1Commit to a prediction
Module 2 showed that money loses purchasing power when its supply grows faster than the goods it buys. Consider three forms of money today, gold, Bitcoin, and U.S. dollars. Over the coming year, which one do you expect to have the slowest growth in total supply, as a percentage of the amount that already exists?
2Measure scarcity with stock and flow
Scarcity can be measured by comparing the stock of an asset, meaning the total amount that already exists, with its flow, meaning the amount newly produced each year. Dividing the flow by the stock gives the annual growth rate of supply. Dividing the stock by the flow gives the stock-to-flow ratio, the number of years of current production needed to double the existing supply. A high ratio means new production can do little to dilute existing holdings.
Gold
About 222,600 tonnes have been mined in all of history, and nearly all of it still exists. Mines produced a record 3,672 tonnes in 2025.
Sources. World Gold Council, above-ground stocks and Gold Demand Trends, full year 2025.
Bitcoin
New bitcoins are created at a fixed rate that halves about every four years. Since the April 2024 halving, about 164,000 new coins enter a supply of roughly 20 million each year, and total supply can never exceed 21 million.
Source. Issuance rules in the Bitcoin protocol, computed in the model below.
U.S. dollars
The broad money supply, called M2, includes cash, checking and savings deposits, and money market funds. It stood at about $23.3 trillion in August 2026 and has grown by roughly 6 to 7 percent per year on average since 1960, with wide swings from year to year.
Source. Federal Reserve Bank of St. Louis, FRED series M2SL.
3Model future supply growth
The model projects the annual supply growth of each asset from 2016 to 2060. Bitcoin follows its programmed schedule. Gold assumes that mines keep producing at the 2025 rate. Dollar growth has no fixed rule, so you choose the rate. Try the long-run average of about 6.5 percent, then try lower and higher values.
Loading the Python engine. This takes several seconds on the first visit.
Annual growth in the total supply of each asset. Bitcoin's steps mark its halvings, which the model places about every four years after 2024. Years before 2026 use the same simplified assumptions, so the gold and dollar lines are not historical data.
4Model energy and price
Bitcoin miners spend electricity to compete for newly issued coins. When the price rises, mining becomes more profitable, and miners add machines until their costs approach their revenue. The Bitcoin software then raises the difficulty of mining so that coins are still issued at the scheduled rate, no matter how much energy is spent.
The model starts with miners in balance. In month 24 the price changes by the amount you choose, and in month 60 a halving cuts new issuance in half. Miners close the gap between their spending and their revenue gradually, at the speed you choose.
All three lines are indexed to 100 in month 0. Mining revenue equals price multiplied by new coins issued.
According to the Cambridge Centre for Alternative Finance, recent estimates place Bitcoin mining's electricity use at roughly 140 to 190 terawatt-hours per year, on the order of half of one percent of world electricity consumption.
5Reconcile and weigh the arguments
Lock in a prediction in Step 1, then run the supply model to compare.
What did the energy model show?
Energy spending followed the price, rising after the price increased and falling after the halving cut revenue. The number of new coins did not respond to energy at all. In this model, price determines how much energy is spent, and energy does not determine price. This matches the view of the economists of the 1870s marginal revolution, such as Carl Menger, who argued that value arises from what people are willing to give up for a good, and that production costs adjust to value rather than the reverse.
Why might the cost of production still matter?
The computer scientist Nick Szabo used the phrase "unforgeable costliness" to describe money whose supply cannot be expanded cheaply. On this view, energy does not create value directly. Instead, the high cost of producing new units is what keeps supply from rising when demand rises, which protects existing holders from the dilution you modeled in Modules 2 and 3. Gold miners can respond to higher prices only slowly, and Bitcoin issuance cannot respond at all. Dollars, by contrast, cost almost nothing to create.
Does scarcity alone create value?
No. Many things are scarce and nearly worthless, and scarcity measures only how difficult it is to increase supply. It says nothing about demand. Price forecasts built on stock-to-flow ratios alone have performed poorly, and a low supply growth rate is compatible with very large swings in price, as Bitcoin's history shows. Money also needs the other properties from Module 1, including wide acceptance, which Module 4 showed can depend heavily on network effects.
Is the energy well spent?
Critics argue that the electricity consumed by Bitcoin mining produces greenhouse gas emissions and serves no purpose beyond securing a single payment network. Supporters argue that the energy secures a monetary system without a central issuer, and that miners often use electricity that would otherwise be wasted, such as surplus hydroelectric power or gas flared at oil wells. A 2025 industry survey by Cambridge researchers reported that more than half of the electricity used by surveyed miners came from low-carbon sources. Gold mining also consumes large amounts of energy and alters landscapes, which makes the comparison between the two more complex than either side often admits.
6Inspect the code
Nothing on this page is hidden. The Python below is the exact code that produced both models, running in your browser through Pyodide.
Show the supply model
Show the energy model
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