Bitcoin Audible Read_536 - Bitcoin Information Theory B.I.T [Aaron Segal]
Jun 21, 2021
A deep dive into money as information and how a finite supply changes economic signaling. Discussion of monetary entropy, pricing distortions from fiat, and why scarcity should guide resource allocation. Exploration of deflation as a byproduct of innovation and Bitcoin’s role as a mirror and compass for value creation.
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Tech Multiplies Energy Into Reduced Informational Entropy
- Technological innovation reduces information entropy by turning scarce thermodynamic inputs into ordered outputs.
- Siegel formalizes this: thermodynamic energy × technological scaling minus monetary entropy equals negative information entropy.
Fiat Adds Entropy While Bitcoin Adds None
- Fiat money introduces positive monetary entropy that undermines money's information function.
- In Siegel's model monetary entropy (ME) > 0 for fiat but equals zero for Bitcoin, so fiat adds net entropy to the system.
Money Must Absorb Scarcity To Lower Information Costs
- If money can absorb thermodynamic scarcity, it lowers the cost of information production and supports productivity.
- Siegel argues Bitcoin, by accruing scarcity, lets the money reflect real thermodynamic constraints and enable NGU dynamics.
