Chapter 16 - Bitcoin at negative value

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Chapter 16

Bitcoin at negative value

Before Satoshi Nakamoto published his White Paper describing bitcoin and its protocols and long before crypto exchanges, the thought to create a bitcoin or digital currency for widespread universal use was quite the moonshot.  One had to have very specific knowledge of the concept of a blockchain across a network of nodes, have dedicated hardware and equipment while steep in unique skillsets for use, and willing partners to process and test the hypothesis and application, just as a starting point.  Not an easy task in the years leading up to 2009 being in the early evolution of computers and coding.  At a time of computer hacking and intrusions or viruses almost being commonplace and limited means to guard against invading intruders, particularly when you would be inviting them into your computer as an established node in a network of blockchain would inherently come with risks and hence costs.  Not just the costs of a computer, or your time in setting up and participating in such an endeavor, but also the potential consequences of taking such actions.  The costs become specific to the participant at that time and therefore if one had to put a value on the cost of the bitcoin it would be extraordinarily high for the novice but exceedingly reduced for the more guarded and informed.  

The greater preparation and skilled one might be, the more it would have diminishing costs per bitcoin as each new bitcoin does not necessarily create a proportional new risk and cost value.  The cost in those early initial days would be dependent on its participant largely and number of bitcoin farmed to help set its prelaunch value/expense.   The bitcoin held or then redistributed from the node/computer, would also have risk and cost associated with just this part of it.  So, the net value of bitcoin in those early stages would have considerable negative value given the  considerable costs in time, energy consumption/mining, holding, securing, distributing amongst other factors.  The following summarizes some of these aspects:

• Participant’s degree of computer savvy; including fully knowledgeable of hardware, networks, viruses and anti-virus software, blockchain functionality.

• Participant’s time

• Energy consumption

• Hardware, computer, internet connection

Equations could potentially be created to formulate the cost of a bitcoin in those early stages of creation given the variables and sets that make up the mining or realization of a bitcoin.  However, it’s not particularly relevant to the identity of Satoshi Nakamoto other than to convey the steep hurdle that needed to be overcome by an individual with a vision for creating something from scratch that would be used the world over. 

In those early days of creation, there is no question that bitcoin had a value that was less than its cost. In other words, it would cost more to mine an award than what one would have from the award as the value was not even $1 per coin for quite some time.  At the start, the incentive for anyone to expend their time, resources in computers and hardware, energy or other costs would not be countered for some time to come, and they would be holding bitcoin essentially at negative value.