Bitcoin and AI
The Bitcoin Newsletter 28
Happy New Year to everyone! Thank you for sticking with me throughout 2024. The number of subscribers to this newsletter has been growing consistently, with an upward trend. I’ve got a lot planned for 2025 and look forward to starting the year strong with you.
While I’ll share my price targets and strategy at another time, today I want to focus on another, more important topic. In this edition of the newsletter, I explore the growing synergy between Bitcoin and AI, exploring how both are set to reshape the human experience. As AI advances and becomes more integrated into various industries, the need for a digital currency like bitcoin, one that aligns with the deflationary nature of AI, becomes ever more evident.
Bitcoin, with its fixed supply and disinflationary nature, provides the perfect complement to AI's deflationary potential. This convergence could lead to significant, sustainable changes in the economy. This is not only crucial for the future of money but also for humanity's ability to thrive in a more productive and fair system.
I’ve also provided my three favorite episodes from Jeff Booth’s most recent podcast appearances in the 'Ideas of Interest' section, as no one explains the significance of Bitcoin and AI quite like Jeff. I’ll be discussing this further in the third and final chapter of my book, Digital Real Estate, which I am currently putting the finishing touches on. The third chapter dives deep into the economic and social impact of Bitcoin. Expect the release in Q3 of 2025!
Best regards,
Leon
DEEP DIVE
Bitcoin and AI
Introduction
We must rethink how we envision the future. In the short term, things may be worse than we expect, rising inflation, war, and health crises, but this is all part of the fiat dilemma. A system that cannibalizes itself. Yet, at the same time, a new system is emerging.
Bitcoin and Artificial intelligence (AI) will be central to this foundation, providing humanity with the time and tools needed to thrive.
How Technology Drives Deflation
Technology is inherently deflationary. Over time, through free market competition and productivity gains, things should fall to their marginal cost of production.
Yet, in our inflationary fiat system, productivity gains are eroded by the continuous increase in the money supply, driving prices higher. Instead of allowing prices to approach their marginal cost of production as they should, goods and services become more expensive due to monetary inflation.
This principle, that an expanding money supply reduces the purchasing power of individual monetary units and ultimately undermines wealth creation, was recognized as early as 1517 by Copernicus in the quantity theory of money.
Because bitcoin is limited in supply, productivity gains across the economy can lead to greater wealth for all participants in the system, as the price of goods and services falls to the marginal cost of production over time. Rather than rise due to an increase in the monetary supply. We need Bitcoin to ensure that the productivity gains that drive the economy forward can have a lasting, sustainable impact.
The Interplay of Bitcoin und AI
Since the existing system benefits from inflation, market participants are often manipulated into believing that AI is inherently dangerous. While there are significant risks associated with AI, particularly its potential for centralization and manipulation, the technology itself offers great opportunities. The real problem lies in the inflationary monetary system, not AI.
Artificial intelligence is set to increasingly shape the workplace, trade, and finance. Consider the “Magnificent Seven”, a group of tech giants, Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Nvidia, and Tesla, that all leverage AI as a key driver of productivity.
In 2023, the financial services industry alone invested an estimated $35 billion in AI, with banking leading the charge, accounting for approximately $21 billion. This is particularly relevant to Bitcoin, since it serves as both money and a financial system.
As AI becomes more sophisticated, it will increasingly rely on a digital currency that aligns with its digital nature, such as bitcoin, which offers both scalability and speed through the Lightning Network.
For instance, AI systems could use Bitcoin to facilitate microtransactions in real time, managing their wallets autonomously to process payments for services or data. This would unlock new opportunities for AI applications in sectors like actual decentralized finance (DeFi) and machine-to-machine transactions.
The Lightning Network, as a second-layer protocol built on top of Bitcoin, enables transactions to be settled almost instantly and at low cost. This makes it particularly well-suited for AI applications that require fast and reliable transactions.
While some AI and language models can exhibit programmed biases, AI systems, driven by algorithms and data, should strive to prioritize efficiency, minimizing biases wherever possible. If programmed without bias, AI seeks the best tools for operations and decision-making, and Bitcoin offers an optimal solution, providing both the asset and infrastructure needed for efficient, resilient, digital financial systems.
In addition, AI is likely to also contribute to Bitcoin’s development, with algorithms optimizing mining efficiency, hardware usage, forecasting energy demand, and ensuring more efficient resource allocation, all of which will lead to more effective mining strategies.
Conclusion
The synergy between Bitcoin and AI has the potential to enable the creation of more efficient, intelligent and resilient systems. These developments will underpin bitcoin’s role as digital money in a digital world, potentially creating positive second-order effects on global financial markets. The impact will be especially profound in industries such as finance, insurance, robotics, lending, investments, architecture, housing, healthcare, logistics, and others, with effects accelerating over time.
The free market is inherently deflationary, because of productivity gains, things, like housing, should become cheaper over time. Yet, this doesn't happen. Inflationary fiat currencies, like the dollar, lose purchasing power as their supply increases, eroding those gains. Bitcoin offers a framework in which productivity gains can have a lasting, sustainable impact.
Bitcoin, as a disinflationary currency with a fixed supply, preserves the value of productivity improvements, allowing prices to fall to their marginal cost of production. This ensures that efficiency gains lead to greater wealth for all participants in the system.
Moreover, since Bitcoin is accessible, it allows wealth to become more attainable for a wider range of people, enabling general living standards to increase more easily. The interplay between Bitcoin and AI is pretty exciting, and it’s becoming clear that the widespread adoption of AI will drive the widespread adoption of Bitcoin. This is necessary, as only Bitcoin, as a counterbalance to the self-destructive fiat system, can protect humanity from the negative effects of inflation. With the accelerated productivity gains of the AI age, Bitcoin becomes even more crucial as a solution, ensuring that these gains can be preserved and shared more equitably.
WORTH TO KNOW
Podcast and publications
Bitcoin's Role as Collateral in Real Estate Development (Keynote)
Recently, I’ve launched a YouTube channel where I will occasionally upload content. The first video is my presentation at last year’s Honeybadger Conference in Riga, titled "Bitcoin's Role as Collateral in Real Estate Development." WATCH
Niko Jilch Podcast Series: Bitcoin Masterclass (German Podcast Series)
In fall 2024, I had the pleasure of recording a five-part German podcast series with the amazing
Episodes (German):
Bitcoin ist das perfekte Asset für unsere Zeit WATCH
Stress und "Erfolg" im Fiat-System WATCH
Bitcoin schlägt Immobilien als Wertspeicher WATCH
Bitcoin ist nicht mehr aufzuhalten WATCH
Bitcoin ist die Alternative zu Inflation und Gier WATCH
Full Series: Bitcoin Masterclass Playlist WATCH
How Bitcoin BREAKS the $330T Real Estate Market! (Podcast)
In this podcast with Brandon Gentile, we discussed why I believe Bitcoin has the potential to demonetize the $330 trillion global real estate market and how companies like MicroStrategy use bitcoin as digital real estate. WATCH
The Bitcoin Matrix Podcast BITCOIN vs. REAL ESTATE: The Big Shift
I had a great time recording this podcast with Cedric Youngelman, where we delved into topics like Bitcoin vs. real estate, MicroStrategy’s strategies, Bitcoin as pristine collateral, digital real estate, and its role as the foundation of the digital era. WATCH
IDEAS OF INTEREST
No one explains the significance of Bitcoin and AI quite like Jeff Booth. Here are my three favorite episodes from his most recent podcast appearances:
Bitcoin Bram: Jeff Booth on the future of BITCOIN: AI, Deflation & Abundance
In this episode, Jeff and Bram dive into how productivity growth is inherently deflationary, a must-listen. Bram has a whole series with Jeff. This discussion gets particularly fascinating at minute 1:09:11, where Jeff explores Bitcoin's role in the emergence of AI. WATCH
What Bitcoin Did: Repricing the world in Bitcoin w/ Jeff Booth
What Bitcoin Did has been revamped, Danny is doing an excellent job as the new main host. In one of the first episodes of the relaunch, Danny talks to Jeff about how Bitcoin is repricing the world. A great listen for anyone curious about the broader economic implications of Bitcoin. WATCH
Syz Capita: Bonus: Year End Special – Jeff Booth Keynote
In this episode Jeff masterfully explains how technology is deflationary. He also discusses how AI accelerates these trends, pointing out that all "Magnificent Seven" tech companies leverage AI as a key driver of productivity. Yet we live in a world where fiat money loses value, eroding the efficiency and productivity gains that should otherwise reduce costs to near the marginal cost of production. Jeff argues for limited money like bitcoin to ensure these productivity gains can have a long-lasting, sustainable impact. WATCH
If you want to support me. Feel free. You can send me some satoshi/bitcoin.
Lightning: law@getalby.com
On-chain: bc1qyc9q89wjzmvaw729tj3wsrsfhft53mjycrjxdk
Nostr PubKey
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Resources
Mises Institute - Copernicus and the Quantity Theory of Money READ
statista - Artificial intelligence (AI) in finance - statistics & facts READ
Forbes - AI And Bitcoin – A Synergy For The Future READ
Photo Credit: commonedge.org (An Optimist’s Take on AI and the Future of Architecture)
Disclaimer: the content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Make sure you do your own research before making any investment and be aware of your own risk tolerance. If you like to build on my thoughts, feel free, but please cite me as the source. 2024 - Leon A. Wankum.
Editing and content creation by Clemens Haidinger.
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Great read. Hadn’t thought of the inflationary vs deflationary angle. The synergies between crypto and AI are there for sure.
Another synergy is using blockchain technology to provide AI with powers for learning using distributed compute around the world — platforms such as Bittensor.