certain particular things but it it it can only break internally That’s that’s that’s what I would say But the the cryptography aspect is what constrains all of this I think it’s it’s the one that that new incomers to Bitcoin probably learned about the least the deep cryptography aspects of how this system works Um and it’s definitely an educational direction for me as well Thank you for listening I think I’m going to stop it there Um I’m going to do some more videos with this diagram but uh questions comments thoughts theories I shall uh be enjoying this video and I hope to see the comments So thank you for listening Goodbye