BITCOIN: DIGITAL MINERAL RIGHTS FOR THE FUTURE

In Texas, the legacy of mineral rights ownership is a narrative etched into the very bedrock of state history. Passed down through generations like a cherished heirloom, the ownership of mineral rights is more than a legal claim; it is a cultural emblem, a symbol of resilience, and a precious legacy. The wealth and prosperity created for mineral rights owners in Texas over time through the extraction and production of hydrocarbon minerals is tremendous but also comes with a heavy responsibility. That responsibility demands a farsighted financial perspective and a commitment to ethical and environmental stewardship to ensure the well-being of future generations who will inherit the mineral estate. It is common knowledge among native Texans that nothing should ever be done to jeopardize their ownership rights. “Never sell your mineral rights” is a commonly heard expression for Texas natives.


The reason generations of Texans have kept their mineral rights intact within their families is that the modern global economy rests almost entirely upon the benefits of the extraction, refining, and processing of these subsurface minerals. When you own mineral rights, you own the fundamental primary material that allows the production and distribution of nearly all of the goods and services our civilization enjoys. In the future, the world’s economic production will similarly rely on Bitcoin to coordinate large transactions between manufacturers and industrial firms.

TEXAS MINERAL RIGHTS

Mineral rights represent ownership of subsurface materials and the right to sell, develop, and produce those materials. Texans have been fortunate to have the right to access the valuable mineral and hydrocarbon reserves located beneath their properties for more than 150 years. Mineral owners can track ownership through legal records dating back to the 1866 state constitution of Texas, which was formed to meet the requirements to reenter the United States after seceding five years earlier and which firmly established privately held mineral rights.

It is essential to understand that mineral rights in Texas can, and predominantly are at this point, severed from the rights of ownership of the land surface. These two distinct property rights are often referred to as the mineral estate and the surface estate. In addition to the ability to separate the mineral estate from the surface estate, the mineral estate can be subdivided into fractional shares of ownership. In Texas, it is commonplace for mineral estates to be divided into tiny fractional ownership shares. Whether the same owner holds the mineral ownership and surface ownership or they have been separated sometime in the past, according to Texas law, the mineral estate holds a position of supremacy over the surface estate. This authority allows the mineral rights owner to use the land's surface to explore, develop, and produce oil and gas under the property. The mineral rights holder usually accomplishes this by entering into a contract (mineral lease agreement) with a specialized company to explore and extract resources from the property in exchange for a lump sum payment followed by ongoing royalty payments that result from selling the resources to the market.

4 PILLARS OF MODERN SOCIETY

The standard of living in our modern society would not be possible without the massive widespread use of fossil fuels extracted from below the earth’s surface. In his book “How the World Really Works,” author Vaclav Smil masterfully explores our total dependence on fossil fuels to provide four indispensable materials our civilization relies upon. These fundamentally essential materials are cement, steel, plastics, and ammonia.

Approximately 17% of the world’s energy supply is needed to produce these four critical materials. Your ability to use the internet and every connected device ultimately depends on fossil fuel hydrocarbons. The infrastructure and technologies of the modern world are only possible through their use, and they are the sole means to provide food for 4 billion people. In his book, Smil explains the crucial role each of these materials plays in the function of our global economy. Their production heavily relies on fossil fuels with no other viable energy substitutes. Smil reports that the global annual production of cement is 4.5 billion tons, steel is 1.8 billion tons, plastics are nearly 400 million tons, and ammonia is 180 million tons.

Currently, there are no feasible alternatives to using steel or cement to construct the world's infrastructure. Their combination of strength, durability, and adaptability is unmatched by any other materials. The production of cement and steel requires intense heat, which is currently only possible by way of the combustion of fossil fuels. Replacing the aging infrastructure of developed countries and building new infrastructure in underdeveloped nations will require continual vast amounts of new cement and steel production.

Not only do ammonia and plastics require a large amount of energy in production, but they also are formed using hydrocarbon-derived inputs. 50% of worldwide food production relies on ammonia fertilizer, produced using hydrogen that is sourced from natural gas. Natural gas is also the energy source that provides the high pressure and temperatures required for the process.


Over 99% of plastics are derived from the refining of fossil fuel hydrocarbons. No alternative material offers the same extensive benefits of plastic’s light weight, flexibility, durability, and usefulness. The world enjoys countless products that contain plastics, such as automobile and appliance parts, consumer electronics, food packaging, furniture, and life-saving medical equipment found in hospitals. Petroleum refining also provides critical elements such as adhesives, engine lubricants, detergents, coolants, inks, pharmaceuticals, coatings, and textiles.

Eliminating fossil fuels from the global energy supply in the next few decades is an unrealistic goal when we honestly consider the available data. Due to our physical and real-world constraints, the transition to a decarbonized, renewable energy-driven economy poses a nearly insurmountable challenge.

Hydrocarbon minerals play a prominent role in the beginning stages of mass-scale modern production, and the transport of final goods depends almost entirely on hydrocarbon fuels. Tracing the stages of production processes backward from the final stage of consumer goods and services to the original input of fossil fuel hydrocarbons, we find that the ownership of mineral rights at the first stage of production signifies a pivotal position of influence over the economic landscape. This position grants mineral rights owners the immense power to shape and dictate economic destiny for every individual, business, and nation. Our global economy rests upon mineral rights owners' discretion to allow their property to be utilized.



Just as owning mineral rights is owning the base material that underpins the functioning of the entire global economy, owning bitcoin today is owning the mineral rights to the future economy. The worldwide economy will one day function through the exchange of bitcoin between productive entities. Those who own bitcoin will own the financial collateral that allows the economy to function and transact.

BITCOIN AND MINERAL RIGHTS

Bitcoin and mineral rights may seem like disparate concepts, but share some similarities. Both are subject to the concept of limited supply. In the case of Bitcoin, there will only ever be 21 million coins in existence due to its programmed scarcity. Similarly, mineral rights pertain to owning scarce mineral resources found underground. Both Bitcoin and mineral rights have forms of ownership, meaning both can be bought, sold, or transferred to others. The value of each asset is determined by market demand and supply dynamics, and each has experienced significant price fluctuations over time. Both mineral rights and Bitcoin share the feature of being decentralized. Bitcoin operates on a decentralized network, with no single entity controlling its issuance or transactions. Likewise, mineral rights represent ownership of an asset found across the globe without a centralized issuer. Each asset also has a substantial cost to its extraction and release into the arena of human economic activity. Oil and gas extraction from underground requires significant investments of financial capital, labor, and energy. Generating new supply in the Bitcoin network also requires considerable energy expenditures and capital investments in physical hardware and infrastructure.

he scarcity of bitcoin derives from its programmed 21 million supply cap, but bitcoin scarcity also develops because of its relative relationship with the entirety of the world’s goods and services. As the nominal amount of goods and services grows at a rate higher than the rate of supply of new bitcoin, bitcoin becomes more scarce relative to these goods and services because it grows more slowly. This relative aspect of Bitcoin to our economy creates a second layer of scarcity beyond the programmed supply limit of 21 million. As this second layer of scarcity grows over time due to the network effects of an expanding economy, other forms of storing value become perpetually inferior to this better store of value.

The price of everything in terms of bitcoin is always trending downward, making it a better way to preserve capital than other forms. For example, new industrial building construction costs have increased by 46% in the past five years, meaning an industrial capital project that cost $100 million five years ago might cost $146 million today. However, when priced in Bitcoin terms, the cost for this project has reduced by nearly 90%, from 26,253 BTC five years ago to 3,395 BTC today. As the world continues to become more productive, the value of those productivity gains is stored in the most dominant store of value. That store of value is Bitcoin, and as global market participants increasingly understand this, the value of Bitcoin will trend upward forever.

Within the domain of current Bitcoin commentary, it is common to hear or read about a future where merchants will sell their goods in exchange for payment by Bitcoin or other related applications functioning on top of the Bitcoin network. Retail merchant adoption will undoubtedly help build Bitcoin demand and incrementally enlarge the network’s value. However, the most considerable impact on the growth of bitcoin demand will arrive when the owners of the world’s factors of production begin to demand bitcoin as payment for their goods.

BITCOIN AND PRODUCTION

Firms participating in the various stages of productive processes will start to understand the economic phenomenon of holding cash balances that increase in value while simply holding them, and therefore, will begin to demand bitcoin. Cash balances that accrete value instead of declining in value over time simplify financial planning for large capital expenditures. Significant capital investments in new projects become more manageable to facilitate. Businesses can finance capital projects more efficiently using their cash reserves held in Bitcoin rather than relying on debt or equity financing that dilutes shareholder value. Financial officers managing a company's capital structure will break into a new era of corporate finance when they begin calculating the net present value of an investment made with money that appreciates in value over time instead of depreciating.

When a firm chooses to invest in productive endeavors, the firm does so in anticipation of earning a resulting return of greater value. When a company uses accumulated Bitcoin to fund a capital project, it will consequently only accept Bitcoin as a return on investment. Accepting an inferior form of money in return will be unacceptable. As manufacturing and production businesses increasingly adopt Bitcoin as a medium for coordinating exchanges of value in manufacturing processes, the Bitcoin network will absorb significant amounts of value from the existing monetary system. This process will create a circular exchange, strengthening Bitcoin's store of value characteristic and increasing demand among companies supplying production factors throughout supply chains.

When the use of Bitcoin to facilitate large value exchanges between businesses becomes widespread, the availability of Bitcoin in the market will become limited. At that point, the only way to acquire Bitcoin will be by providing something of value in return. Purchasing Bitcoin with other forms of currency from a money exchange will become rare, and those who wish to obtain Bitcoin will instead have to earn it. Bitcoin will become all but unavailable for purchase through traditional means.

There will be a day when the producers of capital-intensive goods and scarce natural resources stop accepting continually and purposefully diluted money for their products. In the future, when large payments of value between manufacturers and industrial firms are made through Bitcoin, the worldwide economy will become dependent on it to function. Those who have accumulated bitcoin in advance of this will find themselves in a position of dominance. Just as the owners of subsurface mineral rights today profit by allowing their property to be utilized to power the global economy, bitcoin owners will one day profit by administering the money that coordinates worldwide economic production.

Owning Bitcoin today is owning the mineral rights to the future.