About 100 years ago, Henry Ford, a businessman and car mogul, proposed an "energy currency" instead of gold.
Can Bitcoin finally deliver on some promises of this "energy currency"? According to a recent post from Capriole Investments on Medium, we were able to rethink the issue.
Energy backed currencies
Henry Ford's argument about energy currency is that, unlike gold, it cannot be controlled. Instead, every country can issue currency based on its natural wealth of energy. The value standard of this system is to apply a certain amount of energy in one hour, which is equivalent to 1 dollar.
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This currency backed by kilowatt-hours (kWh) has some similarities with Bitcoin, and Bitcoin can also be regarded as a "backing" with energy input.
For about 80% of existence, Bitcoin's price history is closely related to the raw energy (in Joules) needed to create it.
"Energy" assessment of Bitcoin
Using Ford's standards, the current value of Bitcoin can be determined by multiplying its energy value (in kilowatt-hours) by a factor of 0.00173 (converted between Joules and kilowatt-hours).
Since the Bitcoin network currently consumes approximately 6.9 million kilowatt-hours of energy, the "value" of Bitcoin is approximately $ 12,000.
However, Bitcoin is unique because of falling inflation. The impact of the halving in May will actually mean doubling the energy required to create each bitcoin, which will have the same doubling effect on its intrinsic value.
Plan stalled due to power oversight
Of course, Ford eventually had to abandon his plan, after all, why would regulators consider systems that could make wealth control redundant.
The simple business that one should decide within a week has become a complex one.
More than 60 years later, Austrian economist Friedrick Hayek responded again to this sense of frustration, that the monetary policy of the regulator undermined the concept of a "good currency."
"I don't think we will have a lot of money until we take this thing out of the regulator. That is to say, we cannot take it away from the regulator violently, what we can do The idea is to introduce something they can't stop in some devious way. "
Is Bitcoin an energy currency?
So, bitcoin, an energy-backed currency, will eventually achieve Ford's plan and Hayek's "good currency", although the regulators are immutable and uncontrollable.
Capriole said it may be because so far Bitcoin has found a solution to the currency problem. Despite the potential risks and the long duration of the bear market, the energy value of Bitcoin this month has reached a record high.
As Ford said, "This is just a matter of thinking and calculation. Unlike the standards set by the International Banking Group, we are so used to the International Banking Group that we think there are no other desirable standards."
The original source is from Bitcoinist, compiled by the BluemountainLabs team. The English copyright belongs to the original author. For reprinting in Chinese, please contact the compiler.