@ Sydney Bright

Time is the most precious. Spending time with those we love, relaxing and enjoying peace of mind, and finding time for simple pleasures that warm our hearts are all examples of why we value time over everything else. We all want more time and know how finite it is.

In a previous article, I discussed how a better name for Bitcoin could be the Entropy Engine. In brief, Bitcoin is the Entropy Engine because system users rely upon entropic processes, either through private key generation or the mining process, to benefit from the system. Additionally, considering that life on earth is the consequence of the second law of thermodynamics, it is evident that Bitcoin accelerates our entropic purpose by monetizing energy production in a way never seen in human history. Bitcoin is all things entropy.

After writing the previous article, it slowly dawned on me that Bitcoin is valuable precisely because of its constraints related to entropy. Being an Entropy Engine gives Bitcoin the property of being scarce, and scarcity alongside utility brings value. These properties stem from the relationship between entropy and time. This article will discuss the relationship between entropy, time, and scarcity. These concepts will then help explain economic principles and pave the way to explaining why Bitcoin is a fascinating invention that brought economic value to the digital world.

Entropy is a measure of the disorder or randomness in a system. Essentially, entropy reflects the number of ways a system can be arranged, with higher entropy indicating more possible arrangements and more significant disorder. In an isolated system, entropy tends to increase over time, articulated through the second law of thermodynamics, which states that natural processes move towards a state of maximum entropy1. Our everyday experience with entropy can best be explained through heat. When energy is used to perform work, some of it gets released as heat, increasing the system's entropy by making the energy more dispersed and less useful.

Another impact entropy has on our daily lives is through the experience of time. As previously stated, the second law of thermodynamics states that, in a closed system, entropy always increases over time. Therefore, there is this dynamic where entropy is continuously growing, and our participation in a universe with such a law gives rise to the experience of an arrow of time1. In other words, time is a psychological experience resulting from interacting with a universe governed by the second law of thermodynamics1. It may seem intuitive to anyone reading this, but it is worth highlighting that time is always moving forward because entropy is continually increasing. No human can get any time back. From the point of view of a human, time is finite. Like energy and matter, which, according to the first law of thermodynamics, can neither be created nor destroyed, time is one of the universe's most limited resources.

Understanding the finite nature of time, energy, and matter is fundamental in economics. In his treatise on economics Man, Economy, and State with Power and Markets, Murray Rothbard states that "A man's time is always scarce. […] Therefore, time is a means that man must use to arrive at his ends. It is a means that is omnipresent in all human action"2. He goes on to state that "[…][i]n the first place, all means are scarce, i.e., limited with respect to the ends that they could possibly serve. […] Secondly, these scarce means must be allocated by the actor to serve certain ends and leave other ends unsatisfied. This act of choice may be called economizing the means to serve the most desired ends"2. Economics is fundamentally the study of how human beings make choices that allocate resources to satisfy their desires. Rothbard here highlights how because both time and the planet's resources are finite, human beings must choose how to allocate those resources. On aggregate, these individual decisions lead to the flourishing of human society as it develops and grows by becoming more and more efficient in resource allocation.

We all live on this one planet together. The resources on this earth are finite, which raises the question of how best to allocate these resources to satisfy everyone's needs and desires peacefully. The study of economics shows that free markets, which facilitate the free decision-making process of every human being, are the best way for all the resources to be allocated to maximize human flourishing if it is done so under the principle of non-aggression2,3. Notably, markets are needed because time and matter/energy are finite in the first place and are the necessary means to satisfy our ends. Put another way, economic value exists because of the scarce and useful nature of resources.

Consider now the vital relationship between the laws of thermodynamics and economics. The first law of thermodynamics, which states that matter and energy cannot be created nor destroyed, gives rise to the fact that resources are scarce on earth, which fuels economic decision-making amongst human beings. Additionally, the second law of thermodynamics, which highlights the universe's entropic nature, indicates that time is also scarce, valuable, and an integral aspect of economic decision-making, as all economic actions must use time. Most importantly, as described in more detail in the previous article, biological life can be viewed as the consequence of the entropic process of the universe. Life formed to help accelerate the increase in entropy. The process by which humans utilize energy and help accelerate the increase in entropy can also be viewed from an economic lens: economic decision-making helps drive the pursuit and innovation of energy production and usage. If economics is the study of the process by which human beings collectively make decisions, through individual action, that drive our societal progress forward. Then it is also the study of how human beings further accelerate their role in the entropic process of the universe. Entropy is the reason why we have economic markets, and economic markets help accelerate the entropic process. It is impossible to separate the laws of thermodynamics from the existence of the economic process within human society.

What is also appropriate to consider is the necessary properties of money. Nick Szabo, in his work "Shelling Out: The Origins of Money," provides an anthropological interpretation of how the use of money developed4. In trade, two potentially untrusting parties must find a way to trust one another. To do so, we can rely upon tokens of record governed by the laws of nature, which we all can trust. A commodity can be a helpful medium of exchange when it is scarce and hard to reproduce to the degree that people understand the extreme amount of energy and effort it would take to counterfeit one. Scarcity is how homo-sapiens detect the energy required to obtain a given object, giving it trust and validity as a unit of record. In this way, the first law of thermodynamics, which expresses matter as finite, provides a condition from which human beings can benefit by using it to trust one another. Not only is scarcity an underlying property that is the cause for economics, but the scarcer commodities, or at least those with the highest stock-to-flow ratio, are used as a medium of exchange that allows for more productive exchange within the economy5. In other words, most of a certain kind of scarcity is an underlying property in what makes high-quality money.

What is then interesting to ponder is the concept of the most scarce. One of the scarcest things we value, that which is most scarce, is time. Due to the second law of thermodynamics, time is the most finite and scarce resource. There is no way of 'recovering' or 'creating' more time. In that same vein, money can be conceptualized as an economic abstraction of time. I work now to receive money, which I can use to satisfy an end later. Similarly, I invest some money now so that it may grow, and I can benefit even more from that money later. Money and time are linked. Therefore, it stands to reason that the soundest form of money will be related to time in some fundamental sense. The better a money can store time, the more attractive that money is to use.

One significant component that contributes to the considerable innovation of Bitcoin is the difficulty adjustment. The difficulty adjustment in Bitcoin ensures that the time to mine a block remains close to 10 minutes, regardless of changes in the total mining power (the amount of energy being contributed to the network). This adjustment is crucial because it prevents blocks from being mined too quickly or slowly as miners join or leave the network. By recalibrating every 2016 blocks, the network maintains a certain rhythm, creating a new block every 10 minutes. It isn't easy to design a circuit board that can track time accurately and autonomously without relying on external time sources. However, creating a computer network that emulates the laws of thermodynamics via the mining process while simultaneously including the difficulty adjustment to give the machine a sense of time allowed it to adopt properties that were unique to nature itself. In this case, it is the first digital software that fully inherited the properties of scarcity.

Judging the correct ending for an article that blends so many disciplines is difficult. Perhaps the best way is to go full circle. The works of Donald Hoffman suggest that time is a consequence of human consciousness, not fundamental to the universe, that serves a positive utility towards our evolutionary pursuit of survival6. The predecessor article to this one highlighted how life is a consequence of the entropic nature of the universe. Perhaps time and our perceived relationship between time and entropy are helpful for life in pursuing its nature in this regard. Human beings gravitate towards scarce money like mosquitos gravitate toward light because it can be beneficial in the economic pursuit, which drives us toward the efficiency of furthering the production of entropy. This is potentially why those studying Bitcoin tend to view it as a technology of freedom, peace, prosperity, and more because money is a fundamental tool at which we are allowed to pursue such inherent purpose.

References

1. Grünbaum A. TIME AND ENTROPY. Am Sci. Published online 1996.

2. Rothbard MN. Man, Economy, and State with Power and Markets. Second Edition. Ludwig von Mises Institute; 1977.

3. Mises L von. Human Action: A Treatise on Economics. Ludwig von Mises Institute; 1940.

4. Szabo N. Shelling Out: The Origins of Money. Satoshi Nakamoto Institute. Published 2002. Accessed April 19, 2023. https://nakamotoinstitute.org/shelling-out/

5. Ammous S. The Bitcoin Standard. Wiley; 2018.

6. Hoffman DD, Prakash C. Objects of consciousness. Front Psychol. 2014;5(JUN). doi:10.3389/fpsyg.2014.00577