Why money should have a direct and transparent link to energy

Written as a City A.M. column in July 2023, the piece argues that money should have a direct link to energy. It notes that producing an ounce of gold can require up to 80 tons of rock, and that ending the gold standard in 1971 broke that link, contributing to lost purchasing power and asset bubbles. In its view, money with no production cost leads to overprinting, inflation and currency devaluation.

The column presents bitcoin’s proof of work, launched in 2009, as reconnecting money to energy, and contrasts it with proof of stake, which it says concentrates wealth and power among the largest holders. It argues that mining can use renewable, stranded and waste energy, citing a Bitcoin Mining Council estimate that 59.5% of bitcoin mining’s electricity mix was sustainable in Q2 2022, and suggests that the need for cheap energy gives miners an incentive to become carbon negative.