Fundamental Commodities | Bitcoin Education | Hashpower Academy

Video Transcript:

hello there and welcome to the Hash Power Academy your place to learn anything to do with Bitcoin now here’s the thing if you’ve been watching my previous videos you will notice that this is a different whiteboard and this is a different wall this is because I’m in a different country i am in Dallas Texas in the USA for a couple weeks so if there’s any Bitcoin companies or mining companies that would like to show me an interesting mining site or setup I’m all game so here’s the thing this video is just going to be a short and sweet one to get into the nature of understanding the three fundamental commodities of the Bitcoin network electricity hash power and Bitcoin now I have covered this sort of way of explaining things in previous videos but the thing I’m going to sort of emphasize here is this that if you go back in time to Satoshi Nakamoto he consumed electrons produced hashes and produced Bitcoin exactly the same as today but not with the different technologies now we have better mining hardware faster more efficient different cooling systems different cooling system types and all these sorts of things the technology branch of consuming electricity to produce hash rate that is complexifying in its own way into the future the Bitcoin blockchain the hash rate that’s producing it the mining pools and all these sorts of things i haven’t written them all in just keeping the focus on these three commodities and then the Bitcoin that’s produced the output of blocks being added to the chain electrons being uploaded to the internet and the bit that I find the most interesting is this branch as well well that’s where I see the Bitcoin unit of account branch that the electrical inputs into society begin the first Bitcoin unit of account second to block space the cost of data storage to pay to store your information online forever and what I’m trying to explain with this is that everything is going to change with the technologies in between the commodities but these three commodities will not change this one is contained it’s 21 million units but these two expand and also in other videos you will have seen that I show it typically in a linear series the cost to produce electricity the hash rate side of things from Bitcoin mining the Bitcoin blockchain all the different moving parts and metrics and obviously Bitcoin coming out the other end but that is not the end of the story the future of this is the interconnectivity of all three commodities together the demand response side things on the electrical grid such as here in Texas the Urkott electrical grid has demand response programs that fluctuation of supply and demand of power has a new buyer of power that is just an economic user so if the economics change the other way and to sell the electrons instead of consume them there is stability offered to the grid and higher economic return to the miners because you got to think of it like this a Bitcoin miner is optimizing for 100% uptime which means they need a grid or a power source with effective 100% uptime that is the perfection aspect and we’re continually working towards it we want to get maximum uptime so Bitcoin miners are incentivized to help the grid as much as possible because that’s their source their source input and then all of the different aspects of hash rate and the complexities going into the future of being hash rate being this reusable proof of work commodity that is going to complexify and of itself but what’s not going to change is its use and its expansion the the network hash rate going up to one zeta potentially this cycle i think it’s possible but with all this expansion of electricity that everyone needs compute that everyone needs and even the buildout of AI being helped by Bitcoin mining because Bitcoin mining per megawatt in terms of cost is onetenth of the price to build out so if you’re trying to access large power contracts you can build out Bitcoin mining to access those power contracts at onetenth of the cost of AI so all of this physical buildout whilst this digital race is trying to to race even further ahead quicker than the physical constraints of how much energy and compute we can produce well Bitcoin being this accelerant to all the different things we need in society whether it’s the energy sector compute microchip aspects or finance and the future there that as things change into the future what will not change is the relationship between these three core commodities so with Bitcoin mining again I’m not an art student so forgive me here bitcoin mining what is the key exchange rate or efficiency shall we say not exchange rate jewels per terash that is the direct conversion of electrical consumption for output hash rate and on the blockchain side of things here we’ve got hash rate going to produce Bitcoin blocks that is typically in mining pools and here’s the thing Bitcoin mining pools are the ones holding the pen of the accounting system and all of the different complexities going into the future on the blockchain side of things are new op codes new decisions of how much block space there should be or shouldn’t be all the different debates chaos and changes what will not change 21 million units expansion of hash rate expansion of compute so the expansion here and constraint here with the constant changes of different layers and different oh there’s endless there’s just continual complexity in the technology branches I always use solar as the nice easy drawing example again I’m not an art student um so yeah now here is the interesting one after I’ve put hash price in there BTC per terahash per A Bitcoin as a unit of account the understanding of how to buy something with a quantity of Bitcoin in your mind not a quantity of dollars and using Bitcoin as the settlement layer which people like Jack Dorsey and Block wanting to use payment terminals where you can pay Bitcoin that’s great if I go in and purchase a $3 coffee it’s not priced in Bitcoin i’ve just paid with Bitcoin with dollar as a unit of account but that’s okay for today the transition into the future in my opinion is Bitcoin per kilowatt hour or kilowatt for the cost of building out energy infrastructure what will Bitcoin bonds be used for in the future probably building out large energy infrastructure projects because they have the energy potential to produce compute to produce more bitcoin so you have to understand that anything h that has a fundamental relationship to electricity compute of bitcoin is going to have a mathematical relationship to a quantity of bitcoin and that quantity can derive into a quantity of kilowatt hours there is a cost to produce one bitcoin for a minor with a typical efficiency and so what I’m trying to explain here is these three um mathematical functions essentially and variables metrics these three represent the key core metrics as to how to understand your your ability to accumulate sats or build out things in relation to the different areas of the network but Bitcoin per kilowatt hour represents in my opinion the second Bitcoin unit of account commodity that comparison of electrons in the quantity of SATs because Bitcoin miners are already on the electrical grid such as here in uh Texas where if the electrons have an higher economic return to be sold back to the grid aka the the amount of dollar per bitcoin per kilowatt is higher they switch the machines off but they’re doing it the other way around they’re measuring what the value of Bitcoin is to the Bitcoin layer not Yes the dollar is involved at this stage but the whole aspect that I’m trying to explain is we can remove the dollar from that entirely you could have Bitcoin citadels that aren’t connected to any grid because Bitcoin is essentially a deacto wireless electricity grid because it standardizes a global price for energy that is compared to the revenue rate of how much you can earn per bitcoin per per terahash per day and that revenue rate is defined by your efficiency so again these three core uh metrics for your local efficiency your global access to revenue and that key comparison between those two decided by your individual access to these two your uptime and your efficiency on the mining perspective of this there is a lot to dive into with this but it’s all about the different perspectives that you look within the mining perspective the mining pool perspective the developers perspective people holding Bitcoin their perspective their purchasing power and their access to block space so those two Bitcoin unit of account components come in here the cost to store information online forever and the cost to buy energy in the future Bitcoin miners even today are continually moving towards becoming energy producers and what are they producing energy for to produce Bitcoin but if that energy in that moment in real time is being being directly priced against subsidy and fees it means global subsidy and fees and their fraction of that and their conversion efficiency gives a direct pricing of how much Bitcoin they’re earning per kilowatt hour so if you want to buy that energy from that miner on that local off-rid or large infrastructure scale grid or maybe even the Buckminster Fuller planetary scale grid it means we have a global pricing system that we can define an exchange rate from Bitcoin into electrons at the local level so you can buy your energy from a minor because he has a clear pricing comparison at the global level it delves into quite a rabbit hole that you go hang on well if Bitcoin can directly price electricity at a mathematical layer and electricity is used in a countless amount of inputs in the 21st century well now you can start creating Bitcoin unit account connections into everything that requires electricity to produce or even go backwards in the chain how much electricity can you produce with a barrel of oil and if that electricity can produce a quantity of Bitcoin maybe you can start standardizing a price for oil on a Bitcoin unit account all these sorts of things but again it’s about your efficiency at the particular local level the most efficient mining machines will demand a higher Bitcoin per kilowatt hour rate to buy that energy is more expensive they have more efficient compute and naturally you’ll find more efficient machines closer to cities on larger uh more sort of economically developed countries and what will happen is the less efficient machines will go out into countries that are less economically developed but it also means that the electricity on a Bitcoin unit of account is cheaper but here’s the thing as the network is continually expanding in hash rate it means that those holding Bitcoin 21 million fixed in supply um being priced at the rate of how much uh subsidy and fees is being distributed to that pool of compute and electricity that if you’re the one holding Bitcoin in any amount just by holding it and that exchange rate that cost of production to produce a bitcoin if you’re on the other side of that you want to buy the energy and switch that minor or off you’re able to buy everinccreasing amounts of electricity as the production cost of Bitcoin goes up basically what I’m trying to say is the production cost of Bitcoin is a direct exchange rate where you holding Bitcoin can buy electricity in the future when miners are the operators of electricity grids and micro grids and off-grid communities why would your neighbor switch his minor off if by delivering the electricity to you he does it at the same rate he’s producing Bitcoin or luck of Bitcoin or just slightly higher and he’s captured a premium and when he switches some of his machines off he can lower the efficiency and increase his revenue rate with the existing machines online so there’s an elasticity to that as well i’m going to stop it there if you found this video interesting then like subscribe share send me any comments questions queries and fe feedback to the email info@ hashpower academy and I will see you in the next video goodbye