[nowahe]

Basically, to validate a block, you need to bruteforce a SHA-256 hash of the block by incrementing a nonce in it. And by essence, bruteforceing is wasteful (and by extension, expensive).

And this is by design, as the only way to mint a new bitcoin is to throw away computational power (ie energy -> money). And the amount of power needing to be wasted is constantly adjusted by the network (it's targeting a certain amount of blocks / hour, adjusting the difficulty of the sha bruteforce, compensating for technological improvement).

Now, to create a bitcoin you need to mine a block (solving the bruteforce), inherently requiring a set (on average) amount of real world value (mostly energy) to be irrevocably wasted. For the miners to recoup those losses, they MUST sell the bitcoin they just created for at least their lost value. Which in turn, guarantee the minimum value of each bitcoin.

And with this system, the minimum value of each bitcoin is inversely equal to the amount of value "wasted".

[exo762]

I know technical side of things really well, thank you. I'm talking about economical analysis - which is absolutely insane. Value of a thing is not determined by cost of its production. It is determined only by amount someone wants to pay for it.

Claiming that PoW cost gives BTC its value is bonkers.

[sph]

And you can extrapolate this correlation between energy consumption and Bitcoin price into the idea that a Bitcoin represents some unit of energy.

I wonder if there's a graph anywhere showing the value of 1 BTC in kWh.