Fair distribution

When learning about the block subsidy, we posed the following question:

Let’s say you create a new, global, digital currency.

How do you fairly distribute units of that currency to the global population?

One solution would be to allocate it to every individual in proportion to their fiat denominated wealth.

Porting everyone’s fiat standard wealth over to a bitcoin standard might seem fair, on the surface. But doing so would also port over the effects of decades of policy from the fiat world and confer the advantages and disadvantages of participants in the old system to these same participants in the new system.

One solution would be to pitch your novel currency to investors, and allocate large portions to financial backers who shared your vision and wanted to dedicate resources to making it a success, giving them a stake in the network.

This is the route most other cryptocurrencies, such as Ethereum, took.

But this is allocation based on access, and, really, luck. What about all the people in the world who are willing to dedicate resources, but don’t happen to be VCs at your pitch?

What if you wanted to wipe the slate clean, and start anew? Distribute the new currency to everyone inclusively, fairly, and on the same terms, no matter their previous lot in life?

What if you wanted everyone in the world to have open and equal access and opportunity to compete to earn units of the new currency by performing the same type of work?

Satoshi’s solution to the problem was to distribute currency units to “miners” performing “work” (energy deployed over time) to secure and add transactions to the bitcoin blockchain via the Proof-of-Work consensus algorithm.

Importantly, this method of distribution was, and still is, open and accessible to all on the same terms, although it has become much more competitive since the early days. To participate, you need a power source and an internet connection.

New bitcoin being released into circulation by the protocol cannot be bought and paid for with any currency except the currency of the universe: energy. Literal watts that cannot be faked.

(Energy has a fixed supply, by the way.)

No amount of wealth, or influence, in the old system grants you wealth or influence in the new system short of the rate you’re willing and able to convert that wealth and/or influence into energy.

What’s more, this system of distribution is unbounded and positive-sum. My ability to marshal resources and deploy energy to mine bitcoin does not impede your ability to marshal resources and deploy energy to mine bitcoin.

Of course, anyone can buy and sell already mined (released) bitcoin in the global marketplace. Wealth in the old system can “buy” you wealth in the new system, but only at the cost of converting (forfeiting) your wealth in the old system.

Today, $72,000 gets you 1 bitcoin if you choose to buy your way into the new system.

10 years ago, $400 got you 1 bitcoin, and $40,000 got you 100 bitcoin.

10 years from now? Who knows.

Likewise, 10 years ago, if you didn’t have $400 but you had a laptop computer (maybe you were a broke college student), you could have earned bitcoin by mining it from your dorm room.

Today: