Bitcoin was seen by the establishment to be a farce.

While it did not deliver on the promise of being the ideal replacement for all money, there is a fundamental concept that we have to acknowledge. It is something that is becoming even more evident.

A day does not pass where the conversation of AI isn't brought up. Tangent to this is the need for data which, of course, means data centers. An ongoing geopolitical discussion is where does an applications data go. Is it remaining in country or being exported?

All of this is creating a situation which is transforming the basis of everything. It is easy to see how AI is only growing, resulting in more tasks being automated. The likelihood of this reversing is non-existent.

In this article we will dig into this, helping to lay out how Bitcoin revealed a concept that is central to what is being developed today.

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Bitcoin Showed The Fundamental Concept Shaping The Future Economy

We are not going to espouse how Bitcoin is going to take over the world. It isn't.

I long stated that Bitcoin gift to humanity was ability to reach consensus without a centralized entity. If we look at the history of digital money, there was always a centralized consensus mechanism required.

Since that time, other structures have emerged, mostly tied to blockchain, which follow this concept.

There is something else that we can take from Bitcoin. This is part of what is constructing our future economy, as evidenced by the laser focus of Big Tech.

What are many of these companies doing? They are trying to come up with ways to get more energy. Whether it is setting up near a nuclear power plant (Meta) or using renewables, Big Tech realizes they need a lot more energetic input.

We went through a period where people complained about the energy that Bitcoin consumed. Many of us remember the comparisons made such as Bitcoin used up more energy than ABC country. Of course, nobody mentions that today.

For one, miners have gotten more efficient with their operations. The largest variable expense they had was electricity. If that cost was reduced, their profits increased. Hence, they got rather innovative with their energy, something data centers adopted.

Another factor is AI took the spotlight. Since the release of ChatGPT3, everything change. AI moved center stage and it didn't take long for people to realize that energy usage was exploding. In other words, Bitcoin is now a small consumer as compared to the data centers that are going live.

What does this mean?

Energy Is The Fundamental Economic Unit

This is not something that arose with Bitcoin. It was long known that economic output was tied to energy. Nations that lack energy (or unstable) have lower GDP. Factories cannot run without electricity.

Another component to this was labor. In this regard, human beings were another form of energy. We could say the caloric intake, to some degree, resulted in economic output.

The digital era takes this to a much higher level. With the attack on knowledge work, we are in the process of another shift taking place.

What Bitcoin did was tie money directly to energy. Again, this was not without precedent due to the fact that most currencies had banks as the creator of the money supply. Electricity is required to access applications and move money around using computer networks.

That said, Bitcoin provided a direct link. A certain amount of compute is used to run the network. This is provided by the mining rigs which use electricity.

When we turn to the coin itself, we see there is market value. The value of the energy is materialized in the output of the network. With tokenization, this is market tradeable.

People are starting to see how output is based upon energy. With AI, data is required. This is housed in data centers on GPUs (and other devices) that require energy. The inference, mostly done by Big tech, also consumes electricity. One using the system gets some kind of output.

Naturally, without tokenization the market value is not determined. The value of that energy transformation is based upon what how the output is used. If the result is code that creates an agent that generated $300 per month, then we have a quantified answer.

The Race For Energy

Estimates are that electricity demand will grow by roughly 7% each year into 2030. The historic growth of the US is about 3%. As we can see, there is a gap between additional supply and expected demand.

This is being driven by technology. With data centers exploding and the anticipated entry of humanoid robots into the workforce in the late part of the decade, there is a reason for this outlook.

It is one of the biggest questions confronting Big Tech.

How do we get more kWh?

This race is coming up with a multi-faceted approach. What is central is the investment is going to require trillions of dollars. Of course, the economic output of AI is expected to be in the tens of trillions, so there is room for the ROI.

Sam Altman made waves when he said that an investment of $7 trillion in chips was required to meet the AI needs. We can debate the exact number but the logic is evident.

A lot of money is required for both chips (GPUs) and kWh. Energy is the fundamental component. Without it, nothing is taking place.

Bitcoin showed this link. Future value will be directly tied to energy. We are seeing the removal of intermediaries, establishing a clear connection between the electricity a company (or country) has and the economic output it can generate.

Could we see a day where the kWh or joule is the unit of currency?