In a new blog post published on Medium, Kraken’s director of business development, Dan Held, lays out a thesis for Bitcoin as a “super commodity”.
The crypto exchange exec debunks the notion that Bitcoin’s use of energy is “wasteful” and argues that the cryptocurrency’s energy intensive proof-of-work (PoW) mechanism, which relies on cheap electricity to power its network of transactions, is part of a global cycle that has linked everything to energy and the consumption of energy.
Writes Held,
“All things in our lives are closely linked to the price of energy. Purifying water requires energy. Transporting products requires energy. Manufacturing products requires energy. Cooking requires energy. Refrigerators and freezers require energy. In a free market, the cost of any good largely reflects the energy used in producing that good. Because free markets encourage the lowest priced goods, the energy used in producing any good is minimized. Money, which is the representation of the work required to generate goods and services, can also be viewed as stored energy.”
Held breaks down the energy consumption of traditional systems that power fiat, calling the cherry picking of one usage of energy over another, while everything requires energy, subjective.
- Annual cost versus gigajoules (GJ) used
- Gold mining – $105 billion / 475 million GJ
- Gold recycling – $40 billion / 25 million GJ
- Paper currency and minting – $28 billion / 39 million GJ
- Banking system $1,870 billion / 2,340 million GJ
- Governments $27,600 billion / 5,861 million GJ
- Bitcoin mining $4.5 billion / 183 million GJ
Held also believes that as Bitcoin and the current markets remain obscure, operating with no widespread grasp of how they function, the price of BTC remains dramatically suppressed. He estimates that BTC, which is currently trading around $8,700, would shoot to $1 million – all the way up to $10 million – if everyone understood it.
If everyone in the world understood Bitcoin, and the current macro environment, then the price would be $1M-$10M per Bitcoin.
— Dan Hedl (@danheld) January 27, 2020
Bitcoin critics, such as billionaire investor Mark Cuban, continue to point out that it’s too difficult for mainstream users to grasp, with examples of people unable to access their crypto due to lost private keys or confusion about passwords.
But developers, powered by startups as well as major players such as Jack Dorsey’s Square Crypto, are targeting real-world solutions for failing memories, scalability issues and privacy concerns, describing the industry as being in its infancy. They claim that Bitcoin has much more headroom to grow and that novel infrastructure will solve the biggest challenges, making it a ubiquitous medium of exchange that is easy to use.
Adds Held,
“PoW is about physics, not code. Bitcoin is a super commodity, minted from energy, the fundamental commodity of the universe. PoW transmutes electricity into digital gold.”
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