People resent the Federal Reserve. It’s The Creature From Jeckyl Island. Who really owns the Fed? Who really owns NPR? It’s a non-profit. Who cares.
The Layer1 bitcoin mine is a for-profit.
Layer1 controls 100 megawatts. Their goal is to control 25% of the bitcoin hashrate. Scribbling on a napkin would put the total energy spend of the bitcoin network around 400 megawatts. This is off by an order of magnitude from the 7000 megawatts estimated by cbeci.org and I don’t know who’s right here, but close enough for a blog post. I’ll use layer1 numbers… So a fifth of a Hoover Dam… a 50th of Three Gorges. (For reference, total global energy spend is 1,140,00 megawatts.)
So when there are 50 Layer1s, competing for hash to collect bitcoin transaction fees, bitcoin price will be 50x higher? Could take a few years but, basically, yes.
Not in dollars though. In energy.
Stop thinking in dollars. Bitcoin may be a lot higher than 50x in dollars by the point there is a Three Gorges worth of hash mining, or maybe not, but either way it doesn’t matter. Energy is what matters. Because energy is real.
Difficulty is curently 16.8 trillion. Layer1 is profitable at $1000/bitcoin. And when difficulty hits 34T it will be profitable at $2000/bitcoin. That is a lot of buffer, because with a doubling in difficulty under these conditions we will probably see a (albeit temporary mania) 10x or 20x in price.
How much spare power is there in Texas? How much scale can be applied? When do the main line power plants start copying what Layer1 is doing?
The American retiree depends on the survival of the municipal bond market for his survival. Food, too, is energy.
When do U.S. electric utilities, which are backed by municipal bonds, which are backed by the federal credit, do the sensible thing and start hodling bitcoin?
The uncomfortable thing is, electricity may get a whole lot more expensive. Thinking about places that rely on air conditioning. When you are actually paying for what you use, in a non-subsidized coupon currency, the truth can be painful.
Puerto Rico — where 10% of electricity is stolen — could suffer a lot now that i think about it.
New slogan…. want to be able to afford air conditioning? Buy bitcoin.
People aren’t going to like this. I don’t like it. It’s not going to stop it from happening.
The truth is the Federal Reserve is a non-profit entity created for the public benefit… which private entities can parasite on… which is true of a lot of non-profits.
The Fed, along with other banks getting their arms twisted, buys things for more than they are worth. Things like corporate bonds, municipal bonds, someday soon I guess stocks. It’s the Japanese central bank model, coming to America, coming to everywhere. Because people need air conditioning, people need to eat. There’s nothing wrong with trying to keep people alive, and there’s nothing wrong with socialism, within limits. But it’s non profit. Meanwhile someone needs to do the actual work, or people actually will die.
The not-for-profit Fed is becoming dysfunctional in the way that NGOs or National Public Radio is. You can see the future in places like Argentina or Greece. The vibe of working for a central government bank there. There is a lot of compliance, ritual, not a lot of aggression or chasing real things that generate a profit.
Think of dollar as an affinity coupon, created to support your local non-profit.
Layer1 is a for-profit.
Non-profits depend on for-profits.
Municipal bond investors, and electric utilities, and the Fed, should be talking to Layer1.