The Power Efficiency Index (PEI) is a mathematical valuation model within Power Efficiency Theory that compares changes in computational performance and energy efficiency with the market price of a proof-of-work asset.
Developed by bitcoinversus.tech, PEI measures the growth in a network’s rate of compute alongside improvements in the energy required per unit of computation.
In its comparative form, the model multiplies an initial physical price by the ratio of current to initial hashrate and the ratio of initial to current energy consumption per unit of compute.
Physical price refers to the observed annual market low selected as the model’s starting price.
The calculation produces an indicative valuation that rises as computational capacity increases and energy efficiency improves, while declining performance or worsening efficiency can reduce the reading. Market prices below the PEI estimate suggest undervaluation relative to the model, prices above it suggest overvaluation, and prices near it indicate approximate parity.
The difference between market price and the PEI estimate is called PEI divergence.
The current implementation applies to proof-of-work systems and depends on clearly identified computational measurements, representative efficiency data and aligned observation dates.
PEI provides a framework for interpreting valuation differences, with conclusions remaining conditional on the model’s assumptions.
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