Beyond Trump's Budget Cuts and Musk's DOGE: Network States as a Solution for Bitcoin Mining and AI's Future

Bitcoin mining and Artificial Intelligence (AI) are competing for scarce energy resources, and the progress of both may hit a roadblock. What can be done?

DOGE and the Quest for Energy Efficiency: A Trump-Musk Initiative

Looking at the U.S., the next few years (2025-2028) will be under Donald Trump's presidency, with his ambition to drastically reduce unproductive budget expenses. To achieve this, he formed a Department of Government Efficiency — DOGE — and enlisted Elon Musk, the head of Tesla.

Although as much as $2 trillion in wasteful spending could be targeted, actual budget cuts are likely to be considerably less, leaving limited resources to invest in the energy infrastructure required by the rapidly expanding Bitcoin mining and AI sectors.

Some reductions could be made, but the ballooning U.S. government debt prevents the U.S. from channeling huge resources to meet these needs. In the fall of 2024, one might witness a period where the U.S. government debt increased by $500 billion in just three weeks. This is an unsustainable path for fueling the U.S. economy's growth.

What do we see on the global level? The competition between the U.S. and China has led to a situation where it would be beneficial for both countries to join ranks to drive innovations. Instead, we see how they are moving in various directions.

Introducing Network States: A Novel Solution for Innovation

The progress of humankind could face a stalemate unless new states (NS) or pop-up cities — AI-driven communities that combine the collaboration of blockchain specialists in real life with digital omnipresence — emerge. I believe that NS can exist within the boundaries of existing states while gaining a trans-boundary digital nature.

There are new hotspots to drive further human progress by intensively implementing the best available innovations (BAI). This differs from the Best Available Technologies (BAT). BAT are about the technical implementations of new things, while BAI are about the genuine ideas and emotions that instill very productive ways to drive blockchain and AI together.

NS as a Catalyst for Decentralized Technology and Business

In the sphere of AI and blockchain, BAT means that prompt engineering and training Generative AI (GAI) will be the most in-demand job occupation in the coming years, while traditional human coding jobs may see reduced demand. The phenomenon of NS underscores the issues that innovative businesses face while trying to operate in a classical business-friendly environment such as Silicon Valley.

Actually, recently, Elon Musk moved the HQ of his X company from California to Texas in an apparent pursuit of a more business-friendly state. This tendency is likely to gain steam in the near future, and I forecast that Gulf countries, with the UAE as a focus, will become significant places of residence for NS—new venues to drive innovative businesses. Gulf countries have a developed fintech sense for new technologies and, at the same time, vast amounts of energy to deeply implement AI and blockchain.

Decentralization and omni-blockchain are key characteristics of NS. NS is going to give rise to the proliferation of decentralized energy generation (DEG). While most large Bitcoin miners try to build up a vertically integrated company, they often miss the importance of bringing decentralization into all operating processes, including energy generation.

AI-driven DEG allows Bitcoin miners to extract maximum benefit from balancing demand and supply in classical electricity grids. The rise of NS points out that the most innovative businesses in the near future will be organized using the opportunities of cloud storage and calculations and will leverage the uncharted territory of digital worlds. NS is, to some degree, the scaling-up principle of Decentralized Autonomous Organizations (DAOs).

Bitcoin's Evolution and the Future of Finance within NS

Bitcoin miners that conduct other business outside the Bitcoin blockchain in a centralized manner face a crucial choice: whether to move into NS or risk losing their strategic profitability to those miners that operate within an NS environment. DEG and AI unleash the power of digital banking finance. Not only do Bitcoin miners need substantial financing to continue their activities, but AI corporations do as well.

Currently, major AI developers face hurdles they cannot overcome unless they move their activities to NS. NS, in its essence, represent mutual AI-driven economics. The decentralized environment is similar to the culture of a regulatory sandbox but extends the scope for innovations.

The main characteristic of financial services in NS will be decentralized Peer-to-Peer (P2P) financial and digital communications. Distributed Ledger Technology (DLT) in NS will take various forms, not only blockchain but also new ones. These new forms of DLT will give an impulse to the proliferation of new kinds of cryptocurrencies, similar to how NFTs have made significant strides in the world.

Bitcoin mining consumes increasingly more energy. In 2024, its estimated energy consumption was about 160 TWh. Bitcoin's hash rate over the last three years has increased sixfold. The environmental impact of classical energy resources makes it imperative to find sustainable solutions. The only viable option for Bitcoin mining to survive sustainably is to transition to NS and drastically reduce operating costs via the decentralized nature of such digital communities.

The advent of quantum computing will create a challenge for the integrity of the Bitcoin blockchain and Bitcoin wallets protected with a seed phrase of usually 12 so-called random words. However, the advent of quantum computing, with a speed of more than 1 quintillion operations per second, creates the necessity to raise the security of the Bitcoin ecosystem. Consequently, Bitcoin will imminently need to migrate to another form of DLT to survive.

This migration is already being designed by AI developers in some NSs. This transition will represent a significant step forward and will imbue Bitcoin and Bitcoin mining with new meanings. It will lead to Crypto Reset 2.0, in which cryptocurrencies, both old and new, will achieve a fundamentally different level of existence, moving away from the status of speculative assets as they have been regarded by most investors buying Bitcoin futures, options, and Bitcoin ETFs.

This transformation will be led by AI, marking a period in the life of cryptocurrencies and DLT when all available innovations achieve ubiquity through the rising influence of digital worlds in human communications and interactions. The greatest value will be created in these digital worlds, and this value will be a sharable good.

Community, Collaboration, and the Future of NS

The Proof-of-Work (PoW) consensus mechanism of Bitcoin mining will be transformed during this migration. The calculations required to find the next block will be replaced by the completion of tasks that AI must solve autonomously to advance its own evolution. The future of Bitcoin mining and AI is, in fact, intertwined and mutually dependent.

Of course, NS are universal digital communities of like-minded individuals, but they can also develop into physical communities. People prefer to be with those who are spiritually 'their own' rather than with random neighbors. Their lives can be better off if they can implement AI, blockchain, Augmented/Virtual Reality, and other innovations.

Blockchain is more than just cryptocurrencies; these digital assets are ideally suited to the operation of AI-driven assistants and oracles on blockchain networks. Such assistants will thrive in NS, utilizing cryptocurrencies for competition and self-improvement.

These assistants will play a crucial role in the thriving of Bitcoin mining in NS, the transition of Bitcoin from blockchain to another form of DLT, and ultimately the emergence of new kinds of cryptocurrencies.

The development of DEG, driven by the demand from Bitcoin mining and AI data centers, will usher in the era of very cheap ubiquitous energy. This unleashes the potential for traveling and occupying Mars by AI-driven robots, which will be the next game changer for AI and Bitcoin mining. It will be a huge upscaler of such activities.

It creates the opportunity for verifiable autonomous AI on the blockchain of Bitcoin and other blockchains. A groundbreaking leap in transparent, tamper-proof AI-driven decentralized data integrity.

The rise of NS is spurring the development of private AI systems, which can be developed through Trusted Execution Environments (TEEs) or Fully Homomorphic Encryption (FHE) to guarantee data privacy in cloud-based AI services. This is particularly important since AI-to-AI training is estimated to account for about 90% of AI learning activity.

The modification of FHE into Multi-Party FHE will enable collaboration between individuals and other AI systems while ensuring privacy and encryption. Multi-Party FHE creates an environment for developing AI assistants that will both maximize competition among Bitcoin miners in NS and foster the collaborative spirit necessary for working on blockchain projects within NS.