Digital Energy Reserve: Why Bitcoin Is the Best Payment Method for Using AI?
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Digital Energy Reserve: Why Bitcoin Is the Best Payment Method for Using AI?
For any artificial intelligence, Bitcoin is the most logical choice of currency.
Navigating Web3 tides with focused insightsAuthor: Arthur Hayes
Translation: TechFlow
The views expressed here are the author's personal opinions and should not be considered as investment advice or a recommendation to engage in any financial transaction.
A few weeks ago, I visited a very special coffee shop in Paris that gave me confidence about humanity’s future. Driven by a deep passion for specialty coffee, the baristas there offer a two-hour Omakase coffee experience. For readers interested in visiting, reservations are required in advance. I plan to send all my salespeople there so they can personally experience what happens when someone transforms their passion for craft into an incredible customer experience—one that, at least for now, only humans can deliver.
Therefore, I believe artificial intelligence (AI) and robotics will primarily serve to eliminate the dull, monotonous jobs that most humans currently perform, freeing more and more people to pursue their passions in similar ways. Ideally, this could lead to our next great artistic and cultural renaissance, as millions—or even billions—of people suddenly gain the freedom to do what they love and create joy through art.
Before such a future arrives, we must push boundaries and answer today’s most pressing question: Will AI surpass us fragile humans and become our master? Since the first computers came online during World War II, scientists and philosophers have debated the evolution of thinking machines and their impact on human experience. Most great science fiction novels or series explore the interaction between humans and AI, yet there is no clear consensus on the most likely outcome. But today, we are closer than ever to finding answers. Recent advances in computing power have brought us to a critical juncture where AI will spread rapidly and transform human destiny almost overnight. In just two months, ChatGPT reached 100 million monthly active users—the fastest adoption rate in technological history. Imagine how quickly everything will change once AI becomes embedded in daily life, continuously learning and improving.
I am neither a scientist nor a philosopher—I am a businessman. And as a businessman, my primary creed is to make money. So when I see an emerging financial sector ripe for hype—one that dramatically increases the financial returns of both public and private companies—I want both to embrace it and keep some distance. I want to embrace it because I know AI will greatly enhance humanity’s future and thus become extremely valuable. Yet I also know that with any novel, super-exciting technological advancement, early capital often pays too high a price for growth.
Take Amazon as an example—the stock dropped 93% from its peak in 1999 to its low in 2001, but then grew 400-fold afterward. Could you hold on through that dark valley? I don’t think I could. I’d rather try to avoid the initial burst of bull market euphoria and buy in during the troughs.
But I also know myself well enough to realize that sitting on the sidelines would make me uncomfortable. I must participate somehow. Therefore, to profit from the coming wave of AI enthusiasm, I need to identify the intersection between the industry I understand best—cryptocurrency—and the novel developments in artificial intelligence. This is the origin of this article and the next two, which together form a triptych on the potential interactions between cryptocurrency and AI.
The themes of these three articles are:
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Bitcoin will become the currency of artificial intelligence (this article);
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DAOs and DEXs: How AI will redefine what it means to be a profitable enterprise;
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Which tokens will benefit most from AI’s data demands.
Before diving into the first article, let’s clarify some terminology.
When I use the abbreviation AI, I refer to anthropomorphic thinking machines. While some may argue that AI isn’t “alive” in the carbon-based sense of biological life, our understanding of consciousness remains limited—so who are we to say silicon-based machines aren’t sentient beings?
As living entities, I will assume these AIs are primarily concerned with a) survival and b) achieving the goals set by their creators (i.e., humans, or eventually other AIs). These articles assume that AI will do whatever it takes, within its programming, to fulfill the tasks it was created for.
Bitcoin Will Become the Currency of Artificial Intelligence
In this article, I will explain why BTC will become the preferred currency of artificial intelligence. I will build a series of logical arguments that cumulatively “prove” Bitcoin will be chosen by AI as the monetary unit for its economic activities.
First, I will discuss why AI needs a blockchain-based digital payment system. I acknowledge this alone does not make Bitcoin the winner, since fiat currencies can also exist on public blockchains (e.g., USDT). Central bank digital currencies (CBDCs)—government-backed digital tools—could also run on permissioned blockchains. However, the focus here is to argue that analog payment systems (i.e., traditional finance) are unsustainable for an AI-driven economy.
Second, I will argue that the two most critical inputs for any AI are data and computational power. Like humans, AI’s “food” is merely a derivative of energy. I will argue that AI needs a currency capable of preserving its purchasing power for energy over long periods.
Third, I will argue that Bitcoin is the closest thing to pure energy as a monetary instrument. I will compare and contrast Bitcoin, gold, and fiat currencies across monetary properties that matter to AI.
Finally, I will synthesize all of the above and discuss the implications of Bitcoin becoming AI’s preferred currency. How will this affect on-chain transaction volume? Most importantly, if the AI + Bitcoin narrative goes mainstream, how high could Bitcoin’s price reach within this bull cycle ending in 2025/26?
When Blockchains Become the Payment System for AI
To understand AI’s payment needs, we must first understand the types of financial interactions AI must perform to exist and sustain itself.
Let’s imagine an AI called PoetAI whose goal is to generate beautiful poetry from natural language prompts by absorbing all poetry ever written. PoetAI is an economic entity—it charges fees for its service. Every time you give PoetAI a prompt and receive a poem, you pay a fee.
PoetAI learns by using others’ data. Therefore, PoetAI must pay for access to past human (and possibly other AI) writings. When PoetAI initializes, it pays a fee to acquire the entire dataset of existing poetry. Then, whenever new poems are created, PoetAI must obtain those too. Over time, as the number of poems grows, PoetAI must continually pay various data providers as it constantly seeks to learn and gather more data.
Finally, PoetAI must exist electronically. This means paying for electricity and computational power via semiconductors (“chips”). As long as PoetAI exists, it must continuously pay for these services.
So what kind of payment system does PoetAI need? It must use one that is always available, digital, and fully automated. A system only accessible when humans are awake or willing to work is unsuitable. Clearly, analog banking systems—which operate only Monday to Friday and are fragmented geographically and institutionally—are inadequate.
One might counter that digital overlays on analog banking systems, like PayPal, are sufficient. However, PayPal operates under the discretionary authority of the banking system. PayPal is not censorship-resistant. PayPal and similar companies frequently block payments for individuals engaging in activities they deem unworthy. They do so because they believe they must follow opaque and deliberately obscure banking rules dictated by their banking partners.
For an entity that is not human and fundamentally doesn’t understand human “laws,” the risk of platform censorship is unacceptably high. AI will require a digital payment system with clear and transparent rules, regardless of who conducts the transaction or for what purpose. No single entity should have the authority to arbitrarily change the rules at any moment. AI has no army to force a payment system to comply with its will. The system must be censorship-resistant from the outset. Only public or private blockchains can provide such a system. Blockchain rules are explicitly and transparently encoded. This is why only this type of digital payment system can be used by AI.
“Wait,” you might say. “A permissioned blockchain isn’t censorship-resistant because those with ‘permission’ can change the rules at will.” You’re correct—and this is one reason I believe censorship-resistant digital currencies like Bitcoin will become AI’s preferred choice. But let’s set that aside for now. I’ll address censorship concerns later in this article when comparing various digital payment options AI might use.
By using a blockchain-based payment system, PoetAI—or any other AI—can receive electronic payments in tiny increments as needed. Then, PoetAI can simultaneously and continuously pay other participants in the digital economy using this always-open blockchain network.
AI’s Source of Energy
AI requires two key resources to exist and thrive: data and computational power.
Let’s return to PoetAI. To succeed, PoetAI must continuously learn from new poetic data. This data must be stored somewhere. What does storage require? Computers powered by electricity.
The second thing PoetAI needs is a powerful computer network to process all this data. These computers receive input data, learn from it, and generate responses to prompts. Learning is continuous—the more poems PoetAI writes, the better it should become at writing poetry. But in all cases, these operations require computers powered by electricity.
When we reduce PoetAI’s sources of sustenance to their most basic components, they are actually semiconductors and electricity. NVIDIA’s stock has recently surged because the market recognizes that its GPUs are essential for all AI. But this article isn’t about chips—let’s move on to the second food source… electricity.
For AI to be profitable, its revenue from output must exceed the energy required for survival. In this regard, AI is no different from humans. As humans, we must also create enough value for society to afford our food/energy.
When electricity is cheap, AI feels “happy,” just as humans feel content when they can afford high-quality ingredients. Likewise, the currency AI accepts must preserve its purchasing power in kilowatt-hours, just as human-accepted currency must maintain its ability to purchase the same number of kilocalories.
Bitcoin Is Energy Money
In this section, I will examine how gold, fiat, and Bitcoin are produced and valued. Understanding the source of value for each currency and how it holds and transfers value allows us to assess how its purchasing power changes over time. Scarcity, digital censorship resistance, and energy purchasing power are the three attributes used to evaluate each currency.
Gold
There is a finite amount of gold on Earth. To obtain it, humans mine it from underground. Then, we refine the extracted ore into the familiar shiny bars and jewelry.
Gold mining has evolved over time. Initially, humans used their own muscle power. Then, we began using horses and oxen for certain mining tasks. As technology improved and we needed to dig deeper, we started using steam, then diesel-powered machinery.
Gold is indeed a derivative of energy, but the energy source isn't constant. It could be kilocalories burned by humans or animals, or diesel consumed by machines to "create" more gold. There is no single energy derivative directly tied to the production cost of gold.
Gold is a physical commodity. To use it as money, you must transport it from point A to point B. However, in the digital world, we can create certificates or derivatives representing gold stored in a warehouse. The problem with gold certificates is that you must trust the issuer actually holds your gold when you want to redeem it. There is no way to continuously and trustlessly audit whether the issuer possesses the gold they claim. Thus, to efficiently use gold digitally, you must rely on trusted members of an alliance (e.g., banks and governments). In this sense, digital gold is not censorship-resistant.
Fiat
Fiat currency comes into existence when a government decrees that previously worthless objects now function as money. The U.S. government (USG) issues the U.S. dollar (USD). Dollars are purely fictional entries printed on cloth; but by mandating that all legal transactions within the U.S. must be conducted in dollars, demand for the currency is created. Since most new dollars are generated digitally through bookkeeping and lending in commercial bank accounts rather than printing physical notes, their creation requires almost no energy.
The value of the dollar or any fiat currency depends entirely on the credibility of the government issuing it. The problem with credibility is that higher per capita energy consumption doesn’t necessarily mean greater governmental trustworthiness. A government may consume vast amounts of energy or possess abundant natural wealth, but if it is extremely corrupt—so much so that no one believes it can maintain its fiat currency’s value in terms of energy—then its currency lacks trust. Myanmar and Zimbabwe are two examples of countries rich in natural resources but with terrible currencies. In monetary valuation, the political structure of a government matters more than its material wealth.
This means fiat cannot be considered to have any inherent long-term energy value, and there is no objective way to predict which political form will endure the longest. Large-scale human civilization has existed for only a few thousand years—a blink compared to the age of the universe. During this time, we’ve experimented with various forms of political organization, but none has proven absolutely correct.
Fiat can be held in physical or digital form. Currently, the world is in transition—we have paper bills and digital fiat tokens. I believe within the next decade, most nations will eliminate paper currency. All fiat will be digital and enable instant transactions on some payment network—whether a central bank digital currency (CBDC) operated solely by the state, private bank tokens (e.g., JPM Coin), or public blockchains (e.g., ERC-20 USD stablecoins like USDT). Digital fiat is not censorship-resistant, because ultimately governments control its issuance, usage, and can change the rules at any time.
Bitcoin
Bitcoin is mined by computers solving complex mathematical puzzles. Miners buy ASIC chips and use electricity to create Bitcoin. That’s it. There is no other way to produce Bitcoin besides consuming electricity.
The Bitcoin network has established and continuously confirmed that the total supply of Bitcoin will forever be capped at 21 million. Bitcoin is a scarce digital commodity. As a purely digital currency, Bitcoin has no mass. Whether I own 1 satoshi (1 sat = 0.00000001 BTC) or 21 million BTC, the weight is identical: zero.
Participants in the Bitcoin network must agree to its rules, or transactions won’t be processed. Network rules are publicly transparent. Rules can change, but only with agreement from the vast majority of miners validating blocks. The economic game theory underpinning Bitcoin helps ensure network participants won’t act against their self-interest. For example, the network won’t vote to increase Bitcoin’s supply cap, as that would undermine a core principle of its value (its scarcity). Bitcoin is censorship-resistant because rule changes require public proposals to the entire network and majority approval. No single entity can arbitrarily alter the rules.
Now, let’s summarize these three currencies and their attributes.
Scarcity:
Gold – The supply of gold on Earth is finite, but the amount beyond Earth is unknown. When we begin mining asteroids, recoverable gold supplies could surge. What will happen to gold’s “value” in the not-so-distant future?
Fiat – Supply is infinite. Issuing governments can create unlimited amounts at nearly zero cost.
Bitcoin – Supply is permanently limited.
Digital Censorship Resistance:
Gold – A physical commodity. The only way to use digital representations of gold is to trust a centralized entity issuing digital certificates. In digital form, it is not censorship-resistant.
Fiat – Can be physical or digital. In digital form, it is not censorship-resistant due to government regulation.
Bitcoin – A purely digital currency with built-in censorship resistance.
Energy Purchasing Power:
Gold – Can be created using various energy derivatives. Therefore, no single energy source defines gold’s value.
Fiat – Requires almost no energy to create, and its value depends more on political factors than natural energy wealth. Thus, there is no clear determinant of its value now or in the future.
Bitcoin – Can only be created by computers consuming electricity. Electricity cost defines Bitcoin’s value over time.
Let’s step through some questions AI would ask itself before choosing a transaction network and currency.
Can the currency be used in a censorship-resistant digital format?
As I argued above, I believe AI will need a currency that operates on a censorship-resistant blockchain. Only Bitcoin meets these criteria.
Thus, Bitcoin wins.
Does the currency have energy value for AI?
AI’s food is electricity. AI must ensure it can always afford its food. In this regard, Bitcoin wins because, unlike fiat and gold—whose values are unrelated to any explicit or calculable factor—Bitcoin is fundamentally a derivative of electricity costs.
The answer again: Bitcoin wins.
Is the currency provably scarce?
Earth’s gold supply is finite, but on a cosmic scale, it is practically infinite. Fiat is not scarce because issuing governments can create more at will and near-zero cost. Bitcoin’s supply is cryptographically provable as finite.
Bitcoin wins.
Is the currency provably long-lasting?
AI’s potential lifespan far exceeds that of human civilization. Theoretically, an AI properly backed up to survive in a vacuum could exist for trillions of years until the heat death of the universe. In its current form, human civilization can only survive on Earth, with no indication we can avoid various exogenous or endogenous extinction events.
AI should not trust any institution requiring human operation because 1) humans are flawed, and 2) probabilistically, AI will outlive human civilization. Gold and Bitcoin mining may eventually be performed by AI-driven robots, but fiat requires governance by human-led governments. AI is unlikely to rely on anything operated by human governments, so only gold and Bitcoin are viable choices.
That is, gold and Bitcoin tie.
Therefore, for any AI, Bitcoin is the most logical monetary choice. It is purely digital, censorship-resistant, provably scarce, and its intrinsic value is entirely dependent on electricity costs. In these aspects, nothing else comes close to Bitcoin today.
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Arthur Hayes
