How do you determine Bitcoin’s value? By it’s high energy requirements

There’s been a whole lot of discussion about the looming Bitcoin bubble burst or how valuing Bitcoin isn’t possible because “it’s not a value-producing asset”. Bloomberg seems to have figured out that even if Bitcoin isn’t a bubble, it will still fail because of it’s “exorbitant energy costs“.

We can’t assume that current financial transactions take place over a magic network that doesn’t require any energy to run. It takes energy to print paper money and to run the massive servers that banks and financial institutions use all around the globe. It’s not just magic.

Sid Verma is on to something about Bitcoin’s energy requirements, but he came to the wrong conclusion. Bitcoin’s exorbitant energy cost is NOT going to be Bitcoin’s undoing. Rather, it’s precisely what gives Bitcoin it’s value. The massive amount of energy required to mine Bitcoin means that you can compute a value for Bitcoin (contrary to what the “Sage of Omaha” thinks). Bitcoin will require more and more energy and hardware to continue to mine, increasing it’s real-world/tangible value. Even if energy costs decrease, more energy is required to mine at a far greater pace than the reduction in the cost of energy. The value of Bitcoin has a real-world justification for increasing because we value energy to support our digital world.

If the energy required to mine Bitcion will eventually surpass that of the entirety of Japan, Citigroup is suggesting that governments will tax miners for their high energy consumption. That doesn’t take into consideration renewable energy (there’s a reason why so much mining is taking place in Iceland: geothermal energy) and autonomy of energy. Ironically, this decentralized currency is ideal for decentralized (and cleaner) energy production as well.

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