Deflation… Why Bitcoin will NOT work?!? | Hashpower Academy

Video Transcript:

hello there and welcome to the hash power Academy my name is Jake and here we discuss anything and everything related to bitcoin and its underlying Network the question of today is deflation and why Bitcoin won’t work as money wrong and let me explain why but first let’s understand how inflationary money works that credit and debt is expanded in which to pay for things budgets and well governments have budget deficits they spend more than they bring in so in essence they issue more money and borrow more money and all these sorts of things they have a very limited option of how they can access money and what do they do with it money is a manipulation of consumption consumption in society based on debt accelerates and pays and shifts value and wealth towards producing producers of what producers of everything but the goal here is that well Society wants to continually grow and expand and it has to build all that infrastructure so yes a form of money that shifts value towards producers is good but it demonetizes those with savings and salaries think of a chocolate bar that you bought 30 years ago what’s the price of it now did the chocolate bar change probably not it’s energy costs increased and there’s an interesting piece to that but the dollarized aspect of it or the pound or the Euro the Yen or anything it’s continually increasing or even say my grandmother’s house she hasn’t done a single thing to the house the village hasn’t got any bigger but now it’s worth four times as much money why did the house change or did the money change there’s the question and so as the money supply increases it seems like housing prices increase and everything else increases and that is to say that the justification of inflationary money is to expand credit to build and make Society Prosper but that prosperity and productivity is only felt by a very small few and so what does Bitcoin offer that’s different well Bitcoin is deflationary yes it’s fixed in Supply 21 million units but interestingly enough the history of money does does have deflationary money gold gold was a form of money used and it’s very hard to produce and that incentive to go and produce whichever commodity is the money has always been there if any form of society was structured around a specific commodity being the money what did people do they went out and went to seek to produce that particular commodity in Greater volume because it was the most tradable thing that you could use and so so with with Bitcoin being introduced scaling to Monumental valuations well what does that do what incentives are within that system that allow it to prosper and get and give value and add value to society well how is Bitcoin produced Bitcoin is produced from energy right and it’s started with basic laptops CPUs being able to issue and create Bitcoin in large quantities but what happened is as more hash power joined the network the exchange of electricity into computers to perform processing functions to produce the next block in the chain and so the pricing system related to bitcoin is not its scarce 21 million units it’s still being issued now and forever for the next 100 plus years is where subsidy declines to zero subsidy is the amount of freshly mined Bitcoin entering into circulation but you’ve also got fees which is existing Bitcoin that’s already been issued and circulating moving from consumer Trader transactor using the Utility side of Bitcoin to producer Bitcoin Miners And so this duopoly of Finance from the Bitcoin side of consumption to trade and transact and those information pieces are stored in blocks and the production side of Bitcoin and what you get is that this side is constrained by a full supply of 21 million so the money itself is deflationary and continually gaining value against all other things there is 8 billion people and there’s only going to be 21 million if more people and civilization grows it means less Bitcoin per person if more energy and more compute power is continually seeking to produce Bitcoin it means that the price of energy and compute is going to continually Trend to zero but compute power is the only thing that produces Bitcoin and therefore it has a part in this conversation and so right now the pricing system of Bitcoin to compute an energy is roughly about 450 Bitcoin a day is shall we say an amount that is being distributed in about 144 blocks to different Bitcoin mining pools and solo Miners and distributed to those who are consuming energy on electrical grids all around the planet and running it through their Bitcoin miners the network of compute in the middle is about 800 xash and this bit constrains the rate in which blocks are being mined because the software is continually looking at how quickly these blocks are mined and making it sure it it adheres to those 10minute intervals approximately and the amount of compute power or the amount of compute power being produced is a projection of the amount of energy in real time being consumed approximately to produce that compute power to earn that 50 $450 of bit 450 Bitcoin that’s a lot more than $450 so the 17 gaw of power is producing $ 800 xash or 800 million terahash of compute power which is earning that 450 Bitcoin so there is an in essence a division here as well and this is the pricing system of the amount of energy being converted through compute into Bitcoin and this pricing system enables miners to understand okay my electrical bill is this much I’m earning this much Bitcoin here’s my margin and if there is more consumption on the finance side of Bitcoin if more people trading and transacting and the amount of Bitcoin that they earn jumps to 500 Bitcoin to 600 Bitcoin as a network well that 17 gaw of power is going to earn more Bitcoin say per kilowatt and so you’ve got this into Play Between the amount of energy being produced and consumed to capture the next block in the chain and capture some of this 450 Bitcoin that’s being distributed to the network every day and this creates a pricing system and a layer of incentives again inflationary money seeks to print units steal value from savings and salaries of its citizens to buy productivity and build it so essentially it’s putting the cart before the horse what Bitcoin does is it realigns the incentives if you want the money of the future that’s fixed in Supply that’s continually gaining value in a deflationary world you need to go out and produce more energy and more comput you need to expand this supply of energy in the world and the amount of technical techn technology branches delving into microchips and stuff like that is that not a good incentive and it basically means this that Bitcoin as a monetary system its incentives are for those to go and produce more energy and more compute to earn the money of the future now what happens if you increase the supply of energy available in the world you reduce the price and do we not want a world in which the price of energy drops think of energy prices right now if we produce more energy have a system that can consume it in real time and price it against a global monetary asset which means essentially local energy being exported to the internet and proofed into quantities of a data derived energy unit called Bitcoin we now have a pricing system of a deflationary money which is expanding the energy supply of the world so essentially Bitcoin swaps interest rates from a debt-based world into Energy prices from a deflationary world and the hard digital money of Bitcoin allows us to expand energy and compute across the world and it’s already happening there is 17 gaw of power right now being consumed all across the planet which means that there are computers consuming that power and they can also sell that power back to the grid because if someone offered more money than what the rate of the revenue from the Bitcoin Network side of things can offer you’ve got you’ve got two comparisons will the local grid buy the energy for more or the the Global Financial Network buy the energy for more you’ve got two different options so whichever one pays more is better but remember if more more compute power joins the network and not more consumption as in if production in the network increases while consumption stays the same or decreases the difficulty adjustment increases which means the amount of Bitcoin per kilowatt decreases so as more hash rate joins the network the energy to Bitcoin exchange rate drops and that means that your Bitcoin buys you more energy and so hash rate being that projection of energy availability within the network is the key indicator for how much Prosperity we’re going to have the difficulty adjustment continually increasing is the key value metric of the network Collective this was quite a weird and wonderful topic I hope you enjoyed I’m going to do more of this stuff but I hope you understand that deflationary money does not mean that we are going to have a world where productivity declines in fact it’s going to expand massively because what do you think you can produce with cheaper energy and hard money there you go so I hope you enjoyed this video uh like subscribe all that fun stuff and I’ll see you in the next one goodbye