Money as an Energy Source and Carrier

Money as Energy - Cryptocurrencies

From the beginning of time, since the Big Bang, a huge amount of energy was released and created two worlds: tangible and intangible. The entire amount of energy is constant in both of them, it just transforms all the time between its different forms. Forms like thoughts, emotions, frequencies from an intangible world come into a tangible world and become trees, houses and living organisms in our tangible world and vice versa.

One technology which helps to carry and exchange energy in our tangible or physical world is called money. It is one of the oldest technologies in human society besides language. Money has been around in different forms ever since human communities started to grow and cooperate more with each other. The most primitive form of money exchange is money as a commodity – still used in more closed areas and communities, where energy and value are exchanged with “things” for example sheep, oil or vodka all functioning as a form of energy or resource.

Then we have metal coins and paper money as the most common form of money widely used worldwide. A long time ago it was backed by pure gold which was easy to translate into energy or resource through the work required for mining it. Today the world’s most usable form of money is digital. In fact, over 90% of the value in the whole world is transformed in a digital way but there is an interesting fact about current modern money in relation to its source.

How and where does it come from?

Does it fit into the law of constant energy exchange and the transformation of it from one form into another?

Well, it doesn’t and that might be the problem. Let’s take a closer look at how today’s money has been created.

Money Today

Basically, there are two main strategies:

  • First, through US FED (Federal Reserve System) and hierarchy of worlds central banks who will decide to create new money from thin air through changing the loan interests between different banking layers or by buying into government issued bonds and regulating the monetary policy in this way. Such decisions are made in a closed process, based on highly placed people’s decisions, taking into account economic statistics, strategy, analysis, and possible predictions.
  • Another method, for the creation of money is through a system called Fractional Reserve Banking, which means that every bank has the privilege of creating new money from loans. This means that, If I deposit my cash into the bank, then the bank is required to hold only 10% of that amount in its deposit account. The bank is then allowed to lend it (the original amount) out again and again so that multiplies that original amount of money which physically exists in the banking system by almost 9 times.

What we are seeing here is new money, created from zero, not backed by an energy that has been put into it in a first place. If we look even deeper, we see that this money creation is always related to incentivizing some activities (consumption). Banking money is meant to incentivize and regulate consumption – as more money is created, more humans are buying, are working to create, and this, in turn, empowers the economic circle. As discussed earlier, all this money is been created just by a decision, without being backed up by the true energy that has been put into it (backing it).
This may be one of the reasons why our common understanding about the money is more negative than positive.

People are struggling to understand money as energy because when new money is created and poured into the economy it is devoid of that original first energy needed to be backing it. It Comes from “nothing”, just some people making decisions and putting the end-users in the position of needing to create energy, value and put in resource around it, to energize the money flow and rebalance the original “law” referred to at the beginning of this article.

Cryptocurrency is Born

In recent times, we birthed a new kid on a block. It’s called cryptocurrencies, lead by Bitcoin. One very interesting feature of cryptocurrencies is the logic behind their creation. They are controlled by a technical protocol or inside rules which are designed and protected by the beauty of mathematics – a commonly understandable and trusted language. The rules are transparent and can’t be changed by people along the way. In that sense, it’s a totally new type of asset, which we have never seen so far.

Everyone who understands the code, can verify it and predict very exactly, how much new money will be created into the economy during a specific span of time. It’s different with every cryptocurrency but if we take the example of Bitcoin then it goes as follows. Every 10 minutes a new amount of bitcoin is created. At the beginning (in 2009) there were 50 bitcoins, after 3 years (2012) it was divided into 25, then 4 years later, in 2016 divided to 12,5 and so forward, it divides by two after every 4 years. Like one dollar can be divided into one hundred cents, we can divide one bitcoin into hundred million parts. So we have the creation fixed and we have the nominations fixed. From here we can calculate that approximately in 2140 the last, smallest part of a bitcoin will have been created and then it will be altogether 21 million of existing bitcoins circling around the economy. No more, no less.

So how is this related to energy?

Trough incentivizing certain activities which consume one form of energy f.ex electricity. and transforming it into transportable value, in our case, cryptocurrency (energy exchange). In order to create a new amount of bitcoins every ten minutes a certain amount of electricity is consumed and it serves the whole network by offering a transaction settlement service called mining. Everyone can participate in this process – there is no privilege given to anyone and we are all equal here. The only requirement is to have the hardware, internet and electricity.

Looking at the law of energy exchange, it seems that cryptocurrencies are energetically aligned which is something that can be questioned in traditional banking money. Since cryptocurrency creation process is fully transparent, can be verified by everyone and is directly relating into the law of transforming one form of energy into another – electricity to money, this alignment becomes more and more clear.

Food for thought?

by Asse Sauga – Estonia