First Encounters 2017

Value of bitcoin Need to assign a value to enable funds transfer. Wont any low value do? Why is the value increasing?

Here we see someone encountering Bitcoin during its first major bull run. Their starting assumption is purely utilitarian - Bitcoin is for sending money, so they reason any value should work. They're puzzled by why the value keeps rising if it's just a transfer tool.

If there are limited bitcoin, i could just use a lesser amount of bitcoin to represent my value. So i say $100=0.01 bitcoin, plenty of bitcoin for everyone. But, this values each limited bitcoin at $10,000 per coin.

This is their first attempt at reasoning it through. They start by suggesting we could just use smaller amounts ("0.01 bitcoin") to handle the limited supply. But then they have their first "aha" moment - even doing this implies a high per-coin value ($10,000). You can see them discovering that you can't escape the implications of the fixed supply.

So i say $100=100 bitcoin, $1 per coin, but only limited bitcoins exist so i need to buy from the open market. Creating demand.

Now they try the opposite approach - setting a low value ($1 per coin). But they immediately hit the core issue: with limited supply, they'd need to buy from others. They've just discovered how market forces create price pressure, even if you try to artificially set a low value.

Can i say? $perBitcoin = ( 'total bitcoins' - 'bitcoins held or lost' ) / 'the number of dollars in regular bitcoin transactions' ok what is regular, its not definable.

This is fascinating - in 2017 they're trying to create a logical formula to determine the "right" price. They're considering supply (total bitcoins minus held/lost ones) and demand (transaction volume). But they immediately spot the flaw in their own logic: how do you define "regular" transactions? They're discovering why simple supply-demand formulas don't fully capture Bitcoin's complexity.

If i store my funds, i need to know the value will remain the same or better. Not guaranteed

Their final thought shows how far they've come in just this one entry. They've moved from thinking about Bitcoin as just a payment tool to considering it as a store of value. The uncertainty in their final words shows they understand there's no guarantee of stability - a sophisticated insight for someone just working through these concepts during Bitcoin's first major bull run.

A New Understanding 2021

Bitcoin is not money or currency it is a divisible agreed store of value. Like a property has agreed value.

What a transformation from 2017! They've completely moved past their earlier confusion about Bitcoin's price. Instead of trying to force it into a pure utility role, they now see it as a consensus-based store of value, similar to real estate.

The value is what I can confirm with my node, as can every other node who wants to be part of the agreement process. The value only truly exist on every node running bitcoin, as a formal agreement that the value exists. Value has a relationship to the number of node owners on the network, network effect.

Here's a sophisticated insight about Bitcoin's decentralized nature - they understand that value comes from network consensus. Compare this to their 2017 attempt to find a mathematical formula for Bitcoin's "proper" value. They now grasp that value emerges from collective agreement rather than any single calculation.

Bitcoin has creation value, and speculative value. The creation value of a bitcoin is how much a miner commits to spending on electricity and hardware to compete and mine a Bitcoin first. Value realised when they sell to make profits from the mining operation. The speculative value of Bitcoin is driven by traders and investors competing to be the earliest to realises the scarcity of bitcoin in the 'future'

They've developed a sophisticated two-part model of value: 1. Creation value: Based on mining costs and operational investments 2. Speculative value: Based on future scarcity expectations This shows much more nuanced thinking than their earlier "won't any low value do?" question.

The word 'future' is key, mining gives the illusion of bitcoin abundance. But halving events show a glimpse of the future scarcity when one day there will be no more coins generated by the system. Halving's are the wake up call.

They now understand how Bitcoin's monetary policy creates long-term incentives and value dynamics - a far cry from their 2017 attempt to assign arbitrary values to coins. They see halvings as windows into Bitcoin's ultimate scarcity.

Recently miners have stopped selling, many are now holding btc in trust for investors in the mining company. Will this have a similar price effect as selling? Or does it decrease supply? Selling tickets in bitcoin instead of the bitcoin.

They're now asking sophisticated questions about market dynamics, exploring complex interactions between mining operations and market supply. This shows remarkable growth from their earlier basic supply/demand puzzlement.

Contradictions, I believe there is no 'time' the future is now and before, yes quantum time exists, but for our small scale light is effectively instant so its not a factor. Bitcoin is called a time based system, but perhaps it is more accurately an 'event completed' system or 'anti-disentanglement' system.

This is where they get philosophical, questioning Bitcoin's relationship with time itself. They're challenging the common description of Bitcoin as a "time-based" system, showing how deeply they're now thinking about its fundamental nature.

Bitcoin is a decentralised persistent disentanglement resistant value ledger, with programmatic reward functions for enhanced self network propagation.

What a definition! Compare this to their 2017 view of Bitcoin as just a payment tool. They now see it as a self-propagating system with built-in incentives, showing a dramatic evolution in their understanding.

It's alive, and a lot of energy is going into feeding it. But it's not bad, it's a more efficient and fair life form than the one we currently live with, one that was already created by economists and governments and wealthy to effectively manage large growing populations of independent thinkers.

They've moved beyond purely technical analysis to grappling with Bitcoin's broader societal implications, seeing it as a more efficient alternative to traditional financial systems. This shows how far they've come from merely trying to understand its price mechanics.

The Energy Insight Nov 2022 - Mar 2023

Nov 2022:
Proof of work had become an enormous factor in my understanding of the value of bitcoin. Will elaborate further.

Their focus has shifted dramatically. From initially trying to assign arbitrary values in 2017, they now see proof-of-work as a fundamental value differentiator. This represents a major evolution in their thinking about what gives Bitcoin its worth.

The only digitally scarce public asset embodies as one of its traits proven effort in its creation, that sets a bar so high that any competitor would never overcome the energy requirements

They're understanding the moat that proof-of-work creates. This is a sophisticated insight about Bitcoin's competitive advantage - it's not just about being first, but about the accumulated energy investment creating an insurmountable barrier to competition.

Mar 2023:
The fact that energy was used to create each Bitcoin is provably locked into each Bitcoin at the time of its discovery, this proof of work is unforgeable, making it a fair tradable commodity, fairly tradable for goods requiring equivalent energy to produce.

They've developed a sophisticated theory of value based on embedded energy - seeing Bitcoin as something that can be "fairly tradable for goods requiring equivalent energy to produce." This is worlds away from their 2017 attempt to just assign convenient values. They're now thinking about Bitcoin in terms of fundamental physics and real-world energy equivalence.

Over time scarcity is programmed to increase until ultimate scarcity is achieved when no further bitcoin are ever produced. This newly discovered ultimate scarcity will make all bitcoin the new denominator in any value calculation equation. Ie the final value of one bitcoin is the value of absolutely everything tradable, divided by 21million.

Their thinking about scarcity has evolved dramatically: - 2017: Struggling with basic supply limitations - 2021: Understanding halving events as "wake up calls" - 2023: Seeing Bitcoin as the ultimate denominator of all value This shows a profound deepening of their understanding about Bitcoin's long-term implications for value measurement.

This scarcity was only ever known by smaller human groups, these groups were always outperformed and eventually absorbed by groups with superior monetary technologies. As a planet we will be just like these early groups, we will have no choice but to align towards the ultimate monetary technology, and work together for the reward of the scarcest commodity ever to have been known.

They're now drawing parallels with historical monetary evolution, seeing Bitcoin as the next step in humanity's monetary technology progression. This shows how they've expanded their thinking from pure technical analysis to understanding Bitcoin's role in human civilization.

Price leading up to absolute scarcity. The fixed mining reward schedule is the value suppression system which allows for organic growth within existing market. The constant release of new bitcoins ensures the value will not get too high, but as the schedule halves the reward every four years, then every four years the suppression value halves, and we are one step closer on the 32step value path to absolute scarcity calculation.

This is a fascinating insight - they now see the emission schedule not just as a path to scarcity (as in 2021), but as a deliberate "suppression system" allowing for controlled integration with existing markets. They understand that Bitcoin's design allows for organic adoption through a measured release of supply, showing sophisticated thinking about market dynamics and adoption mechanisms.

The Metaphor Phase Mar 2024 - Apr 2024

Mar 2024:
Bitcoin as a better metaphor for value storage. A move more into how the mind interacts with bitcoin, I assume breedlove was influential here.

They're entering a new phase of understanding, moving from the technical and economic into the philosophical and psychological realm. It's interesting to see them acknowledge external influences on their thinking, showing how their understanding is being shaped by broader Bitcoin philosophy.

A speaker is a transducer, it converts electrical energy into sound. We use metaphor as a transducer to convert perceived value into stored value, and #Bitcoin is the best metaphor for value storage.

Look at this fascinating progression in their understanding: - 2017: "Won't any low value do?" - 2021: "Bitcoin is a decentralised persistent disentanglement resistant value ledger" - 2023: "Energy locked into each Bitcoin... fairly tradable for goods requiring equivalent energy" - 2024: Understanding Bitcoin as a "transducer" - a mental tool for converting perceived value into stored value They're now trying to understand how Bitcoin bridges the gap between abstract value and concrete reality.

As understanding of this improved metaphor spreads so does the bitcoin value.

They're making a connection between collective understanding and value - suggesting that Bitcoin's value increases as more people grasp its nature. This shows a sophisticated understanding of how narrative and comprehension drive adoption and value.

Apr 2024:
It's the most useful metaphor because is is a metaphor tied to reality with energy.

This single line brings together multiple threads from their previous entries: - The importance of energy (from 2022/23) - The role of perception (new in 2024) - The need for real-world anchoring (present since 2021) Though they'll later reject the metaphor framework entirely, here they're trying to reconcile their understanding of Bitcoin's energy foundation with its role in human psychology and value perception.

The Entropy Revelation Sep 2024

Not a metaphor.

What a powerful opening - directly rejecting their March 2024 view. In just six months, they've moved beyond seeing Bitcoin as a metaphor for value to understanding it as a fundamental thermodynamic process.

The world we live in is simplicity releasing into complexity; that's entropy increasing. Humans control and work against this high entropy and form less complex areas in our lives. We build systems and engines to generate extra low entropy areas where we want or need them.

They're setting up a fundamental framework: human civilization as a battle against entropy. This is a far cry from their early attempts to understand Bitcoin's price mechanics. They're now thinking in terms of physics and universal principles.

A refrigerator lowers the entropy of the inside of a box for us, but as an overall system it increases entropic complexity with heat waste and sound.

Using a familiar example to build understanding - showing how humans create local areas of order at the cost of increasing overall entropy. This sets up their new framework for understanding Bitcoin's energy use.

Bitcoin is a similar system where miners lower entropy in pockets within a digital system, overall releasing heat waste but the low entropy output remains. Although low entropy is already easy to achieve in digital systems, the solution Bitcoin provided was creating low entropy digital units that are also secure, unique, and counterfeit resistant, within a high-entropy environment.

This is a sophisticated insight about Bitcoin's true innovation - not just digital scarcity, but maintaining that scarcity in an inherently high-entropy environment. They're seeing Bitcoin mining not just as "work" but as entropy manipulation.

Bitcoins are not stored energy or time; they are stored low digital entropy in a high digital entropy environment. They were created with energy over time. The system they were created in ensures that they will remain in this perfect state forever.

Compare this sophisticated understanding to their earlier views: - 2017: Trying to assign arbitrary values - 2021: Seeing it as a "value ledger" - 2023: Understanding energy as locked in - Mar 2024: Viewing it as a metaphor - Now: Understanding it as an entropy management system

Newly mined bitcoins have more value because they are harder to mine, representing even lower entropy units. This raises the value of all existing bitcoins, as the average entropy of the entire system decreases. When existing bitcoins are sold, they have gained value because their average entropy has decreased over time, releasing more stored potential than they originally had.

Their understanding of halving events has evolved remarkably: - 2021: "Halving's are the wake up call" - 2023: "The fixed mining reward schedule is the value suppression system" - Now: Seeing halvings as entropy-reduction events that affect the entire system This shows a complete reconceptualization of Bitcoin's monetary policy in thermodynamic terms.

An example, using air pressure as an analogy: The Bitcoin generated after a halving are harder to mine so are lower entropy. These new lower entropy bitcoins enter the Bitcoin system (pressure vessel) as low pressure areas, acting on all existing bitcoin (air atoms) to move and equalise (trade) to the current pressure (price).

Even while using an analogy, they're careful to frame it in terms of physical systems rather than metaphor. They're showing how their new understanding can explain market dynamics in terms of fundamental physical processes.

When you buy bitcoin, that bitcoin immediately aligns with the current market forces, entering a state of equilibrium within the system. When someone sells their bitcoin, it releases its stored potential, which has increased due to the overall decrease in system entropy.

They're now able to explain market behavior in terms of equilibrium states and entropy changes - a far more sophisticated model than their early attempts at price formulas.

Why bother breaking it down like this? It allows us to mentally model and act on known changes caused by halvings and mining as it is viewed by an insightful praxeologist (one who studies human action). And it allows us to appreciate the beauty of the overall system design.

They recognize that this framework isn't just theoretical - it provides practical insights into Bitcoin's behavior and evolution. They're bridging the gap between physical understanding and human action.

The Final Understanding Oct 2024

Bitcoin is human engineered to be perfect money. (see previous)

Notice how confidently they can now state this - compared to their 2017 confusion about value. The "(see previous)" references their thermodynamic explanation from September, showing they view that as their complete technical understanding. This simple statement represents the synthesis of all their previous insights.

I can explain the energy, entropy, and self propagating reasoning now.

This line reflects their entire journey of understanding: - Energy: From their 2022-23 insights about proof of work - Entropy: From their September 2024 thermodynamic framework - Self-propagating: From their 2021 recognition of Bitcoin's network effects The "now" suggests they feel they've finally reached a complete understanding of these fundamental aspects.

Now I know, what's most important now is what having perfect money means to our world

This represents another evolution in their thinking - they're moving from understanding WHAT Bitcoin is to contemplating WHAT IT MEANS for humanity. Their intellectual journey has been:

Technical understanding (2017)
System dynamics (2021)
Energy fundamentals (2022-23)
Philosophical framework (Early 2024)
Scientific framework (Sep 2024)
And now: Societal implications (Oct 2024)

The brevity of this entry suggests someone who has reached clarity after years of wrestling with complex ideas. They're ready to move beyond understanding Bitcoin itself to exploring its implications for human civilization.

Bitcoin Understanding: A Journey Through Time