By contributing author @LuxBTC, Bitcoin and Decentralization advocate. You can find him talking more about Bitcoin on Twitter and Medium.

“Somewhere, something incredible is waiting to be known” - Carl Sagan

Introduction

In this thought experiment I will try to establish an analogy between simplified laws of thermodynamics and behavior of Bitcoin -Bitcoindynamics.

Phase changes

Latent heat

Sensible heat is energy that changes the temperature of the body or system. The energy required to change the phase of a substance is called a latent heat. When the substance undergoes phase change from solid to liquid, it requires the latent heat of fusion, and when the phase change is from liquid to a gas, it requires the latent heat of vaporisation.

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Latent heat is used to overcome attractive forces between molecules, breaking the bonds that hold them in place. (B to C and D to E). During the phase change, temperature remains constant since there’s no sensible heat.

Latent power of Bitcoin

Similar to energy input in a form of sensible and latent heat, the state of transferring power into Bitcoin system causes the increase in value and network effects [1] that can usually be observed when society undergoes technological revolutions.

A large transfer of power and capital occurs and the new technology replaces the old one in a very short time causing the creative destruction [2] and reorganization of society. (Maturity phase.)[3]

The state when value hardly changes can be seen as a reorganization of Bitcoin from one phase to another consuming it’s latent power, analogous to breaking bonds between ice molecules to become water molecules and water molecules to become vapor. [4]

In this thought experiment, each step represents a different Bitcoin phase. [4]

Heat capacity

When heat is transferred from a hot body to a cool one, their temperatures will drop and rise, respectively.

ΔQ=C·ΔT

Heat capacity C is a physical property of matter that tells us how much heat is needed to change the temperature of a body by 1 K (or °C). Different substances have different heat capacity (also varying with pressure and temperature).

Water has one of the highest heat capacity per kg among common substances -C=4182 J/K at 20 °C which gives it a special property of heat reservoir.

Power capacity

Following through this thought experiment, let’s assume that combination of your skills are scarce and useful [5] which can give you a certain advantage, a value or power in comparison to others. That’s your power capacity.

And Bitcoin’s power capacity is it’s S2F. [6][7]

Higher power capacity translates to higher ability to retain the power.

ΔP=S2F·ΔM

To change it’s market value ΔM even slightly, would eventually take an enormous amount of power as S2F increases over time. Not only does S2F make sure it’s difficult to take power of Bitcoin network away, it even propels market value since they’re in direct relationship according to PlanB. [6]

Bitcoin is an example of a perfect power reservoir since it has a unique property of unforgeable scarcity [8] and theoretically infinite power capacity.

Increase in Entropy

Simplified, entropy is a measure of how evenly energy, or some analogous property, is distributed in a system.

ΔSΔQ/T

An increase in entropy ΔS occurs in any isolated system in which there is heat transfer ΔQ at the system boundary or through entropy generation inside the system (any irreversible process).

Entropy is often interpreted as the degree of disorder or randomness in the system.

All thermodynamic processes are irreversible since our universe suffers from dissipation. Heat cannot be fully converted into mechanical work without dissipation.

Thus, change ΔS in our universe cannot be ΔS=0.

We can only compare how close process is to ideal reversible when less energy is lost to dissipation — measure of efficiency .

Increase in Violence

“The transition from one stage of economic life to another has always involved a revolution. We think that the Information Revolution is likely to be the most far reaching of all. It will reorganize life more thoroughly than either the Agricultural Revolution or the Industrial Revolution. And its impact will be felt in a fraction of the time.”

In the book The Sovereign Individual [9], authors argue how violence is an inevitable occurrence in technological transitions where power rearranges.

Jean Duplessis-Bertaux — Scene from the French Revolution

Analogously, an increase in violence ΔV occurs in a system when there is power flow ΔP at the system boundary and through violence generation inside the system.

ΔVΔP/M

When power flow, from one system to another stops (ΔP = 0), the increase in violence becomes ΔV≥0 and the transitions from one stage of economic life to another is over by establishing equilibrium.

Even when the power transfer stops after the technological transition, change in violence is still not ΔV=0 as we can observe throughout history.

Violence generation inside our society will always exist, if we follow the entropy analogy, since entropy generation (dissipation) is inevitable in our universe. That doesn’t mean that our society is not becoming more efficient.

Bitcoindynamic equilibrium

The decentralized nature of Bitcoin network with a self-regulating mechanism and strong incentives causes power within the system to become evenly distributed.

The effect of that is reduction of dissipation because the nodes (bodies) are trying to establish equal hashrate (temperature). Dissipation can be interpreted as the instability of Bitcoin network.

Bitcoin network by it’s design gravitates towards higher efficiency.

In an ideal, bitcoindynamic reversible process, when all nodes are at hashrate equilibrium, the power flow and dissipation are equal to zero and the network is completely decentralized. The total entropy of a system then remains constant and the change is ΔS=0.

Conclusion

Following the thermodynamic analogy, I showed how transitions between Bitcoin phases resemble phase changes of a physical substance.

I have explained how Bitcoin by it’s design gravitates towards lower increase of entropy within network.

Bitcoin shows how important it is as decentralized system, having also impact on lowering the increase of violence in socio-economic system by being perfect power reservoir, hence disabling power flow to other systems.

Verification

Address: 198vnSD3RYPPGMiACnZokqbPtnafJUWkee

Message: Medium article Bitcoindynamics by @LuxBTC, 10.9.2020.

Signature: H8xhv1o656P+5N5Ho6/II4p4wZiuiaVdKlmCbfjgUz56Bk98Pdjsjk0CQKZPbJEfMcTFp2MfnaSysRq73P/cJmY=

References

[1] Trace Mayer, The Seven Network Effects of Bitcoin, 2015

[2] Joseph A. Schumpeter, Capitalism, Socialism and Democracy, 1942

[3] Carlota Perez, Technological revolutions and financial capital: The dynamics of bubbles and golden ages, 2002

[4] PlanB@100trillionUSD, Bitcoin Stock-to-Flow Cross Asset Model, 2020

[5] Tomas Pueyo@tomaspueyo, How to Become the Best in the World at Something, 2019

[6] PlanB@100trillionUSD, Modeling Bitcoin Value with Scarcity, 2019

[7] Saifedean Ammous, The Bitcoin Standard: The Decentralized Alternative to Central Banking, 2018

[8] Nick Szabo, Bit Gold, 2005

[9] James Dale Davidson, Lord William Rees-Mogg, The Sovereign Individual: Mastering the Transition to the Information Age, 1997