Currency depreciation in Lebanon and cold weather in Texas demonstrate the Bitcoin network’s utility.
Two things are happening in the world on opposite sides of the globe that are related to two very different subjects that highlight the incredible utility of the Bitcoin network: the intentional debasement of the Lebanese pound and unusually cold weather in Texas.
As some of you may already be aware, Lebanon has been mired in an economic crisis since 2019, and it appears to be worsening as the country’s central planners continue to mismanage the situation. Here are their most recent plans to repair their monetary and banking systems:
After nearly three years of keeping people’s money in bank accounts, the government has decided to simply wipe out an estimated $69 BILLION of wealth from the face of the Earth. Forcing people to convert their US dollars to Lebanese pounds against their will. All in the hopes of getting their books in good enough shape in the eyes of the IMF to allow them to double down on their incompetence by taking out a predatory loan to try to right the ship.
Millions of people have seen their hard-earned money vanish before their eyes. Really sad stuff that is entirely avoidable in the future. This can be avoided by choosing a monetary system that is not subject to the whims of inept politicians and bankers with a penchant for printing money. That monetary system is provided by Bitcoin. If Lebanese citizens began converting their work to sats instead of the failing pound and made the effort to secure their own keys, they could have much more confidence that they will not be rug-pulled like that again. There are no inept or corrupt politicians or central bankers who can taint Bitcoin’s monetary policy to the detriment of its users. Those Lebanese who converted their pounds to sats before the Great Bank Account Freeze of 2019 are faring much better than their countrymen.
Simply put, Bitcoin is a superior monetary system.
We are currently experiencing a cold front in Texas, which is causing temperatures to drop into the low 20s (Fahrenheit). This is increasing demand for electricity as people across the state turn up their heat to stay warm. As demand for electricity rises, it is critical that supply meet that demand. This is another area where the Bitcoin network, through the mining industry, can assist.
It is critical to be able to provide a dispatchable load of electricity to residential customers when demand is unusually high. As I mentioned in the tweet thread above, Bitcoin miners acting as buyers of last resort for electricity that would otherwise not be generated if there was no buyer is a great way to ensure residents always have enough electricity to protect themselves from Mother Nature. When the demand for electricity reaches a certain threshold, miners can shut down and sell the electricity they would have used to mine to residential consumers – usually for a good price. This is happening right now in Texas, as miners participating in ERCOT’s demand response programme, such as Rhodium and RIOT, turn off their machines and sell the electricity to the market.
The system isn’t perfect yet, but there’s still time to improve it. There are still people LARPing that this is a good way to make grids “greener” by adding more wind and solar, but this argument makes no sense if you think about it for more than 30 seconds. When the grid failed in Texas last year, it was because the sun wasn’t shining, wind turbines froze over, a nuclear power plant had to shut down due to a faulty sensor, and some natural gas lines froze due to human error. According to your Uncle Marty, the only way a demand response system can work at scale is if the energy being overproduced comes from reliable sources such as nuclear, natural gas, and coal.
The nuclear sensor and natural gas lines, which can be weatherized, are two mistakes that can be corrected after looking at last year’s Texas grid debacle. No one on Earth can clear the clouds so that the sun can shine on solar (coal) panels or keep freezing rain from causing wind turbines to grind to a halt.
All efforts should be directed toward increasing nuclear and natural gas power generation in order to add reliable base load to the grid. And who better to incentivize that than bitcoin miners, who are willing to pay for the electricity generated by these load sources when demand is lower than it is now?
It is critical that we be honest about the role bitcoin miners play in grid stability and what happens when they do shed load to send electricity to market; they are selling the electricity because it is more profitable than mining because they can sell it for significantly higher prices due to high demand.
Having said that, let us not lose sight of the fact that, despite the nuances surrounding the subject, this is an overwhelmingly positive development. Over time, it should become clearer how markets should structure these grid projects that cater to miners willing to act as first-response buyers. We are witnessing Capitalism solve an extremely difficult problem while improving humanity’s quality of life.
Bitcoin miners can make grids more secure if we execute correctly and don’t make too much of an issue of unreliable “renewables.”
Bitcoin is adaptable. It can help those who have been robbed in Lebanon and those who do not want to go cold in Texas.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.