The value of bitcoin is fundamentally determined by the amount of energy required to produce it, similar to how the cost of producing a product dictates its value in a free market system. The innovation and scarcity of the supply can lead to higher profits, but competition eventually drives prices down. However, unlike computers that have experienced deflationary effects due to technological advancements, the automobile industry has not seen the same result due to increased costs of raw materials and production. Similarly, bitcoin has a fundamental cost of production driven by energy requirements, and the current price of bitcoin is influenced by its production cost. The bitcoin network acts as a marketplace for energy, allowing energy pools to connect globally and determine the value of energy based on the current bitcoin hashprice. Energy sets the value of bitcoin, and bitcoin sets the value of energy. Removing the energy component from bitcoin would make it no different from fiat currency.



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