In this article, Arthur Hayes explains why Satoshi Nakamoto's creation will become the currency of choice for artificial intelligence. I will present my argument as a series of logical conclusions that build on each other to "prove" that an AI will choose Bitcoin as the currency of denomination for its economic actions.
Author: Arthur Hayes
Original source: Medium
Compilation: Kate, Marsbit
My faith in the future of humanity was restored a few weeks ago after I visited a coffee shop in Paris that was truly extraordinary. Out of passion for specialty coffee, the baristas at this specialty store offer a 2-hour coffee-making experience. Readers who want to visit need to make an appointment. I think I'll send all my sales people there so they can experience firsthand what it's like when someone turns their passion for a craft into an incredible customer experience , at least for now, this experience can only be provided by humans.
To that end, I hope that artificial intelligence (AI) and robotics will be primarily used to eliminate the dull, boring jobs that most people currently have, so that more and more people can pursue their passions in a similar fashion. Ideally, this will lead to our next great art and cultural renaissance, as millions (if not billions) of humans are suddenly free to do what they love and create happiness through art.
Before such a glorious future arrives, we must push the boundaries and find the answer to the most critical question of today: Will artificial intelligence surpass us weak humans and become human slaves? Ever since the first computers came online during World War II, scientists and philosophers have debated how machines will evolve and their impact on the human experience. Most of the best science fiction novels or series consider the interaction between humans and artificial intelligence, and there is no clear consensus on the most likely outcome. But today, we're closer than ever to finding out. Recent advances in computing power have brought us to the cusp of a hockey stick moment when artificial intelligence will spread rapidly, changing the course of humanity almost overnight. In just two months, ChatGPT has reached 100 million monthly active users, making it the fastest-adopted technology in human history - so imagine as AI is integrated into everyday life, learning and improving, How quickly everything can change.
I am neither a scientist nor a philosopher. I'm a businessman, not a priest. As a businessman, my main creed is to make money - so when I see a new, hyped sector of the economy that is sending financial returns soaring for many public and private companies, I want to embrace it, I want to keep my distance from it. I want to embrace it because I know AI will greatly enhance the future of humanity, making them incredibly valuable. However, I know that the first money invested in a novel, super exciting technological advancement usually gets burned because it overpays for growth.
Take Amazon, for example. From its peak in 1999 to its trough in 2001, the company’s stock price fell 93%, but has since risen 400%. Can you hold out in the dark valley? I don't think I can do it. I'd rather try to avoid the first burst of bullish misery and buy at the bottom.
But I also know myself, I don't feel comfortable sitting on the sidelines. I have to participate somehow. So in order to profit from the coming AI boom, I had to identify the intersection between the industry I know best - cryptocurrency - and exciting new developments in AI. This is the genesis of this article and my next two articles, which together will form a triptych on the potential interplay between cryptocurrencies and artificial intelligence.
The topics of the three articles are as follows:
Bitcoin will be the currency of artificial intelligence (this article)
DAOs and DEXs: How artificial intelligence will change what it means to be a for-profit business
The shitcoins that will benefit the most from AI's data needs
Before I delve into this first article, let's clear up some terminology.
When I use the abbreviation AI, I mean an anthropomorphic thinking machine. While some might question that AI isn't "alive" in the sense of a human, carbon-based life form, we barely understand what consciousness is - so how can we say that silicon-based machines aren't sentient beings?
Being living beings, I would also assume that these AIs will be primarily focused on a) surviving and b) accomplishing goals set by their creators (i.e. humans, or other AIs in the future). These articles assume that the AI will do the best it can for the tasks it was created to do, based on how it was programmed.
01
Bitcoin will be the currency of artificial intelligence
In this post, I will lay out why Satoshi Nakamoto's creation will become the currency of choice for artificial intelligence. I will present my argument as a series of logical conclusions that build on each other to "prove" that an AI will choose Bitcoin as the currency of denomination for its economic actions.
First, I will discuss why AI needs to use blockchain-based digital payment systems. I don't think that alone is enough to make Bitcoin the presumptive winner, since fiat currencies can also run on public blockchains such as Tether. A central bank digital currency (CDBC) — the devil’s digital tool — also relies on a permissioned blockchain network. However, the focus of this section is to argue that a simulated payment system (i.e. TradFi) is not sustainable for an AI-driven economy.
Second, I think the two most critical inputs to any AI will be data and computing power. Similar to humans, the "food" of artificial intelligence is only a derivative of energy. I think AI needs to be transacted in a currency that retains its energy purchasing power over the long term.
Third, I think Bitcoin is the closest monetary instrument to represent pure energy. I will compare and contrast the monetary properties of Bitcoin, gold, and fiat currencies that are important to AI.
Finally, I will tie it all together and discuss the implications of Bitcoin being the currency of choice for AI. How does this affect on-chain transaction volume? Most importantly, if this AI+Bitcoin narrative becomes mainstream, how high can the price of Bitcoin go in a bull cycle ending in 2025/26?
02
Blockchain or bankruptcy
In order to understand the payment needs of AI, we first need to understand the types of financial interactions that AI must have in order to exist and persist.
Let's imagine there is a poetry AI called PoetAI. The goal of PoetAI is to create beautiful poems from natural language cues by assimilating all poems ever written. PoetAI is its own economic unit, which means it charges for its own services. Every time you enter a hint into PoetAI and receive a poem, you pay a fee.
PoetAI uses data from other people to learn how to write. So PoetAI has to pay for the privilege of using past human (and possibly other AI) written words. When PoetAI was initialized, there was an upfront cost to acquire a dataset of all written poetry. Subsequently, whenever a new poem is written, PoetAI must also obtain this information. PoetAI has to keep paying all these different data providers as it keeps trying to learn and get more data as the number of poems grows.
Finally, PoetAI must exist in electronic form. This means increasing the cost of electricity and computing power through the use of semiconductors ("chips"). As long as PoetAI is alive, it will have to keep paying for these services.
So, what kind of payment system does PoetAI need? It must use a ready-to-use, digital, fully automated system. A system that is only available when people are sober or want to work is not going to work. Clearly, a mock banking system - which is only open Monday-Friday and is fragmented between territories and the banks themselves - is not suitable.
One might counter that a digital skin on top of an analog banking system like PayPal is appropriate. However, PayPal exists at the discretion of the banking system. PayPal has no censorship. PayPal and similar companies routinely block payments from certain individuals involved in activities they deem unworthy. PayPal did this because it believed it knew what its bank bosses would want it to do in order to comply with opaque and purposefully incomprehensible banking rules.
For an AI that is non-human and intrinsically does not understand human "laws," the risk of such deplatforming is high and unwelcome. AI will require a digital payment system with clear and transparent rules that apply no matter who is making a transaction or paying for what on the network. It is impossible for any single entity to arbitrarily change the rules of the game at will. AI does not yet have an army to force payment systems to its will. The system must be censorship resistant from the start. A suitable payment system can only be powered by a public or private blockchain. The rules of the blockchain are contained in clear and transparent code. This is why only this type of digital payment system can be used by AI.
"Wait a minute," you might say. "A permissioned blockchain is not censorship resistant because those with 'permissions' can change the rules when they want." This is true and why I think censorship resistant digital currencies like Bitcoin Will become the first choice for artificial intelligence currency. But let’s put that aside for now – I’ll discuss the issue of censorship later in the article when I explore the pros and cons of the various digital payment options AI might use.
By using a blockchain-based payment system, PoetAI (or any other AI) can also receive electronic payments in tiny increments when needed. PoetAI can then use this always-on blockchain network to simultaneously and continuously pay other digital economy participants.
03
AI has to do
The existence and continuation of artificial intelligence requires two key resources: data and computing power.
Let's go back to PoetAI. For PoetAI to be successful, it must constantly learn from new sources of poetry. This data has to be hosted somewhere. What is required for hosting? Computer consumes power.
The second thing PoetAI needs is a network of super powerful computers to make sense of all this data. These computers take the data provided, learn, and then answer when prompted. The learning is continuous, because the more poems PoetAI writes, the better he gets at writing poems. But in any case, these operations require the computer to consume electricity.
When we strip PoetAI's food sources down to their most basic components, they are essentially semiconductors and electricity. Nvidia's stock price has soared recently because of the market's realization that the GPU chips Nvidia makes are critical to all of artificial intelligence. This article isn't about potato chips, so let's move on to the second food - electricity.
AI's profitability (and, in a sense, its entire existence) is based on being able to reap more from its output than the energy it needs to survive. From this perspective, artificial intelligence is not that different from humans. As humans we also have to create enough value for society so we can afford our food/energy.
AI is "happy" when electricity is cheap, just like humans are happy when nodoguro is affordable. Likewise, a currency accepted by an AI must maintain its purchasing power in kilowatt-hours, just as a currency accepted by a human must be able to purchase a constant number of kcals.
04
Bitcoin is an energy currency
In this section, I'll discuss how gold, fiat, and bitcoin came to be and how their value is assigned. Knowing the value and origin of each currency, and how it is held and transferred, can tell us how much its purchasing power is likely to change over time. Scarcity, digital censorship resistance, and energy purchasing power are three attributes that are evaluated for each currency.
gold
Gold on earth is limited. To get gold, we humans dig it out of the ground. We then process the extracted gold ore into the shiny gold bars and jewels we all know.
Gold mining has evolved over time. In the beginning, humans used their own muscles to mine it. Then we started doing some mining for us with horses and cattle. As technology advanced and we needed to go deep into the ground to mine gold, we started with steam and then hydrocarbon powered machines to dig.
Gold is definitely an energy derivative, but the source of energy is not constant. It could be humans or animals burning calories, or it could be machines burning diesel to "create" more gold. None of the energy derivatives are directly related to the price of gold production.
Gold is a physical commodity. To use it as currency, you need to carry it from point A to point B. However, in the digital world, we can create certificates or derivatives that represent gold in a warehouse somewhere. The problem with gold certificates is that you have to trust that when you go to redeem your gold, the entity that issued you the certificate actually holds your gold. It is impossible to continuously and untrustworthily audit whether issuers own the gold they claim to hold. So, if gold is digitally efficient, you have to rely on members of the trust cartel (e.g., banks and governments). In this sense, digital gold is not censorship resistant.
French currency
Fiat money is born when governments decree that previously worthless items are converted into money. The U.S. government issues U.S. dollars (USD). The dollar is purely a figment of paper, but by mandating that all legal transactions within the United States must be in dollars, it created demand for dollars. And since most new dollars are created virtually—that is, through government digital credits and debits to commercial bank accounts—rather than by physically printing money, its creation itself requires hardly any energy.
The value of the U.S. dollar, or any fiat currency, is entirely dependent on the credibility of the government issuing the fake currency. The problem with credibility is that higher energy spending per capita does not mean that the government will be more credible. A government can spend a lot of energy or have a lot of natural wealth, but be so corrupt that no one trusts it to maintain the energy value of its fiat currency over time. Myanmar and Zimbabwe are two extremely rich countries with shattered currencies. Politics is more important than the material wealth of governments when it comes to the valuation of currencies.
This means that it cannot be assumed that a fiat currency will have any energy value over time, nor is it possible to objectively predict which political form will last the longest. Large-scale human civilizations are only a few thousand years old. Compared with the length of time the universe has existed, this time span is not even a speck of dust. During this time, we experimented with various forms of political organization - none of which proved to be infallible.
Fiat currencies can be held physically or digitally. Right now, the world is in a transition period where we have paper money and digital fiat tokens. I believe paper currency will be abolished by most countries within the next decade. All fiat currencies will be digital and will move instantaneously on some kind of payment network - either run solely by the state, such as CDBC, a private banking institution (such as JPM Coin), or a public blockchain (such as ERC-20 USD Tether). Digital fiat currencies are also not censorship-resistant because governments ultimately control how it is issued, how it is used, and can change the rules at any time.
bitcoin
Bitcoins were created by computers solving complex puzzles. Miners buy ASIC chips and use electricity to create bitcoins. It's that simple. There is no other way to create bitcoins other than by consuming electricity.
The network has been established and continuously confirmed, and the number of bitcoins is always only 21 million. Bitcoin is a finite digital commodity. As a purely digital currency, Bitcoin has no mass. Whether I have 1 Satoshi (1 Satoshi = 0.00000001 Bitcoin) or 21 million Bitcoins, they all weigh the same: nothing.
Participants in Bitcoin must all agree on the rules of the network, or transactions will not be processed. Network rules are open and transparent to everyone. Network rules can be changed, but changes require the consent of a majority of miners when validating blocks. The economic game theory underpinning Bitcoin helps ensure that rights holders using the network do not do things that harm their interests. For example, the network will not vote to increase the cap on the number of bitcoins produced because it would undermine one of the key tenets of its value (i.e. it is a finite resource). Bitcoin is censorship resistant because the only way to change the rules is by submitting a public proposal to the entire network and deciding by a majority. There is no single entity that can arbitrarily change the rules of the network.
Now, let's summarize these three forms of money and their properties.
Scarcity:
Gold - Limited supply on Earth, but unknown off-terrestrial supply. When we start mining on asteroids, the supply of mineable gold will skyrocket. What will happen to the "value" of gold in the near future?
Fiat currency - has an infinite supply. The issuing government can create almost any amount of money for free.
Bitcoin has a finite supply, forever, ever, ever.
Digital Censorship Resistance:
Gold - is a physical commodity. The only way to use the digital representation of gold is to trust a centralized entity to issue golden digital certificates. Its digital form is not censorship resistant.
Fiat currency - can be physical or digital. Although it is in digital form, it is not resistant to censorship due to government surveillance.
Bitcoin - is purely digital and censorship resistant.
Energy purchasing power:
Gold - can be created through various energy derivatives. Therefore, there is no single energy derivative that defines the value of gold.
Fiat currency - requires hardly any energy to create, and its value is based more on the politics of its government than its natural energy wealth. Therefore, we cannot know exactly what it is worth now or at any time in the future.
Bitcoin - can only be created by computers that consume electricity. Over time, the cost of electricity determines the value of Bitcoin.
05
AI decision tree
Let’s take a look at some of the questions an AI will ask itself before choosing a transaction network and currency.
Can the currency be used in a censorship-resistant digital format?
As I said above, I believe AI needs a currency that can run on a censorship-resistant blockchain. Only Bitcoin has these qualities.
Bitcoin wins.
Over time, can this currency hold its value in the long run relative to AI food?
The food of artificial intelligence is electricity. AI has to make sure they can always afford it. The winner here is Bitcoin because while the value of fiat currencies and gold is not tied to anything definite or calculable, Bitcoin is essentially just a derivative of the cost of electricity.
Bitcoin wins.
Is this currency really scarce?
On Earth, there is a finite supply of gold, but globally, the supply is essentially unlimited. Fiat money is not scarce because the issuing government can create more fiat money at will at zero cost. The supply of Bitcoin is cryptographically limited.
Bitcoin wins.
Does this currency have a provable lifespan?
The potential lifespan of artificial intelligence is much longer than that of human civilization. In theory, if AI can survive in a high vacuum, it could exist for trillions of years until the heat death of the universe. The current human civilization can only survive on the earth, and there is no sign that we have the ability to avoid various exogenous or endogenous earth extinction events.
AI should not trust any agency that requires humans to operate because 1) humans are fallible and 2) AI will probabilistically outlast human civilization. The mining of gold and bitcoin can be done by artificial intelligence robots in the future, but fiat currency needs to be managed by human governments. It's unlikely that an AI could make itself dependent on anything run by a human government, so only gold and bitcoin would be suitable.
The relationship between gold and bitcoin.
Therefore, Bitcoin is the logical choice of currency for any artificial intelligence. It is purely digital, censorship-resistant, provably scarce, and its intrinsic value is entirely dependent on the cost of electricity. In these respects, nothing currently challenges Bitcoin.
Bitcoin Price = Moon
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