PoW is Efficient

Foreword

Most people think #Bitcoin’s PoW is “wasteful.” In this article, I explore how everything is energy, money is energy, energy usage is subjective, and PoW’s energy costs relative to existing governance systems. This article is a collection of direct thoughts from many individuals in the space — my value-add was in the aggregation, distillation, and combination of narratives.

Work is Energy

The idea of “work” being energy started when the French Mathematician Gaspard-Gustave de Coriolis introduced the idea of energy being “work done.” A long time ago, the work done in the economy was entirely human. That work was powered by food.

About a million years ago, humans stumbled across fire. As a result, the energy available to us increased because now we could keep warm not just from what we ate but also from burning. So this added energy usage improved our standard of living.

Some thousands of years ago, our energy usage increased still further when we domesticated animals. Animals could labor in our place. Those new laborers also had to be fed. Large amounts of food were required to meet the energy demand, and our prosperity increased alongside.

In the last few hundred years, we built great machines. Those mechanized machines produced work, first from sources like water & wind, and then the cheaper sources like coal and gas, and now from nuclear sources (fission/fusion). Both machines and nature produce work through the utilization of energy. We have an economy based not on money, but on work and energy.

All things in our lives are closely linked to the price of energy. Purifying water requires energy. Transporting products requires energy. Manufacturing products requires energy. Cooking requires energy. Refrigerators and freezers require energy. In a free market, the cost of any good largely reflects the energy used in producing that good. Because free markets encourage the lowest priced goods, the energy used in producing any good is minimized. Money, which is the representation of the work required to generate goods and services, can also be viewed as stored energy.

World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

In the early 20th century, industry leaders like Henry Ford and Thomas Edison were interested in replacing gold or the dollar with “the energy dollar” or “units of energy” (commodity/energy currency). The concept was popular due to its sound money characteristics, including: a well-defined unit of account, easy measurement/not easily counterfeited, divisibility into smaller units, and fungibility (that these units would be equivalent to any other unit). However, energy money was flawed — it could not be transmitted or stored easily.