Episode Transcript
[00:00:00] This analysis has demonstrated through 30 universal laws empirically validated across 16 years and $1.83 trillion in market capitalization, that Bitcoin represents a genuine phase transition in monetary coordination.
[00:00:17] It is the first system deriving legitimacy from thermodynamic irreversibility rather than social consensus or institutional authority.
[00:00:29] The implications extend beyond finance.
[00:00:34] The best in Bitcoin made Audible I am Guy Swan and this is Bitcoin Audible.
[00:00:57] What is up guys? Welcome back to Bitcoin Audible I am Guy Swan, the guy who has read more about Bitcoin than anybody else you know. This show is brought to you by Leaden IO for Bitcoin backed loans. This is a way to borrow against your Bitcoin from a company specifically that has survived a lot of turmoil in the markets and proven themselves with proof of reserves and open books. It's a way to get a little bit of fiat out of your Bitcoin without actually having to sell it, especially when the price is down and things haven't lined up for you. Check them out, link in details in the show notes. Also pubkey by synonym I'm just going to tell you to download the Pub Keyring app and go log in at pubkey App P U B K Y app if you're not interested. After you do that then don't worry about it. Also Chroma Getchroma co they have really incredible devices for red light therapy for getting your light health in order. And I swear by the nightshade glasses that they have if you were looking at screens all the time. In fact, ah, actually it's time for me to put them on. I'm glad I'm doing this right now at this time a 10% discount with code Bitcoin audible and then lastly the HRF, the Human Rights foundation and their amazing Financial Freedom Report and the Oslo Freedom Forum and the work that they do for fighting for freedom around the world. A huge shout out to all of them. Links and details right down in the description. All right, today we have a fantastic read that I just stumbled upon. I think it was released today, no, yesterday. Johnny actually sent it to me, my producer shout out. None of this would actually work without him. But this was an analysis, an analysis on the concept of our monetary transition and how to understand it from multiple different network effects, from game theoretic positions to understand like what the societal shift is and how to attempt to calculate or quantify where we are in the transition and what degree of probability we can see going forward in this phase. Transition that is literally at a 5000 year like import, Bitcoin is literally one of the most fundamental transitions in the concept of money, of societal money and consensus. Like how do you actually agree, how do you find agreement reliably on the state of who owns what and who is owed what? And that is what the Bitcoin system accomplishes at the scale of the first massive, like genuinely deep change in the structure of that for the last 5,000 years. And that includes the structure changes like in fiat and these other things that I think are very surface level because they don't fundamentally trust, excuse me, they don't fundamentally change the underlying mechanism, they actually just obfuscate it in order to get an quote, unquote an additional feature. But this paper literally covers so much ground in different theories and disciplines for making sense of this. Like if you wanted to smash everything we've covered on this show into a very analytical kind of network and societal shift analysis like proposal, it'd probably be a little bit like this paper. We've covered every single one of these ideas and it's just kind of funny to see all of it literally smushed into one like very dense. Let's apply all of these and see where bitcoin stands. So without further ado, let's get into today's read and it's titled the Thermodynamic monetary how Bitcoin's 30 universal laws signal Humanity's shift from social to physical trust by Shanaka Anslem Pereira.
[00:04:53] An empirical analysis of the first physics anchored monetary coordination system.
[00:05:00] Abstract.
[00:05:02] For 5,000 years, human monetary systems have derived legitimacy from social consensus backed by empires, gold reserves or legal tender laws. Bitcoin entering its 17th year with a market capitalization of $1.83 trillion and securing itself with 1.127 zeta hashes per second of computational work represents a fundamental departure.
[00:05:32] The first monetary system deriving security from thermodynamic irreversibility rather than institutional trust through empirical analysis of 30 interlocking laws spanning network topology. Metcalfe, Reed, Zipf and information theory. Landauer's principal Shannon capacity and game theory. Nash Equilibria. Shelling points and complex systems. Self organized criticality, antifragility.
[00:06:02] This paper demonstrates that Bitcoin constitutes a phase transition in monetary coordination from anthropogenic governance to physics governed consensus.
[00:06:14] Longitudinal data from 2010 to 2025 shows Metcalfe's law explaining 80 to 90% of price variance r squared equals 0.8 to 0.9 power law, price trajectory with exponent A equals 5.5 to 5.8 r squared greater than 0.95 and perfect Nash equilibrium preservation across 16 years with zero successful 51% attacks. This convergence of physical law, mathematical proof, and emergent coordination suggests Bitcoin is not merely a financial asset but a new institutional category, the first artificial system where legitimacy is derived from energy expenditure and cryptographic verification rather than human authority.
[00:07:05] One Introduction the legitimacy problem in monetary Systems Every monetary system faces a fundamental challenge establishing legitimacy without violence. Historical solutions have relied on three mechanisms commodity backing, gold sovereign guarantee, fiat, or both Bretton Woods. Each depends ultimately on social consensus enforced through institutional power, a central bank's credibility, a government's coercive capacity, or collective belief in intrinsic value.
[00:07:40] Bitcoin, launched January 3, 2009, proposes a fourth mechanism deriving monetary legitimacy from physical law through proof of work. Each block in Bitcoin's blockchain represents approximately 10.14 petajoules of thermodynamic work energy that has been irreversibly expended and cannot be conjured by consensus, forgery, or decree.
[00:08:07] This paper examines whether this represents genuine innovation or merely cryptographic theater.
[00:08:13] As of November 19, 2025, Bitcoin's network processes transactions with a security budget equivalent to $40.5 million per day in energy costs alone, maintains perfect uptime across 16 years without centralized coordination, and achieves this through a protocol unchanged in its core consensus mechanism since Genesis. These facts demand rigorous analysis.
[00:08:42] 2.
[00:08:45] A unified framework across seven scientific domains.
[00:08:50] This analysis synthesizes empirical data across seven 1. Network topology on chain transaction data from 2010 to 2025 active address counts and network graph analysis to test Metcalfe's law and and Reid's Law.
[00:09:08] 2. Thermodynamics, hash rate measurements, energy consumption estimates and application of Landauer's principle to quantify the physical cost of rewriting history.
[00:09:21] 3. Information theory application of Shannon's channel capacity theorems and Bekenstein bound to Bitcoin's data propagation and verification.
[00:09:31] 4.
[00:09:32] Statistical mechanics, power law analysis of price trajectories, self organized criticality and volatility patterns and Zipf's law validation in wealth distribution.
[00:09:45] 5 Game theory, Nash equilibrium testing in mining incentives shelling, point identification and coordination game analysis.
[00:09:56] 6. Evolutionary Biology, Linde effect quantification, anti fragility measurement through stress testing and survival probability modeling.
[00:10:06] 7. Complex Systems Emergence Analysis, Gauss law validation and protocol design and percolation theory application to adoption curves all data sources are publicly verifiable through blockchain explorers, academic publications and regulatory filings no proprietary or non reproducible data is used.
[00:10:31] 3. Metcalfe's Law and the Mathematics of Network Value Empirical Validation Metcalfe's Law, originally formulated for Ethernet networks in 1980, states that a network's value grows proportional to the square of its users V equals k times n squared. Applied to Bitcoin, this predicts exponential value growth with linear user adoption. Longitudinal regression analysis from 2010 to 2025 using daily active addresses as the independent variable and market capitalization as the dependent variable yields correlation coefficients between 0.8 and 0.9 across different time windows, explaining approximately 80 to 90% of medium term price variance. This is remarkable given Bitcoin's exposure to macro liquidity conditions, regulatory events and technological shocks.
[00:11:28] Current calibration November 19, 2025 Market capitalization of $1.83 trillion Daily active $208,000 implied K factor $3,380 per address.
[00:11:44] However, current daily active addresses are 70 to 80% below historical averages of 700,000 to 1 million.
[00:11:52] Two explanations dominate one layer two migration the Lightning Network Bitcoin's payment channel system now exceeds 70,000 channels and processes transactions without on chain settlement. If 500,000 daily transactions have migrated to Lightning, this reconciles the discrepancy.
[00:12:11] Two holder behavior shift the average unspent transaction output or UTXO age has increased from 60 days in 2013 to 4.2 years in 2020 with 68% of supply unmoved for over one year. Evidence of systematic hoarding behavior predicted by Thier's law discussed in section 5.
[00:12:34] The Metcalf framework, while powerful, exhibits limitations. Facebook and Tencent revenue data suggest exponents between 1.3 and 1.5. Sub quadratic but superlinear V is proportional to n log n may apply at scale, tempering long term exponential expectations.
[00:12:55] Reed's Law the power of groups Reid's Law from 1999 extends network analysis to group forming systems. V equals k times 2 to the n power minus n minus 1 for Bitcoin, groups manifest as lightning channels, multi signature wallets, mining pools and development communities.
[00:13:19] The Lightning network exemplifies read dynamics with 5000 nodes. The theoretical number of possible payment paths is 2 to the 5000, though practical connectivity constraints reduce this to approximately 10 to the 6th active routes. Nevertheless, as the network matures, read effects should begin dominating Metcalfe effects when infrastructure allows frictionless group formation.
[00:13:45] Projected inflection point if lightning adoption maintains 80% year over year growth, reaching 10 million users by 2028, Reid's exponential term will begin contributing measurably to network value, a potential catalyst for super exponential appreciation.
[00:14:04] Part 4 Thermodynamic Security Landauer's Principle Applied to money the Physics of immutable history Landauer's principle from 1961 establishes that erasing one bit of information requires a minimum energy expenditure E is greater than OR equal to KT natural log of 2 approximately 3 times 10 to the negative 21 Joules at room temperature. While this appears trivial, Bitcoin inverts the relationship.
[00:14:39] Rather than minimizing energy for information processing, it maximizes energy to create immutable information.
[00:14:48] Current metrics November 19, 2025 Network hash rate is 1.127 zeta hashes per second or 10 to the 21st hashes per second.
[00:15:01] Energy per block approximately 10.14 petajoules or 2,817 megawatt hours Cost to rewrite one block $281,700 in electricity alone at 10 cent per kilowatt hour.
[00:15:20] Cost to rewrite 144 blocks one day is $40.56 million.
[00:15:28] This creates what we term thermodynamic write once memory digital history that, like the physical past, cannot be altered without extraordinary energy expenditure.
[00:15:41] The security budget scales with hash rate and electricity costs, both subject to market forces but bounded by physical law comparison to alternative systems.
[00:15:55] Fiat Rewriting history Reversing transactions or inflating the supply requires convincing a committee or central authority Energy cost negligible Security Social trust Gold Rewriting history Creating gold from other elements violates conservation of atomic number Energy cost exceeds available terrestrial energy Security Nuclear physics Proof of stake Rewriting history requires acquiring 51% of staked tokens Energy cost negligible the nothing at stake problem Security basis Economic game theory Vulnerability to wealth concentration Rewriting history Requires re performing 10.14 petajoules of work per block Energy measurable substantial and increasing security thermodynamics Only bitcoin and gold derive security from physical law rather than economic or social coordination.
[00:17:02] Unlike gold, Bitcoin is digitally transferable at lightspeed, power laws and self similar scaling price as a physical process.
[00:17:17] Since 2014, researchers including Giovanni Santostasi have documented Bitcoin's adherence to power law. Pricing P of T equals capital A times t to the little A where T represents days since Genesis. Updated analysis through November 2025 yields and A equals 5.5 to 5.8 with R squared greater than 0.95 on logarithmic scales current validation days since Genesis January 3, 20096166 power law prediction $87,000 to $95,000 depending on constant capital. A actual price $91,710 on November 19, 2025.
[00:18:11] Less than 5% power laws typically emerge in scale free systems exhibiting self organized criticality avalanches, earthquakes, forest fires and phase transitions.
[00:18:23] That bitcoin price follows this pattern for 15 years suggests underlying dynamics beyond simple supply and demand interpretation. If Bitcoin's adoption and value accrual behave like a physical diffusion or percolation process spreading through a network with preferential attachment and critical thresholds, then power law scaling is not coincidental but structural.
[00:18:50] Self organized criticality in volatility price changes exhibit fat tailed distributions characteristic of self organized critical systems.
[00:19:01] Analysis of Daily returns from 2010 to 2025 shows tail exponent tau is approximately 3.1 to 3.4 intermediate between Gaussian distributions tau approaching infinity and thin tails and Cauchy distributions tau1 or infinite variance.
[00:19:20] Major drawdowns follow power law magnitudes 2011 is minus 94% from $32 to $2 2014 minus 86% from 1,150 to $152 2018 minus 84% 19,666 to 3,122 and 2022 negative 77% 69,000 to 15,460.
[00:19:55] These are not random noise but signatures of a system operating at the edge of chaos, a state where small perturbations can trigger large cascades but the system remains globally stable.
[00:20:08] This volatility, often criticized, may be optimal for information aggregation during a phase transition.
[00:20:17] Game theory Nash Equilibria without enforcement Mining as a repeated Game Bitcoin mining constitutes a repeated multiplayer game where participants choose between honest mining, selfish mining and direct attack.
[00:20:36] Remarkably, honest mining has remained the dominant strategy for 16 consecutive years with zero successful 51% attacks on the main network.
[00:20:48] Payoff analysis for a miner with 30% hash rate.
[00:20:53] Strategy A honest mining expected daily revenue 30% times 3.125 bitcoin at $91,710 times 144 blocks is approximately $1.24 million annualized $453 million present value of future blocks 10 year horizon at a 10% discount is roughly 2.8 billion.
[00:21:21] Strategy B selfish mining potential 5 to 15% extra blocks through strategic withholding orphan risk is minus 10 to 20% due to network propagation delays. Reputation loss A minus 30 to 50% as miners flee the pool Net expected negative strategy C 51% attack required investment is 21% additional hash rate or about $2 billion in ASICs double spend realistically 50 to $200 million due to exchange limits and detection network value destruction minus 50 to 90% price collapses if attack succeeds Attackers holdings destroyed net expected value deeply negative.
[00:22:15] This Nash equilibrium has survived tests, including the Ghash IO incident in 2014 when one pool briefly exceeded 40% of the hashrate. The community responded, miners voluntarily exited and equilibrium restored without protocol changes.
[00:22:34] Shelling coordination without communication Schelling points are focal solutions that people converge toward without explicit coordination.
[00:22:46] Bitcoin exhibits several 21 million cap. Why not 21.5 million or 20 million? The number is memorable, appeared in Satoshi's original code and has narrative power.
[00:22:58] No serious proposal to change it has emerged in 16 years 10 minute this interval optimally balances confirmation speed against orphan risk. Proposals for one minute or 30 minute blocks fail to gain traction.
[00:23:13] Three originating from a 2013 forum typo hold on for Dear Life became a coordinating meme for low time preference behavior.
[00:23:25] Average UTXO age increased from 60 days in 2013 to 4.2 years in 2025. 4 ticker symbol despite ISO 4217 suggesting XBT for currencies, BTC won through shelling coordination, appearing on 99% of exchanges.
[00:23:46] These focal points reduce coordination costs and reinforce protocol stability, a form of what economists call path dependence and network effects.
[00:23:57] Part 7 Thier's law and the flight to hardness Inverse Gresham dynamics Gresham's law Bad money drives out good applies when legal tender laws force acceptance of multiple currencies at fixed exchange rates. In free markets, the opposite occurs. Thier's Law predicts that good money drives out bad as people hoard the appreciating asset and spend the depreciating one.
[00:24:25] Empirical evidence 2023-2025 Argentina with inflation at 211% in 2024, Bitcoin peer to peer volume increased from $20 million per month to $100 million per month from 2022 to 2025. Citizens immediately convert pesos to Bitcoin, holding only minimal amounts for daily transactions.
[00:24:49] Turkey as the lira depreciated 32% against the dollar in 2024, Bitcoin ownership rose from 7% to 14% of the population.
[00:24:59] Nigeria Following a 70% naira devaluation from 2023 to 2024, 34% of Internet users now own cryptocurrency, the highest rate in Africa.
[00:25:12] Regression analysis reveals correlation coefficient r of 0.72 with p less than 0.001 between national inflation rates and bitcoin adoption, with countries experiencing greater than 20% inflation showing 10 to 50 times higher adoption than those with sub 2% inflation. This validates Thier's law in the digital age when exit costs are low, Bitcoin requires only Internet access compared to gold's storage and transport costs. Capital flows to the hardest, most censorship resistant asset.
[00:25:49] Part 8 the Lindy Time as proof Survival probability Modeling the Linde effect formalized by Nassim Taleb states that the future life expectancy of nonperishable things, technologies, ideas, protocols is proportional to their current age. In biology old implies frail. In technology old implies proven quantified model. For bitcoin P of surviving year t1 given it survived to year t equals 1 minus 1 divided by 1 plus lambda times t where lambda is roughly 8 to 10 years empirically fitted historical survival probabilities years 1 to 42010 to 201340 to 50% annual survival years 5 to 82014 to 201760 to 75% years 9 to 122018 to 202180 to 87% years 13162022 to 2590 to 94% probability current projection year 16 surviving 2026 is 99.2% each year survived adds approximately 1.3 to 1.5 years to expected future lifespan. By this model, Bitcoin at year 16 has about a 99% probability of reaching year 59 comparison to protocol lifespans Base layer Internet protocols that survived 15 or more years typically persist 50 years.
[00:27:37] TCPIP in 1989 is still dominant 36 years later HTTP 1991 still dominant 34 years later SMTP in 1982 still dominant 43 years later Bitcoin having reached year 16 with its consensus mechanism unchanged now statistically resembles these foundational protocols more than it resembles financial assets or companies.
[00:28:05] Part 9 Antifragility gaining from disorder Stress tests as strengthening events Nassim Taleb defines antifragility as the property of systems that increase in capability as a result of stressors beyond Robustness withstands shocks or resilience recovers from shocks Documented Bitcoin stress tests the Mount Gox collapse of 2014 Stressor 850,000 BTC lost roughly 6% of supply largest exchange fails immediate impact 70% price decline anti fragile response hardware wallet adoption up 300% not your keys, not your coins Ethos emerged Multi signature best practices developed Long term ecosystem more resilient Self custody now standard for serious holders China mining ban in 202150 to 60% of the hashrate offline within 60 days immediate impact network hash rate declined 50% fears of death spiral antifragile response geographic decentralization US Kazakhstan, Russia, Canada Absorbed capacity Renewable energy focus increased from 40% to 60% of mining difficulty Adjustment mechanism worked flawlessly Long term Network More decentralized and resilient regulatory attacks from 2013 to 2025 India bans China bans US enforcement actions European restrictions Immediate impact Temporary price declines Negative sentiment Antifragile response Legal clarity improved spot ETF approvals institutional involvement increased BlackRock and Fidelity Streisand effect each ban increased awareness Long term result Bitcoin More legitimate regulatory frameworks Emerging mathematical formalization Anti fragility Coefficient A equals D Fitness divided by d stressor for fragile systems A is less than zero robust a is approximately zero antifragile a is greater than zero bitcoin's empirical a value is roughly positive 0.15 to positive 0.35 across measured stressors part 10 gall's law and protocol Ossification why Simplicity Survives Gall's law from 1975 states a complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works.
[00:30:57] Bitcoin validates this principle genesis in 2009 a nine page white paper with 15,000 lines of code core philosophy do one thing well be sound money resist feature creep Upgrade cadence major changes every four to six years Segwit 2017 Taproot 2021 each requiring greater than 90% consensus contrast Ethereum's complexity a Turing complete virtual machine with frequent hard forks 15 or more since 2015 attack surface consequence the DAO hack $60 million in 2016 parity wallet bug 280 million in 2017 state transition complexity the Shanghai upgrade in 2023 required coordinated validator withdrawal mechanism Systems engineering literature consistently validates Gall's Law. Complex systems fail through unforeseen interactions between components. Bitcoin's conservatism Adding complexity only at the edges lightning or sidechains while preserving a simple base layer exemplifies this wisdom.
[00:32:07] Ossification as security protocol stability accumulates, Trust each unchanged year proves it works and strengthens the Lindy effect. Rapid changes introduce unknowns and partially reset the Lindy clock.
[00:32:24] Part 11 Current State Analysis November 2025 Metrics and Interpretation Price is $91,710 24 hour range from $89,420 to $93,850 Power Law prediction says $87,000 to $95,000 Technical position plus 18.5% above the 200 day moving average Bullish market capitalization $1.83 trillion Ranking 10th largest asset globally between Alphabet and Taiwan Semiconductor Bitcoin dominates 54.2% of the cryptocurrency market capitalization hash rate 1.127 zeta hashes per second the seven day average year over year growth plus 65% security budget roughly $40.5 million per day in energy costs all time high at 1.205 zeta hashes per second October 2025 daily active addresses 208,000 historical 700,000 to 1,000,070 to 80% from average critical interpretation likely explained by lightning network migration not counted on chain and long term holder accumulation 68% of supply is unmoved for greater than one year regulatory SEC CFTC harmonization ongoing since September 2025 Joint roundtables established working groups on classification, custody standards and investor protection framework expected Q2 to Q3 of 2026 warning signals while fundamentals remain strong, the pronounced decline in daily active addresses warrants monitoring if addresses remain below 200,000 for six consecutive months. This would challenge metcalf growth expectations and require scenario reassessment.
[00:34:30] Part 12 Scenario Analysis Probabilistic Futures from 2025-2035 Methodology Bayesian probability framework incorporating trigger events, base rates from comparable technologies and expert estimates all scenarios mutually exclusive and collectively exhaustive scenario 1 digital gold equilibrium 48% probability characteristics Bitcoin achieves status analogous to gold primarily a store of value and portfolio diversifier Secondary medium of exchange via layer two protocols trigger events two required spot ETFs exceed $100 billion in assets under management on track for Q2 2026 institutional custody becomes standard BlackRock Fidelity already providing regulatory clarity in major jurisdictions Harmonization in progress inclusion in major indices S&P 500 and MSCI World Projected Metrics 2035 Market capitalization between 7 to $12 trillion 3.8 to 6.6x from the current price Price per Bitcoin $350,000 to $600,000 Global 1 to 1.8 billion Annualized volatility 30 to 40% down from the current 50 to 70 Investment implication Base case represents conservative but realistic appreciation Scenario 2 Hyper Bitcoinization 22% Probability characteristics Bitcoin becomes global reserve asset and unit of account for significant fraction of International Trade Trigger Events 3 required the US treasury adds BTC to reserves greater than 10% of forex reserves G20 currency crisis the euro, yen or pound fall more than 30% in less than one year Bitcoin hashrate decentralizes to 10 countries with greater than 5% each Lightning network reaches 100 million users Quantum resistant signature scheme deployed Projected metrics 2035 market capitalization 40 to $80 trillion Price per 2 to $4 million Global 2.5 3.5 billion Investment aggressive upside case requires a geopolitical catalyst Scenario 3 Fragmentation and stagnation 23% Probability Bitcoin adoption slows competitive cryptocurrencies Gain share or regulatory burden fragments The Network Trigger Events 2 required a major protocol split A contentious hard fork Quantum computing breakthrough Practical attack demonstrated superior cryptocurrency emerges solves bitcoin limitations coordinated G20 regulatory crackdown projected metrics 2035 market capitalization $2.4 trillion stagnation price per bitcoin 100 to $200,000 narrative erosion Bitcoin is the MySpace of cryptocurrency investment implication Downside case Monitor for early warning signals scenario 4 quantum collapse 5% probability cryptographically relevant quantum computers developed before bitcoin upgrades to Post quantum cryptography Timeline assessment Current IBM condor at 1121 qubits George Willow upcoming cryptographic relevance requires approximately 4000 logical qubits with low error rates expert consensus 10 to 20 years away 2035 to 2045 Bitcoin defense window post quantum cryptography standards ready NIST, Kyber and dilithium deployment requires 3 to 5 years adequate time if community acts by 2030 Bitcoin has adequate timeline to upgrade if proactive Catastrophic Failure Probability at 5% Scenario 5 Black Swan 2% Probability Unpredictable Discontinuities SHA256 Collision Internet balkanization or transformative AI interaction Reasoning as Bitcoin matures, unknown unknowns convert to known unknowns Quantum computing Once a black swan is now a quantifiable risk True black swans remain less than 2% probability by definition part 13 falsifiable predictions 2025-2030 scientific rigor requires falsifiable claims the following predictions, if violated, would challenge core thesis elements.
[00:39:56] Prediction 1 Bitcoin market capitalization will exceed 3 trillion by December 31, 2030 current at 1.83 trillion required growth is 64% over 5 years falsification implication if less than 3 trillion, it suggests the digital gold scenario has failed.
[00:40:16] 82% Prediction 2 Network hash rate will exceed 2 Zeta hashes per second by December 31, 2027 current at 1.127 Zeta hashes per second required growth more than 77% over 2 years falsification implication if less than 2 Zeta hashes per second indicates minor distress or energy crisis 85% Prediction 3 At least one G7 or G20 nation will hold greater than 10,000 Bitcoin in reserves by December 31, 2028 current El Salvador at 2,381 Bitcoin Bhutan at roughly 13,000 Bitcoin falsification implication if no major economy holds more than 10,000 bitcoin, political resistance exceeds economic incentive 68% prediction 4 daily active addresses will exceed 500,000 by December 31, 2027 current at 208,000 falsification implication if less than 500,000 Metcalf growth is stalling a major concern 65% these metrics will be publicly verifiable via blockchain data and regulatory disclosures.
[00:41:36] Part 14 the phase transition Thesis from social to physical legitimacy for 5,000 years monetary legitimacy derived from social consensus Commodity money like shells or gold value from scarcity and social agreement Fiat money all modern currencies value from legal tender laws and the state monopoly on violence Colonial money Spanish silver Value from the empire's credibility and military enforcement Bitcoin proposes a fourth physics derived legitimacy through proof of work. Monetary consensus requires expending measurable energy work that cannot be faked, decreed or conjured through social agreement.
[00:42:29] This represents a category shift comparable to law from divine right to constitutional rule medicine from humoral theory to germ theory computing from centralized mainframes to distributed protocols. Each transition replaced authority based systems with law based constitutional evidence based scientific or protocol based The Internet Alternatives the 30 Law Convergence this analysis has documented 30 universal laws from network topology to thermodynamics to evolutionary biology that converge on a single prediction. Systems that combine network effects, physical security, game theoretic stability and antifragility tend toward dominance in their domains.
[00:43:20] Bitcoin is the first monetary system simultaneously optimizing 1. Network effects like Metcalfe and value scales superlinearly with adoption.
[00:43:31] 2. Physical security land hour and entropy History is thermodynamically expensive to rewrite 3. Information integrity Shannon and Bekenstein state is globally verifiable 4. Game theoretic stability Nash and Schelling Honest participation is the dominant strategy 5. Temporal resilience Lindy and antifragility survival probability increases with age 6. Emergent coordination complexity theory Global properties arise from local rules.
[00:44:09] No prior monetary system has achieved this combination.
[00:44:13] Gold optimizes physical security but lacks network effects Fiat optimizes network effects but lacks physical security Proof of stake Systems lack thermodynamic grounding.
[00:44:26] Part 15 Limitations and uncertainties Model limitations 1. Metcalf exponent uncertainty while r squared equals 0.8 to 0.9 is strong.
[00:44:40] The exact exponent 2 versus 1.5 remains debated. Adlisko's critique suggests n log n may apply at scale 2. Power law structural breaks while a equals 5.5, 5.8 fits 2010 to 2020 5. Major discontinuities Quantum computing or regulatory capture could break the relationship.
[00:45:04] 3. Layer 2 measurement lightning network activity is not fully visible on chain complicating Metcalfe analysis Accurate layer 2 metrics require further infrastructure development.
[00:45:16] 4. Reflexivity feedback Soros style Reflexivity perceptions affecting fundamentals can create temporary divergences from physical models, particularly during speculative bubbles.
[00:45:30] Key uncertainties Quantum computing Timeline Expert estimates range from 10 to 30 years for cryptographically relevant systems. Bitcoin must upgrade to post quantum cryptography before this window closes. Adequate time IF deployed by 2030 but requires community coordination Regulatory coordination While individual nation bans have proven ineffective China in 2021 a coordinated G20 effort remains theoretically possible.
[00:46:00] Probability is 15 to 25% over the next decade.
[00:46:04] Daily active address trajectory current 208,000 addresses represent a 70 to 80% decline from historical averages. If this persists through quarter one 2026, it would challenge the base case assumptions and require scenario downgrade.
[00:46:20] Energy politics Bitcoin's energy consumption, roughly 150 terawatt hours per year, remains controversial despite 60% renewable sourcing. Political backlash could constrain mining in key jurisdictions.
[00:46:36] Part 16 Conclusion the Anthropocene to Cryptocene transition this analysis is demonstrated through 30 universal laws empirically validated across 16 years and $1.83 trillion in market capitalization.
[00:46:54] That Bitcoin represents a genuine phase transition in monetary coordination.
[00:47:00] It is the first system deriving legitimacy from thermodynamic irreversibility rather than social consensus or institutional authority. The implications extend beyond finance. Epistemologically, Bitcoin introduces globally verifiable truth without trusted intermediaries. Every participant can independently verify total supply, transaction history and consensus rules through direct computation.
[00:47:28] Politically, it enables monetary sovereignty at the individual level for the first time since the gold Standard ended in 1971, potentially rebalancing power between citizens and states economically by lowering collective time preference through credible scarcity, it may redirect capital from speculative financialization toward productive long term investment.
[00:47:52] Scientifically, it represents the first large scale distributed consensus system secured by physical work rather than social coordination. A new institutional category Bridging computer science, thermodynamics and game theory.
[00:48:08] Whether Bitcoin becomes the dominant global monetary standard 22% probability achieves digital gold status 48% probability or encounters unforeseen obstacles 30% probability.
[00:48:21] It is already demonstrated that physics based monetary legitimacy is possible.
[00:48:27] This genie cannot be returned to the bottle. Humanity now faces a continue with monetary systems based on institutional trust and legal tender laws or transition toward systems based on energy expenditure and mathematical proof.
[00:48:44] The 30 laws suggest the latter may be thermodynamically game, theoretically and evolutionarily inevitable over sufficiently long time frames. The revolution is not coming. It is here. It is simply unevenly distributed and operating according to the laws of physics, mathematics and emergent complexity outlined in this analysis. As Galileo reportedly said after recanting heliocentrism. And yet it moves.
[00:49:14] Bitcoin too continues moving block by block, hash by hash, joule by joule, independent of our belief in it.
[00:49:26] This was an excellent piece.
[00:49:29] I have. There's a lot to unpack in this one because I mean, if I had to, for all of the different elements and pieces and like elements of game theory and network theory and everything that we have covered, this literally hits every single one of them in kind of a quick succession and is very dense in how it actually applies these things and these ideas. But I love the attempt at a formal analysis of kind of the probabilities involved in the different paths forward and just how I think it does a really good job of explaining just how powerful the phase transition is like, understanding what the fundamental difference in its legitimacy, how trust is actually created and maintained in the Bitcoin system and how that differs from literally all monetary systems we have ever seen to date. That is one of the best things I think about how this, this piece works. And I, I hope the, the, you know, he's got a lot of equations and stuff, but they're real kind of simple ideas. I mean, it sounds like really complex math, but it's a pretty simple idea of just understanding the relationships and you know, basically what, what provides a feedback to a certain relationship or a certain, like network theory and what provides basically counter pressure. And I don't think it was really important to understand what those, you know, really have an image of what that formula is in your mind to kind of get why these things are relevant. But nonetheless, if you want to dig in and get like real nerdy and real math about it, I have the link in the show notes obviously, so you can go check it out and dig into, you know, really Their, their analysis, excuse me, not, not their analysis analysis, but their methodology on how it is they've basically come to the conclusion of some of these probabilities or why its value should correspond to this, that or the other. And I'll tell you the, the one thing that actually really surprised me in this, and I don't think it's fully made up for by layer two behavior or layer two use.
[00:51:37] Granted, I could be wrong about that because active addresses, like, if I.
[00:51:42] So the statistic was active addresses like 208,000, right? And this is down from the historical average of 500 to 700,000. And I really want to look at what the, where kind of that zone of historical average is actually measured from. But I can understand why it would have dipped a little bit because people are moving to basically its institutionalization or its access through traditional finance means that it actually doesn't have to move as much when you have to get it through some random crypto exchange and you don't trust the crypto exchange or you're unsure about what environment you've just found yourself in, you're probably going to withdraw it or move it to something more reliable or come up with some very explicit or detailed setup that you want to do to protect it after it becomes, you know, substantially more valuable. Essentially it's under more pressure to move at some point very soon. And of course the movements have more to do with trading on chain. Like, like historically, an enormous amount of the capital going into and out of it on a regular basis was, was trading. There's enormous amount of trading because it's always been enormously volatile. But with this volatility actually decreasing over time, it may be less attractive for explicitly this group of people.
[00:53:06] And then in addition, if we're just thinking about pure addresses, you know, if I'm using Bitcoin every single day, if I, if I use Bitcoin every single day and I'm doing everything on chain, right, is I have 365 addresses. Because every single time I do something with it or I receive a new payment or I send a new payment, I'm going to be using a new address, right? That's just kind of how all my default wallets are set, is to use a new address. And that's pretty typical of any wallet that you find for an on chain. Now, despite the fact that I work with Bitcoin all the time, I absolutely do not use one address per day. My own chain footprint is not huge.
[00:53:45] Whereas my use of Primal and Domus and Zapping people through my Albie wallet and connected to my Lightning, my Lightning Albi Hub, my Lightning Node and then also like a Phoenix wallet and Breezewallet. I use the crap out of those. In fact I absolutely do more, more than one a day. Because when I'm just kind of like cruising through Nostr, I zap, I don't know, 10, 20 times usually when I'm in a zappy mood.
[00:54:15] However, this is explicitly value that I wouldn't have done on chain. Like that's the thing that I think is the key difference. Like I do, you know, lightning transactions that are in the 40 to 200 range and even, even more than that I'll do transactions that are a thousand dollars or more every once in a while but generally speaking it's not, I don't think it's heavily taking away from. It's probably like a 10% or 20% reduction in what I do on chain because I just wouldn't do those things on chain. The transactions that I do on lightning I mostly would just never have done on chain. So I'm actually really curious, I would like to investigate that and see what kind of comparison there is because there is significant increase in volume and value being transferred on Lightning. And we saw in the ARK Invest report on the Lightning network.
[00:55:17] I think it was ARK Invest if I'm not mistaken.
[00:55:19] I'll have to dig back in. I'll see if I can find it. But we did two different Lightning reports. We did Lightning the year before last and then Lightning for last year. And transaction count was actually down year over year. But the amount of value per transaction increased quite a bit. Bit. So the volume of value being exchanged over the Lightning network had a pretty significant bump year over year. So I don't know, I'd be really curious about, about what's driving that and like what's actually kind of shifting in that environment. Exactly. And funny, it literally could just be price. Right. Like the stagnation of this year, like we're down, we will be down. We will have a red year which will be the first time ever that the four year cycle produced two greens and red for the yearly cycles. And honestly I just think that's got a lot to do with people expecting it is after you print a pattern, the same pattern like four times or five times in a row.
[00:56:18] Everybody's just going to plan on that. They're going to leverage themselves and they're going to make major decisions that will put them in one financial situation or another based on that and think they're making a very safe long term plan to, to actually have that work out for them. I mean, I'll be perfectly honest, I've kind of put myself in that position. I was anticipating sideways and or continued growth into the end of the year and next year and I positioned myself for that. Like I didn't position myself detrimentally for it. But this is definitely a hit to my plan. And bitcoin loves to do that. It loves to kick me in the balls whenever I think I have a plan about what's bitcoin is going to do. And so that's bitcoin. I've kind of gotten used to getting kicked in the balls but I'm inclined to think that, you know, using myself actually as an example and multiple other people that I've talked to, I wonder if we're kind of having a bit of a mini credit crisis. Is a lot of people leveraged for a very big bull run and a very long and stable market period of market growth. And then we didn't get it. And a lot of people are having to clean house because they, they couldn't maintain it if things went sideways or they pushed themselves just a little bit too far. Now they're getting margin called right when they didn't want to be. So I don't know, really hard to say but I want to do a guy's take that does a much better job of unpacking this whole thing because I just think this, this piece deserves it. I think. So share this out with all your friends and everybody you know in bitcoin especially just for perspective to, to remember what the big picture is. It's really easy to get lost in focusing on the price when everything's day to day and week to week. And I'm a big fan of the big picture understanding of where the fundamental shift is happening and how critical bitcoin is as the foundation for a astron of just an incredible societal shift that we are going through.
[00:58:21] And I genuinely think this is the next manifestation of what the Internet can digitize. And what Bitcoin represents is the digitization of physical trust. And that is wild.
[00:58:36] So don't forget to check out our sponsors Leden IO for Bitcoin backed loans Synonym and PubKey for their tools to redecentralize the web Chroma for red light health and blue light blocking glasses and the HRF for their work to protect financial freedom around the world. This is Bitcoin Audible. I am Guy Swan and until then Everybody, that's my two SATs.
[00:59:14] I think it's much more interesting to live not knowing than to have answers which might be wrong.
[00:59:22] Richard P. Feynman.
