This article has been published on Medium.

To outsiders, the Bitcoin journey often looks incredibly strange – and yes, we probably sound a bit crazy. But it’s even wilder for those who actually experience its rabbit hole. Suddenly, things start to make sense, like putting on special glasses that reveal patterns and connections everywhere. Trying to explain this transformation to someone is like trying to explain how you ended up in a career light-years away from your initial interests when you first graduated. It’s a long, messy, and winding path, made up of wins, random turns, and sometimes, failures. And one of the ways you start to re-evaluate the world around you is by applying first principles.

Energy is such a first principle. We’ll dive deeper into this concept in the next section, but for now think of energy in how it relates to your own life. You expend physical energy by working, moving around, doing chores, concentrating, or even just by staying alive — your basic physiological functions like your digestion, breathing, cellular processes, and nervous system activity. Beyond this, there’s your attention and focus. We each have a limited capacity for attention and a limited bandwidth. How you choose to direct this energy determines what you achieve. It’s up to you to allocate it wisely. This comes down to one of the most fundamental concepts of our existence:

— Human time is scarce.

This is why we have this sense of urgency. I love how Jack Mallers phrases this: “If I lived forever, I would only go to the gym in a thousand years.” This reflects our tendency to act now and to prioritize our time and energy. Human attention becomes valuable because while we are focusing on one thing, there’s an opportunity cost for the things we are not doing. We filter out what’s important now and postpone or even eliminate less important things. This used to be easier when the world was smaller. But now we relentlessly have to fight distractions in our lives. Take, for instance, one thing you really like, let’s say gardening. You’ve probably watched some gardening videos. But if you were to watch every gardening video on YouTube alone, you would roughly be watching two lifetimes’ worth of content. In a world where more and more distractions and possibilities are screaming for our attention, it becomes painfully clear how valuable our time and thus our energy is.

Entropy and thermodynamics

Energy is everywhere, and how it works comes down to some basic natural laws. One of the fundamental laws that govern energy is thermodynamics, a branch of physics that studies the relationships between heat, work, temperature, and energy within a system. At its core, it focuses on how energy is transferred and transformed. This field was born in the 19th century, as scientists were first figuring out how to build and operate steam engines – an idea that will be useful to remember later on.

There are four main laws of thermodynamics:

• Zeroth Law: If two systems are each in thermal equilibrium with a third system, they are in thermal equilibrium with each other. This law defines temperature and justifies the use of thermometers.
• First Law (Law of Energy Conservation): Energy cannot be created or destroyed; it can only be transformed from one form to another. The change in internal energy of a system equals the heat added to the system minus the work done by the system on its surroundings.
• Second Law: The entropy (a measure of disorder or randomness) of an isolated system always increases over time, meaning energy transformations are not 100% efficient, and heat cannot spontaneously flow from a colder to a hotter body. This law explains the direction of natural processes and the concept of irreversibility.
• Third Law: As the temperature of a system approaches absolute zero, the entropy approaches a constant minimum (often zero for a perfect crystal). This law establishes an absolute scale for entropy.

In simpler words, here’s what we can learn:

1. Energy is scarce because it cannot be created. What we actually do is to harness energy by transforming it from one state to the other. Sunlight becomes electricity (solar power), chemical composition becomes heat (burning gas), water at height becomes motion (a dam with a turbine), the motion of a turbine becomes electricity, and so on…
2. Energy is constantly dissipating, going from order to disorder. It breaks up, spreads out, or gradually seems to vanish, all the time. Living organisms are constantly fighting this disordering process, or in other words, consuming energy.

Okay, so we now more or less understand how energy sits at the basis of our existence, that it is scarce, and that it is difficult to hold over time. The energy we harness needs to be turned into useful work at some point, but when work doesn’t need to be done immediately, it risks being surrendered to the forces of entropy and fading away. This is why you need an efficient way to store it.

As humans, we have been controlling energy since the very beginning. We can see this clearly from the evolution of weaponry. From creating spears and arrows to sophisticated explosives. We learned how to harness different kinds of energy to perform useful work. Steam is one of the oldest examples of using stored energy to perform work. We capture steam in a pressure vessel—a strong, tightly sealed container—then release it in a controlled way to power turbines, locomotives, or pistons. The key to this is pressure: steam under pressure can turn wheels, drive mechanical systems, or generate electricity. Adding more steam to the system increases the energy density per unit, enabling it to perform even more work. But what happens when the container is not solid enough or not properly sealed? The energy dissipates into the air—useless and unrecoverable. In other words, when the energy per unit is diluted, the density drops, and we need more of it to do the same amount of work.

Monetary energy & inflation

We now know that to get the most out of our energy, it needs to be stored efficiently to be able to perform the maximum amount of useful work later on. As previously discussed, our daily lives constantly use different forms of energy. And this is where money comes in.

Money is, at its core, our time and energy in an abstract form. It’s the unique market good we don’t consume but rather use to transfer and store value —what we can call ‘monetary energy.’ Why energy, you ask? Well, it’s the energy we put in for roughly 40 hours a week. We specialize in one thing, do it well, and then trade that for other goods and services. This is far more efficient than trying to do everything ourselves. This very process led to the evolution of civilizations and, essentially, brought us to where we are today: specialization. In return for our specialized effort, we receive this energy back in the form of a tool that should be able to hold and transfer this energy efficiently. See where this is going? Notice I said “should.” Because, surprise, surprise, it doesn’t.

Most people see inflation as simply rising consumer prices. But many don’t fully grasp its true origin. At its root, inflation is mainly created by the money supply expanding. When a central bank creates new monetary units, all existing units are diluted and gradually lose value.

If we think back to what we discussed about thermodynamics, energy can’t be created or destroyed. It’s the same amount of energy —or slightly more because we create more goods and services—but spread across more units, decreasing the energy density per unit. This energy density is what we know as purchasing power—and notice, ‘power’ refers to energy. When the storage container gets bigger, but the total energy inside stays the same, the energy density per unit falls.

In the example of our steam generator, the pressure vessel leaks, the gas dissipates, dilutes, and it can no longer transfer its energy to the turbine. This decreased ability to do work is precisely how fiat currency loses its purchasing power.

Bitcoin as the perfect pressure vessel

Money, just like everything else, answers to the laws of thermodynamics: we cannot simply create new energy out of thin air. Yet, central banks constantly attempt to do exactly that. For a short period of time, this seems to work as intended: more money can be spent at its current purchasing power. But this newfound spending quickly pushes up the prices of goods and services closest to where the new money entered the system. Rising prices then trickle down the economy, eventually showing up in our shopping carts.

Bitcoin is free from these arbitrary changes in monetary policy. It doesn’t care about government deficits or banks needing bailouts. It is a solid, perfectly sealed, and unbreakable pressure vessel. Adding energy to it simply increases the energy density within every single unit. This is precisely what happens when people choose to opt out, even partially, from a corrupt and broken system, moving into a new, sound, and fair one. They are transferring their ‘steam’, their life force, from the leaky, expanding vessel into the solid, tightly sealed one. This new vessel can absorb and withstand all the pressure in the world, channeling its built-up energy into a powerful stream of productive work, rather than letting it evaporate into entropy. These are the laws of thermodynamics in full effect.

Modern pressure vessel for storing pressurized gasses. Source: www.titanmf.com

Another way in which Bitcoin adheres to these laws is through its timechain. On average, every ten minutes, a seemingly disordered blob of information is added into a block and cryptographically sealed through the mining process. This information contains a previously unknown subset of transactions pulled from the mempool. As the previous block of transactions is being mined, it is yet unknown what the next block will look like, creating a high degree of uncertainty about the future state of the chain.

In his 1948 paper, “A Mathematical Theory of Communication,” Claude Shannon introduced the concept of entropy in information, laying the groundwork for information theory. ‘Shannon entropy’ is essentially a way to measure how much surprise or “newness” there is in a piece of information, or how uncertain an outcome is. It’s similar to thermodynamic entropy: high uncertainty about specific outcomes is reflected by high entropy, or disordered possibilities. When a specific outcome is certain, entropy is zero, meaning no uncertainty and no new information gained by observing the outcome.

Bitcoin’s blocks reflect this certainty of outcomes with each added confirmation to a mined block. In other words, with every block, a snapshot is created containing events from different times in the near past, the entropy – the disordered information – falls to zero, and the state of ownership, an indisputable truth, is frozen in time, forever. And just like all life forms, it does this by expending large amounts of energy, increasing the entropy of its surroundings. Bitcoin, in a way, behaves like a living creature, fighting and lowering entropy all the time.

Finally, Satoshi’s solution to the double-spend problem brings a crucial piece of physical reality into cyberspace. In the real world, we take for granted that we can’t easily duplicate objects. But in the digital realm, that’s not the case. When I send you a photo via WhatsApp, I’m not sending you the original; I’m sending a copy. In Bitcoin, however, objects – like an unspent piece of bitcoin – actually move instead of duplicate. This gives Bitcoin the same behavior as a physical object in the real world. It’s hard to overstate the importance of this discovery, as this was impossible before 2009 without relying on a trusted central party.

Again, this strengthens the similarities to physical reality: just as in the real world, actual energy is expended to move – or change the ownership of – an asset.

Energy allocation

Now that we understand how truly unique Bitcoin is, having properties that make it the perfect container to store your monetary energy, we can start to make the case for it as a new but deeply misunderstood investment class. Bitcoin is not a company: it doesn’t have a CEO, it doesn’t produce anything, and it doesn’t generate yield. Bitcoin is not a commodity: it is engineered and has absolute and verifiable scarcity. It is not a unique collectible nor a utility to live in. It is something totally new, and we are still making sense of it. For the first time in human history, we can genuinely own an asset without relying on greedy middlemen or being subjected to physical theft. And because it is pure information, it is extremely portable yet hard to confiscate. It is often hard to wrap our heads around because it appears to have characteristics of something physical, constrained by natural laws. This makes Bitcoin real, even though it only exists in the realm of digital information.

For most people, Bitcoin is still unknown or exotic, and those familiar with the world of investing and finance often stay in the comfort of traditional finance. For them, saving and investing is about protecting and growing wealth. Yet, many options that used to work well simply don’t hold up any longer. Historically, USD price inflation has averaged 3% according to the consumer price index (CPI). More recently, we’ve seen years with up to 7-8% year-over-year inflation, largely due to the COVID relief measures. Intuitively, most of us feel prices have increased even more in certain spending categories. The truth is, the real inflation rate is a rather personal metric, depending heavily on your own spending habits and where you live, but for many of us it feels like we’re being lied to.

Overall, the past five years have clearly revealed how easily the money supply can be inflated when a crisis hits and how significantly this impacts price inflation. Over the last decade, the US M2 money supply has grown substantially, roughly quadrupling from about $5.5 trillion in 2015 to around $21.9 trillion by early 2025. Price inflation often follows shortly after (red line in the chart), and alternative metrics, like inflation excluding food and energy (because who needs those, right?), are often used to smooth the data and understate the true reality.

Source: FRED®, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/graph/?g=13lDl

The takeaway here is this: inflation is slowly bleeding out our energy. When making investment decisions, we must be aware that the first 5% of every investment return is often needed to break even against inflation. The hard truth is that many assets’ returns are simply a reflection of this monetary debasement, or worse, they don’t even yield positive returns at all – ahem, real estate.

This brings us to a crucial question: where do we allocate our time and effort – our energy, our life force? If life in general is a game of energy allocation, the world of investing is just a subset, but at the end of the day it will determine how much of your time you have been able to preserve and enjoy.

I hope I’ve sparked some curiosity in you, enough to dive deeper into this beautiful gift that Satoshi gave us. And that perhaps you, too, will be willing to allocate a little bit of your precious energy to studying Bitcoin.