Information & Entropy

Every passage, on the record.

1. 00:33Reference

   I wanted to do an episode on the idea of Bitcoin as a bridge between the physical realm and the informational realm, this idea that Bitcoin is turning the physical world into a discrete state machine.

2. 01:10Reference

   This is originally popularized by Jason Lowery as of late. It has a whole heap of implications that are interesting to discuss and to flesh out.

3. 01:40Open question

   What I think ended up happening, I realized at the end of this podcast, is I answered a question I didn't even know that I had, which was, "Why is there no end to the rabbit hole?" ... It's a little bit of a bummer, because I'm going to have to do another podcast on this idea of this discrete state machine and this bridge between the physical and the informational realm.

4. 02:17Claim

   Decisions are decisions that we make. They are based in the informational realm. But they affect through physical laws the reality realm. The decision is being made in Bitcoin by the hive mind rather than the individual. That's the difference in the two.

5. 02:17Open question

   The decision is being made in Bitcoin by the hive mind rather than the individual. That's the difference in the two. That's again, something for a completely different podcast.

6. 04:01Reference

   The best definition that I could come up with or that I have seen is Schrodinger's, "Life is organized matter, which evades the decay to equilibrium through absorption of energy."

7. 04:01Quote

   Life is organized matter, which evades the decay to equilibrium through absorption of energy.

8. 04:01Idea

   Life is organized matter, which evades the decay to equilibrium through absorption of energy. If we do not eat, all of our cells and then the molecules and then the atoms will be scattered into the environment.

9. 04:32Analogy

   If we do not eat, all of our cells and then the molecules and then the atoms will be scattered into the environment. If we eat, we are able to keep our body organized and avoid that. We are avoiding equilibrium.

10. 05:06Claim

    We need to constantly be transforming energy to fight against the most probabilistic state of all the particles that make up our bodies. This same idea then applies to the extended order, which is simply life. Stop with the energy and entropy increases. If we stop finding ways to transform energy, that leads to an increase in entropy. Less order means no more life.

11. 05:38Claim

    We have to understand what happens if entropy wins. If entropy wins, what happens? Equilibrium. The more that we can push back equilibrium, the higher the chances are that we're going to be around.

12. 05:38Analogy

    The classic example is molecules in a box. There's a probability distribution that allows us to see where the molecules will eventually end up in a closed system... if we want to reorganize the default of equilibrium, what do we need? We need energy.

13. 08:11Claim

    Energy extraction or the transformation of energy from inaccessible, the way that I phrase it, requires information. The more a system is far from equilibrium, the further away it is from equilibrium, the more energy that we can extract from it.

14. 08:48Reference

    It was John von Neumann who said, "Something along the lines of entropy corresponds to the amount of microscopic information that is missing in the macroscopic description."

15. 08:48Quote

    Entropy corresponds to the amount of microscopic information that is missing in the macroscopic description.

16. 09:27Claim

    Entropy is a lack of information about the system. Not knowing the total supply of fiat claims on energy reserves means that at the very least there is more entropy in the system because we have less information.

17. 09:27Quote

    Entropy is a lack of information about the system.

18. 10:16Analogy

    The difference between having an orchard full of apple trees and the energy that you have at your disposal there versus all of the apples compiled into a crate where all you have to do to access that energy is to pluck your hand inside, you get the apple, you can eat it then... In the crate of apples, there is less entropy... the more ordered, the more energy we can extract from that system.

19. 10:16Quote

    More entropy equals less extractable energy.

20. 11:20Claim

    For Bitcoin, we can think of it like this. The more noise, the harder to discern the signal. Information is what gives us signal. And we need energy to separate the signal from the noise.

21. 11:20Quote

    The more noise, the harder to discern the signal.

22. 11:20Analogy

    Much like the radios back in the old days where you would have to actually turn the little dial to be able to tune into the frequency that you wanted to tune into. And somewhere along the way, you would hear nothing but static. And then you would twist the dial and pretty soon you'd start to hear little creplings of voices or you'd hear a little tiny bit of music... finally, you'd get significantly more signal than you would noise.

23. 12:41Claim

    If you got legacy system, there is nothing but noise. So we're getting very little of the song coming through the radio. We're getting a lot of static. And as we switch to something, which allows us to have better information, that means we're cutting out that noise, which gives us more signal.

24. 12:41Reference

    The extended order in the extended order is just all of humanity, the highest form of life that we know of that has the ability to transform energy at scale.

25. 13:22Claim

    The higher the entropy, the lower the amount of energy that we're able to extract from the system. So the greater the original entropy, the smaller is the available energy of the body.

26. 13:54Analogy

    If we want to extract wealth from something like the stock market, what do you have to do? You have to study it. You want to be able to understand and know how it evolves or how it's going to react in any given moment. And that is information that you have. And you then use that information to be able to extract the energy from the stock market.

27. 14:25Claim

    The more information we have access to, the more informed our energy allocation decisions can become, the greater the energy is going to be on the other side. And the same idea then applies to money overall.

28. 14:55Claim

    By providing incredibly valuable information on the state of energy in the extended order, the constant of 21 million units, the constant of Bitcoin, the fixed monetary policy, the immutability, all of these aspects of the system means users have more information that accurately reflects the current state of the system.

29. 15:27Claim

    The alternative, which is the fiat legacy system, is less information on what the current state of the system is. That means poor energy allocation.

30. 16:01Claim

    If you use Bitcoin and denominate your energy allocation in SATS, can you accurately predict the future state of the system better than someone who operates in the legacy fiat system? Yes. Why? Because there's not 12 people sitting in a room affecting the cost of capital at any given moment for any given reason.

31. 16:31Claim

    The main problem in the fiat system is that there is constant uncertainty and a constant uncertainty in the system ends up meaning a lack of information.

32. 17:04Claim

    To store information, we have to set the system that is storing that information in a low probability macro state. And how do we get a low probability macro state? That means lower entropy. And we know that in order to decrease entropy, we need energy. So even to store energy, we need a lower entropy environment. And that requires energy in and of itself.

33. 17:41Analogy

    This is easy to see with a network like language. We need a low probability macro state for language. That is a must. If there is a tremendous amount of noise in the signal in a language, the utility of that language, the utility of that information is reduced significantly.

34. 18:12Claim

    We remove vast amounts of energy spent by the extended order to keep the state of money in a low probability macro space by removing the ability of money to be in any other macro state besides the ones laid out by the code. That is what Bitcoin does. It defines the microstate of money. And if you do not follow that microstate, that is not Bitcoin, which means that is not the money.

35. 19:17Idea

    It starts with entropy is a lack of information on the microstates of a system. More information then equals less entropy. The more information we have, the less entropy there is. Lower entropy systems allow for more energy extraction because we are more efficient operating inside the system because we can more accurately predict how a change is going to affect the whole.

36. 19:57Quote

    Because information itself requires energy to store it, we can also remove that requirement from every user because Bitcoin doesn't allow for any other state outside of the code.

37. 21:05Quote

    The energy gains never stop and neither does the digging.

38. 21:45Prediction

    And this is also another example of why number goes up forever. We simply cannot fathom how inefficient we have been with the tool that we call money up until this point. And what a giant step forward, something like an economic constant like Bitcoin is going to do.

39. 21:45Quote

    And this is also another example of why number goes up forever.

40. 22:18Claim

    It's an interesting idea and key to understanding exactly how Bitcoin is going to bring about prosperity. Prosperity in the form of more energy.

41. 22:18Idea

    Just what that is going to lead to as we begin to develop this cocoon. That information, the build up of information is strengthening the cocoon for whatever transformation is going to be able to take advantage of the enormous energy reserves that are going to be built up by the extended order embracing Bitcoin and leaving the inefficiencies of the fiat legacy system behind it.