Life, entropy and bitcoin
One wild and precious life
The poet Mary Oliver ends her poem The Summer Day with the line, "Tell
me, what is it you plan to do with your one wild and precious life?"
All of us share this common experience of emerging into consciousness within a context neither of our making nor of our choosing. With consciousness comes agency, and we begin to act on the world around us. The range of optionality varies enormously, but we unavoidably choose how we play the hand we are dealt. Camus writes, "Life is the sum of all our choices" and no doubt there is truth in that.
John Donne, the English Poet and cleric is attributed for the well known phrase, "no man is an island". As we become aware of our own consciousness, we also become aware of other conscious people around us and we begin to learn how to exchange with them. We exchange glances, laughter, love, favours, chores, meals, recipes, knowledge, possessions, etc. Within the Dunbar number, these exchanges are mostly direct between participants, voluntary and mutually beneficial. We also begin to learn of another type of exchange, one with money. Surprisingly, since it is one half of almost every transaction, I don't recall ever being taught anything about it, only that I'd need to devote much of my wild and precious life to making it.
What is life?
Elon Musk likes to quote "Physics is truth, everything else is opinion", and so for the purpose of this article I will put aside the question of ontology and turn to the physicist Erwin Shrödinger (yes, the one with the cat) and his 1944 book, "What is life?"
In it he observes that "living organisms maintain order and complexity, effectively
opposing the natural tendency toward entropy."
So a physicists definition of life may be that which opposes entropy.
Entropy is a measure of disorder within a system. The second law of thermodynamics states that in an isolated system, entropy increases over time.
Bob Dylan's great line "He not busy being born is busy dying" poetically expresses the biological entropy we all face. In our youth (which Oscar Wilde famously said is "wasted on the young"), we appear to beat it. Then seemingly suspend it, before succumbing to it, our body returning to the Carbon, Hydrogen, Nitrogen, Oxygen, Phosphorous and Sulphur from which it somehow had assembled itself. Wild and precious indeed!
While those six base elements continue to somehow assemble themselves into the approximately 35 trillion recycling cells that devote themselves to this anti-entropic process, we choose how we wish to spend the energy surplus to... make money?
The first law of thermodynamics states that energy is conservative, it cannot be created or destroyed, only transferred or transformed.
Through a process of cellular respiration, our cells convert the chemical energy stored in the glucose and nutrients from the food we ingest into Adenosine Tri-Phosphate (ATP), which is known as the energy currency of the body. ATP is described as being like a rechargeable battery, storing energy to power our lives.
Energy transferred over a unit of time is called Work. Our cells are constantly working to conserve what has been assembled while producing a surplus enabling us to impact on the world around us.
Whether prince or pauper, all of us have to metabolize our own energy. This knowledge is wonderfully imparted by dad in the 2010 movie, Spud. Wanting to send Spud off to boarding school with some wisdom, he says ; "remember my boy, even the queen has to take a shit".
Not long ago, entropy claimed even that queen. Natural law is the great leveler.
Value exchange is an energy exchange
The chemical exchange taking place between ourselves and our environment is an energy exchange, governed not by decree but by the laws of thermodynamics.
The economic exchanges taking place daily between ourselves, other selves and our future self can also be viewed as an energy exchange in which we trade the useful output of our scarce time and energy with that of others.\When voluntary, the value of that work is subjectively judged by the recipient and is typically correlated to the time and energy required to do it oneself. \As an example, the most urgent need each of us has is air, and yet in earths atmosphere there is no price. Why? It is abundant and distributed. Water is the second most urgent need, and for it we do pay a price. Why? Because someone, whether ourselves or another, has to expend some of their scarce life energy to retrieve it from a source, or to build infrastructure to deliver it to themselves and others.
In an exchange that is direct, voluntary and free of violence or coercion, an equilibrium is struck whereby each party considers the work they are being saved from doing as proportional to the work they had to expend in order to produce or acquire what they are offering in return - whether in the form of a good or a service.
I would be hard pressed to find someone willing to exchange their car in return for me mowing their one acre lawn! To satisfy the work, or energy over time equation, a reasonable car would perhaps require 500 mowed lawns.
So I have a problem, I want your car but you don't want my offer of mowing your lawn 500 times. This problem is called the double coincidence of wants and it is primarily this problem that led to the natural emergence of the solution we call money.
Money enables the life energy spent to mow each lawn to be stored. It enables me to focus on optimizing my lawn mowing operation, storing that scarce energy until such time as I have an equivalent to that which was spent creating your car.
Money - an energy proxy
And so money can be considered a proxy for time and energy, vital for facilitating the exchange of work across time and space as we optimize around cooperation and division of labour.
Put another way, money is a token claiming proof of an equivalent amount of anti-entropic work done. It is conservative, subject to the laws of thermodynamics.
Communicated across time it is a store of value, storing up life-energy to be used in the future. Communicated across space it is a medium of exchange, a claim of proof to each party that the work done is equitable. Being one half of every transaction, it is also a unit of account, holding all parties accountable to a common standard for the expression of value, or anti-entropic benefit produced by wild and precious lives.
Returning to our lawn mower example; if I could successfully fake, or counterfeit the tokens representing work done, I could exchange them for your car without mowing any lawn at all.
But as we have seen, money is subject to the laws of thermodynamics. The transaction is an energy exchange which, according to the first law is conservative, and therefore the energy the proxy represents has to be transferred from somewhere.
The fake tokens have falsely inflated the actual amount of anti-entropic work that has been done within the system, and so there is now a deficit in the system which needs to be made up by the economic actors within it. Put another way, if there were 500 economic actors within the system, each would now need to mow the equivalent of 501 lawns to make up the deficit. The price of the equivalent car would now require 501 tokens to remain conservative. In other words the purchasing power of each token has been diluted due to the introduction of fraudulent ones.
Notice that the dilution takes place AFTER the counterfeit tokens have been "spent", thus disproportionately benefiting the counterfeiter and those with access to the counterfeit tokens while the system is still adjusting. This is known as the Cantillon effect.
An entity able to control the issuance of a proxy and demand its use within a jurisdiction, would be free to ignore the thermodynamic demand for mutually beneficial voluntary exchange, instead distributing the deficit across the working population within it.
As Ayn Rand is quoted as saying, "You can avoid reality, but you cannot ignore the consequences of ignoring reality".
The high cost of ignoring reality
Over millennia gold, primarily due to its high stock to flow ratio, emerged as the commodity most trusted to represent truthful economic energy and most international trades were settled in it, with various proxies being established for intra-national trades depending on the jurisdiction.
80 years ago at the Bretton Woods conference, 44 nations agreed to peg each of their respective proxies to the United States Dollar on the condition that USD tokens could be redeemed for gold.
This established powerful incentives for all participants to ignore reality, in particular for the United States, which could increase the supply of dollars beyond the rate set by the stock to flow of gold, thus establishing itself as the global reserve currency via the ability to export the deficit to the world.
In 1971, responding to an emergency, president Richard Nixon issued a fiat, or decree, "temporarily" suspending convertibility of the united states dollar for gold thus severing us from reality entirely. See https://wtfhappenedin1971.com.
If money is an energy proxy and therefore subject to the laws of thermodynamics, then the global debt would be an approximation of the amount of life energy extinguished in making up the deficit required to satisfy the laws.
Of course this is an under-approximation as it does not factor in the increases in productivity due to technology and cooperation that would ordinarily accrue to all participants.
According to worlddebtclocks.com, the global debt at time of writing is just under USD 73 trillion USD, accruing interest at a rate of approximately USD 50,000 per second.
According to worlddata.info, the average global salary using Purchasing Power Parity (PPP) is 18,000 units of the US Dollar life energy proxy.
Being generous, lets round this up to USD 20,000 per year, and assume an average economically active life of 50 years.
Thus the value produced by each wild and precious life is on average 1,000,000 units of the USD proxy, meaning that so far under this monetary system the equivalent economic output of 73,000,000 wild and precious lives has been extracted and distributed to those trading their time and energy, whether directly or indirectly for the global reserve proxy. The deficit is increasing at a rate of 2.5 average lifetimes per second. If it has taken you 20 minutes to reach this point, in that time an additional 3000 productive lifetimes have been extinguished.
Unable to metabolize for itself, and unrestricted in its growth by any natural law, this system grows from a harmless looking cub into an insatiable beast devouring everything in its path.
There is a saying that to avoid being eaten by a bear, one need not run faster than the bear, only faster than one's neighbour.
The problem is we inevitably run out of slower neighbours. At the risk of mixing metaphors, eventually even the queen shits herself.
History records a seemingly endless cycle of ascent followed by chaos and collapse. Like citizens born in the districts of the hunger games, there has been no option but to try and outpace our fellow citizens.
Until now...
Bitcoin - the first thermodynamically sound money
On 3rd January of 2009 an anonymous person or persons, began running an open software protocol with the potential to organically scale to a decentralized and secure protocol defended and bounded by a wall of energy facilitating and enabling the voluntary peer to peer exchange of our absolutely scarce wild and precious life energy across space and time without the need to trust any intermediary nor ask anyone permission, to the benefit of ALL participants.
The first data recorded included the newspaper headline from The Times for that day, "Chancellor on brink of second bailout for banks".
Translated into thermodynamic terms, "Chancellor to ensure banks once again avoid the consequence of ignoring reality by approving the theft of the economic energy of those who did not".
For the first time, there is a thermodynamically sound money able to store our wild and precious life energy where it cannot rust or decay and where neither the chancellor nor any other thief can take it without our consent.
A thermodynamically sound money incentivizes cooperation over competition, creation over destruction, peace over war, truth over deceit, steak over the sizzle, hope over despair, genuine generosity over virtue signaling, love over hate.
An energy portal has been opened between the physical world and cyberspace.
Tell me, what do you plan to do with your wild and precious life?