Crypto and Batteries PT 2

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2 years ago

Part 1:


Fritchle's automobiles were famous for having great range, which was used in advertisements to sell more, illustrating how range was always an important issue.

But even with the success of Fritchle's automobiles, while at the turn of the century electric cars constituted a good proportion of the market, advances in gasoline engine vehicles meant a dwindling market share for electric cars as time went on. .

2.4.2. What made gasoline cars win?

The simple answer is: the Model T, its more competitive price, and the longer range that gasoline engine cars had compared to electric cars.

Henry Ford introduced the mass-produced, gasoline-powered Model T in 1908. In 1912, a gasoline car cost anywhere from $650 to $850 (depending on the source), while the average electric car sold for $1,750. The Model T is a milestone in world history and symbolizes the transition from handcrafted car construction to an assembly line process. Its project was made considering the ease and practicality for the manufacturing process on the assembly line. Before, each worker was responsible for all stages of the production process, with the changes made by Ford, the workers became specialized and became responsible for different stages. Ford created a track system, which moved the production car through the factory, passing each employee's workstation. This process significantly increased productivity and, as a result, the unit cost of a Model T became lower than that of its competitors. Initially, in 1912, Model Ts cost $850, and by 1927, the last year of their manufacture, the price had dropped to $290.

Its engine was a 2.9-liter four-cylinder, which generated 20hp of power. With that, its top speed was somewhere between 65 to 85 km/h (depending on the source). By today's standards it seems little, but for the average citizen of the 1910s it effectively meant stepping out of the "horse speed" era. Until the line application of the assembly line on the Model T, on average humanity was restricted to the mobility of a horse, which can reach speeds between 48–64 km/h, but cannot maintain this speed for a long time.

A Model T Ford next to (what appears to be) a 4 horse buggy on rural American terrain.

In 1912, the first electric starter was invented, eliminating the need for a crank to start a car. This invention made the gasoline-powered automobile even more attractive to drivers who still preferred electric cars. The discovery of Texas crude also lowered the price of gasoline, making gasoline car ownership and maintenance more affordable for the average consumer.

In the 1920s, the US already had a better road system connecting cities. With the discovery of Texas crude oil, gasoline became cheap and available to rural Americans. Gas stations sprang up all over the country in this period. By comparison, few Americans outside the cities had access to electricity at that time. This, added to the lack of autonomy and infrastructure for supply in rural areas, made people adopt gasoline vehicles and not electricity. By the mid-1930s, electric vehicles had all but disappeared.

The high cost, low top speed and short range of battery electric vehicles compared to 20th century internal combustion engine vehicles have led to a worldwide decline in their use as private motor cars.

2.4.3. Gasoline

Gasoline is predominantly composed of octane, a hydrocarbon with eight carbon atoms in its molecule (C₈H₁₈). As stated above, one of the main reasons that led the gasoline engine to surpass the electric motor at the beginning of the last century was the greater autonomy that gasoline gave to cars compared to electric batteries. In comparison with other fuels, gasoline has a higher heat of combustion, or, in other words, it releases the energy stored in chemical form better. This excellent transformation of chemical energy into heat of combustion has made the horizons of the average human being expand in the last century. Travel has become commonplace and accessible to anyone and the world has become more connected.

It is not just automobiles that use petroleum derivatives, ships also left their steam boilers and started to use petroleum products for locomotion. In the case of ships, instead of gasoline, the petroleum derivative used is known as fuel oil and is the residue in the fractional distillation process that separates the lighter fractions (such as gasoline, naphtha and kerosene). Likewise, the plane uses aviation kerosene, a petroleum derivative usually composed of somewhere between 9 and 13 carbon atoms in its molecule.

Illustration of the fractional distillation process with all petroleum derivatives obtained from the fractional distillation of petroleum.

These petroleum derivatives (gasoline, kerosene and fuel oil) help to explain the importance that petroleum has until today. Basically, all land, air and marine transport, all trade routes, all military equipment, everything is powered by petroleum products. Yes, there are exceptions, such as nuclear submarines, sailing ships and electric cars, but they are the exception and were not responsible for shaping the features of the modern world. Oil has become so important that today it is the backbone of the world's financial system, in an arrangement known as the petrodollar.

An example of the petrodollar ballast in action. If Bitcoin is backed by the computational capacity of the network and the energy used, the petrodollar is backed by wars of aggression and support for one of the worst dictatorships in the world, Saudi Arabia

I will not delve into the petrodollar because it is not the scope of the text and it would be a gigantic tangent to explain an extremely complex subject. In a reductionist synthesis: the petrodollar is the arrangement in which the United States prints money to buy oil from Saudi Arabia. With that, that money becomes linked to something real and not just in the air. In exchange for this arrangement, Saudi Arabia began to trade oil only in dollars and to be protected by the US, which helps to explain the various wars that the US has been involved in in the Middle East since the mid-1970s, when this arrangement was made.

Current (publicized) US presence in the Middle East. They must be bringing “democracy and freedom” there, lol.

From now on I will use the colloquial term “gasoline” to refer to both gasoline (octane) and fuel oil and kerosene for convenience, considering the three gasoline in the broad sense.

Basically, the combustion of gasoline changed and shaped the world. In other words, the “gasoline battery” changed the world. This is basically because gasoline is an extremely efficient reservoir of energy. In a comparison between different forms of “batteries”, was observed that lithium cells store about 690 watt-hours (Wh) per liter (L), while 1 liter of ethanol has approximately 6260Wh of energy and 1 liter of gasoline, about 8890 Wh. In other words, lithium batteries lose out badly in terms of gasoline energy density. It takes 13 liters of battery to replace 1 liter of gasoline.

Energy density of lithium-ion batteries, hydrated ethanol and regular gasoline

To say that gasoline is more has more energy density means to say that the same volume of gasoline carries much more energy than the same volume in the form of an electric battery. As a comparison, let's take a tank truck, with a maximum capacity of 50,000 liters of gasoline. This represents 444,500,000 Wh. For lithium batteries to replace a tanker truck, it would take 650,000 liters of battery, or 13 tanker trucks of the same volume.

An example of the Gasoline Battery and its wide use in our daily

summary: The Gasoline Battery has shaped the last century. Thanks to her, there are marine, land and air transport as we know them today. Gasoline has a significantly higher energy density than electric batteries to date, and because of this, gasoline-powered cars have outperformed throughout the last century and continue to outperform electric cars in this century.

2.5. The Aluminum Battery

“As the world saw its stone age, its bronze age, and its iron age, it may, in a short time, have embarked on a new and even more prosperous era — the aluminum age.”

Author unknown (if anyone knows who it is, let me know so I can edit the text)

“It has only been 160 years since the aluminum element was discovered and only 100 years since a viable production process was established, and today more aluminum is produced each year than all other non-ferrous metals combined.”

The European Aluminum Association

Continuing with the topic of batteries in the broadest sense, this section presents Iceland as an example of a country with an abundance of energy that uses a battery (in this case, aluminum) to sell its energy in a portable way to other countries in the world.

Like the reservoir of dams and gasoline, aluminum is a battery. This is because aluminum production uses a lot of electricity, so in practice aluminum production is the conversion of energy into value. And that value can be transported and used elsewhere. Because aluminum needs a lot of energy for its production, it can be used as a battery and transport the energy to be sold in other countries.

2.5.1. Aluminum Production Process

Many people refer to aluminum as “solid electricity” because of the large amount of energy that is required to transform its main ingredient, alumina, into the pure metal aluminum. About a third of the costs of the procurement process are spent on energy.

The production of aluminum begins with the mining of raw material, a mineral called bauxite, which is nothing more than an impure form of aluminum oxide (Al₂O₃) (bauxite has about 35% to 55% Al₂O₃). When bauxite is refined, pure aluminum oxide is known as alumina. This alumina undergoes purification, being dissolved in caustic soda and filtered. A white powder of pure alumina is obtained and used to obtain aluminum through electrolysis. In electrolysis, the electric current in the electrolytic cell promotes the reduction of alumina and decants the metallic aluminum at the bottom of the cell. The released oxygen reacts with the carbon at the anode and turns into carbon dioxide. That is, bauxite + electricity → aluminum.

Alcoa Aluminum Smelter located in Fjardaal, Iceland.

2.5.2. The case of Iceland

Iceland is a country that is an island located on top of the divide between two tectonic plates and on top of a mantle plume (a type of volcanism of larger size and origin different from the more common volcanism. If you want to know more see this basic volcano guide). This means that they have an inexhaustible source of geothermal energy at their disposal. In addition to having several rivers with hydroelectric potential. In fact, renewable energy sources make up 85% of the island's energy matrix, making Iceland the country that uses the most renewable sources in the world.

Icelanders bathe in a thermal pool in front of a geothermal plant

Iceland can produce much more energy than its small population of 364,000 can consume. But this energy does not have access to the consumer market through traditional ways, as the use of cables to export this energy to England and continental Europe is still unfeasible. That is, Iceland has large amounts of energy at its disposal, but the construction of transmission lines that would allow it to export this energy is unfeasible.

In practice, this energy cannot be fully captured due to the lack of a consumer market. As Iceland cannot sell the energy directly, they turn it into a commodity and transport it to the world. Basically, Iceland uses the “Aluminium Battery” to turn energy into value. “We are in the middle of the North Atlantic. We are not connected to the mainland and the European energy grid. So we export aluminum in the form of energy” Bjarni Mar Gylfason, chief economist at the Federation of Industries of Iceland.

The cost of energy in Iceland is about 30% cheaper than in other aluminum producing countries, so several countries have built industries to smelt bauxite and transform it into aluminum with a lot of energy in the region. Smelters import bauxite, the raw material for aluminum, from countries such as the US, Ireland and Australia. The aluminum industry took advantage of this fact and today around 70% of the energy produced in Iceland is used by it. Which helps to explain how Iceland manages to be the country with the 12th largest aluminum production even without having a bauxite mining industry, as the table below shows.

The Icelandic government estimates that only a quarter of the hydroelectric and geothermal potential is currently being utilized and there is interest from both the government and the companies in expanding the country's aluminum production.

Hydroelectric plant in Iceland In

summary: Iceland turns its surplus energy into aluminum and exports it to the world. The Aluminum Battery allows Iceland to store its energy and sell it to the consumer market. Basically, this battery allows Iceland to capture more energy. Effectively, the Aluminum Battery is a non-zero-sum game with the rest of Iceland's energetically abundant population.

2.6. The Money Battery

“Too many people spend the money they earn to buy things they don't want, to impress people they don't like.”

Will Rogers


Gets Out

You get a good job with a good salary and it's ok


is gasoline

Take that money with both hands and stock up…”

Roger Waters, Money — The Dark Side of The Moon, Pink Floyd

You Ever wondered what money is? That money “is how I buy my stuff” we all know, but have you ever stopped to think more deeply about it? “What is money” is a philosophical-conceptual question that many bitcoiners have already and continue to address.

There are many valid answers to this question, and simplistically, money is a rough representation of value. If you want to delve deeper into this issue, we recommend: the classic text “Shelling Out: As Origens do Dinheiro”, which can be found fully translated here and summarized here , and the translation of the text “Why Bitcoin Matters”, which also has great explanation on the subject. There is also the Robert Breedlove podcast called “What is Money?” and is dedicated to this question of “what is money?”.

To keep the focus of this text, we will stick to the simplified view of money as “the technology that allows the storage of value generated as a result of our work and the transport of this value through time and space”.

As well? Let's think you have an apple orchard. That orchard of yours generates value for you in the form of apples (when you sell them). But these apples only represent value for a certain period, because then they will rot. So if there was no way to convert these apples into value, the value generated by these apples would have their shelf life and would tend to zero with time. As apples rot, you can't imagine that you could exchange them all with the same person, since he also knows that apples rot. You would only be able to trade your apples to people who are interested in them in the time window when they are ripe and not rotten. And you would only be able to make this exchange if they had something that was also of interest to you. Complicated right?

Money technology has solved this issue by creating an “item” that I) everyone attributes value to, and which therefore allows for exchanges between all, and II) that does not rot (and therefore allows its owner to transport value to the future).

In Brazil, the Indians and the Portuguese exchanged goods (barter), as there was still no money common to both.

In other words: if there were no money, people would save significantly less for the future, as there would be no good ways to save. Apples could even be exchanged for a pig in the city market, but this is still an inefficient way to store your work over time, after all pigs can get sick, be stolen by neighbors, hunted by wolves or even die. of old age. The fact that it is possible to store the surplus of our labor in something that will preserve value in the future (the name of this is “Reserve of Value”) that made the human being work more than just the minimum possible for his own subsistence (or level of little more than subsistence, with the beginning of agriculture and grain storage), as it created the incentives for this.

There is a concept called Dunbar's number. From wikipedia “ Dunbar's number defines the theoretical cognitive limit of the number of people with whom an individual can maintain social relationships , that is, a relationship where the individual knows each member of the group and knows how to identify in which relationship each individual is found. with the other individuals in the group.[1] Proposed by Robin Dunbar, this theoretical number ranges between 100 and 230 people and has been consistently cited in anthropology. It should be noted that the size of small communities — tribes, villages, common interest groups — tends to fall within this range.”

It is thanks to money that large-scale cooperation has been possible between individuals who do not know each other. This cooperation goes against our cognitive limit, that is, we cannot create trusting relationships with so many people. Money allows just that, that a human being does not need to trust another to negotiate and exchange values. It allows cooperation by entities that are not of the same family or tribe, that is, outside our cognitive limit.

Money also mediates all our dealings with our future selves. “Should I take a nap after lunch every day or is it better to use this time to get a job as a freelancer and earn more money so I can travel to Europe?” Negotiations like this between your “present-self” and “your-future-self” are the basis of any action without immediate results, which are basically all actions that require discipline and that tend to generate more long-term results. . An example that is already cliché on the subject is the marshmallow test, which demonstrates how a child's time preference tends to reflect on that person's professional success, health and success in general. In the book “The Bitcoin Pattern” the author delves into an entire chapter on the topic and how the incentives of the fiat money system influence this time preference, making us more focused on the short term. In short, it can be said that without money that preserves value, human beings are not encouraged to build long-term things.

Money can also be seen as a battery, as it allows human beings to store the result of energy used in the form of work to generate value. In other words, money fits perfectly into the definition “a portable energy reservoir that allows us to take energy from one place to another without major losses” that we are using for batteries in this text. But instead of storing electrical or even chemical energy (as in the case of gasoline), it stores the monetary energy generated by human work.

2.6.1 The ideal Dinheiro Battery

Like any battery, the Dinheiro Battery also has its ideal technical specifications. These characteristics are quite detailed in the texts “Why Bitcoin Matters”, “Shelling Out: As Origens do Dinheiro” and “the bullish case for Bitcoin” and in the book “O Padrão Bitcoin”. Synthesized and hypersimplified, the ideal Money Battery needs to be: durable, portable, fungible, verifiable, scarce, divisible, censorship resistant and with an established track record.

Furthermore, the ideal money needs to preserve its purchasing power over time (store of value); needs to be accepted by other people (means of exchange) and needs to be used as a unit of account (you don't think your house is worth 3 herds of cows, but that it is worth 200 thousand reais. That means that "herds" even have a value , but it is not money, while the real is used as a unit of account).

2.6.2 Problems with the Money Battery currently used

The “the bullish case for Bitcoin” classifies fiat money according to its properties in the table below:

Basically, fiat money has positive characteristics for its durability, portability, fungibility, verifiability, divisibility and has a relatively well-established track record (money has been structured in the current way only since 1971). However, it is not scarce and it is not resistant to censorship either, two factors that make fiat money to be improved.

Why is fiat money not scarce?

First, let's take a few lines about scarcity: scarcity is a fundamental property of money, and more generally, of anything we value.

An example of how scarcity creates value is our respective families. Your family members and friends are demonstrably scarce or, in other words, unique to you. If something happens to one of them and they're gone, you can't get them back and you can't create a copy. We value our dear family and friends because they are truly unique and inherently scarce. Humans are not in short supply, so when 100 people die in a Taliban attack in Afghanistan or in a factory ceiling collapse with conditions analogous to slavery in Bangladesh, we are not really upset. That is, we do not rationally judge that our family members and friends are “just another human being”, but their unique characteristics, and therefore scarce. Scarcity means that something is unreplicable, an important feature of good monetary goods, since being replicable means that the stored purchasing power of that good can be diluted. In the battery analogy, it means that the reservoir is experiencing losses, like a battery that discharges itself.

As Nick Szabo wrote, a monetary good must have “unpredictable costs”. In other words, the good cannot be abundant, easy to obtain, or simple to produce in quantity. Perhaps scarcity is the main attribute of a store of value as it taps into the innate human desire to collect and collect something that is rare. Scarcity is the source of the original store of value. And if scarcity is important for a monetary good, why does our fiat money perform so poorly on the “scarcity” criterion?

The answer is that when the backing of gold was broken in the 1970s, money lost its connection to reality. This means that it is no longer necessary to work to mine gold and issue paper money. Now, to issue paper money, just click a button on the computer keyboard. Or, as Neel Kashkari, governor of the Central Bank of Minneapolis, says: “there is an infinite amount of money in the Fed”.

If the value of something comes from its scarcity, we might think that a representation of its value can be found in dividing that good by its stock to be produced (the amount of that thing that can be produced in a given amount of time). This is the principle that guides the stock-to-flow model of Bitcoin pricing proposed by PlanB inclusive. Now, if the amount of fiat money the Fed owns is infinite, then the value of fiat money tends to zero, since anything divided by infinity has a value of zero.

Note that if something is divided by infinity, I don't even need to know the value of that something to know that it is zero

In practice, what does this “infinite” amount of money that the Fed has and has injected into the economy since the beginning of the pandemic mean?

To answer this question, the image below shows the total assets of the main Central Banks in the world. These assets are bought with the money printed by these BCs, so they are a good representation of the amount of money being printed and put into the financial system. With the exception of the Chinese central bank (which has data as reliable as Chinese data), the main central banks have jumped in the amount of assets between 2020–2021. The balance sheets of the main central banks more than multiplied several times, for example the balance sheet of the Fed, which went from $1 trillion to $8 trillion of assets, while the ECB (European Central Bank) went from $1.5 trillion to over $9 trillion. In fact, of these, the most “responsible” was the Chinese Central Bank, which “only” went from $1.5 trillion to $5.9 trillion, a multiplication of ~4x. In other words, there are now at least 5x more money in circulation than there was 15 years ago, which means that this form of money cannot be considered scarce, quite the opposite.

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