Bitcoin Information Theory: BIT

“I always try to solve problems by some artifact, some tool or invention that makes what people are doing obsolete, so that it makes this particular kind of problem no longer relevant.

The above quote from the prescient Buckminster Fuller in 1983 was in reference to his now famous prognostication of the “Kilowatt dollar”, something he first discussed as far back as 1969 .

● In a free market society, the greatest network of information by far is price, which itself is, at its core, an intersubjective agreement of value.

It is perhaps the most elementary and consequential social tool we have and has been essential to our species’ ability to successfully scale .

This is one of the key manners in which money acts as information , as monetary transfer of risk and uncertainty unveils invaluable morsels of information by way of successes and failures.

Thus, a marketplace is needed to allow the swapping of risk in order to build the capital stock.

With these fundamental and philosophical logos as our background state, let us now explore how money as information technology is key to our grokking of money’s entanglement, with the harnessing of energy as a means to advance civilization.

Above: The Kardashev Scale- A theory originating from Russian astrophysicist Nicolai Kardashev that touches upon the themes of this article, namely the relationship between technology and energy.

For the purposes of the below discussion, let us define entropy in its simplest manner.

This hypothesis is essentially an adaptation of the second law of thermodynamics, combining it with concepts from information theory, and using these observations to create a formula that is more comprehensively applicable to human economic activities.

Just as the first law of thermodynamics teaches us that energy can neither be created nor destroyed, likewise, the second law of thermodynamics states that thermodynamic entropy always increases over time.

We will define monetary entropy as the long-term inflation rate of that money.

Inflation, centralized and thus arbitrary control of the rules of supply , global exchange rate volatility and competitive devaluations and mercantilism, subsidies, free debt-supporting zombie industries, opaque and uneven taxation enforcement, and many other behaviors, all conspire to create an aggregate equation of massive entropy in fiat money economies.

This increases the cost of information production because there are fewer and fewer sources of increasing thermodynamic entropy from which to convert into decreasing informational entropy.

If, in the form of bitcoin, money is allowed to absorb thermodynamic entropy, money will accrue the incremental scarcity from increases in thermodynamic entropy values.

The largest contributing factor to GDP is consumption, and this has been growing materially as a percentage of GDP ever since the financialization of our economy via exponential growth in money and debt since the 1971 unraveling of Bretton Woods, the subsequent formation of the fiat standard and the USD petrodollar global reserve system.

This squandering is effectuated by inflationary monetary policies that do not allow the economy to transition naturally into a lower consumption society resulting from reduced informational entropy and the abundance this could create if we allow it.

Bad money blinds us, causing us to veer off onto spindly and corroded dirt roads.

But it is not the natural economic state, and in a broader historical context, it is actually a fairly recent experiment , we suddenly realize just how incredible an invention this truly is.

Value is created through human ingenuity, environmental necessity and the compounding productivity driven by our accumulation of collective knowledge.

If prices decrease by 5% per year, that is a much greater expression of value creation than our current measures that are perversely inverted, such as “real GDP.” If you print dollars and then count the value created in those very dollars, what does that actually tell you? What if you could instead calculate the amount of goods and services created versus the dollars created.

We live in a time of incredible technological advancements on increasingly exponential growth curves.

If technological productivity has the potential to decrease informational entropy output for each thermodynamic unit of increased entropy input, this is the true definition of wealth creation and prosperity.

Not only does the Bitcoin network inherently take highly disordered information and asymmetrically with its properties of absolute scarcity, decentralized consensus, immutably programmed supply, rule-based and anti-fragile incentive structure, changes the game entirely.

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