A worldwide reserve currency, backed by renewable energy, which in turn backs a universal basic income for all.
- If all the sunlight energy striking the Earth’s surface in Texas alone could be converted to electricity, it would be up to 300 times the total power output of all the power plants in the world. [Source]
- The world already produces enough food to feed 10 billion people per year, which is the projected population for the year 2050. [Source]
The EnergyCoin Concept
In the world of blockchain and cryptocurrencies it is taken as a given that one day (perhaps soon) something like Bitcoin will take over from government-issued money as the world’s reserve currency. Even some on Wall Street are starting to get it. The main roadblock is that no cryptocurrency yet invented has the price-stability necessary to become universally accepted as a stable store of value, and a medium of exchange.
We believe the missing ingredient (from both fiat and cryptos) is a new “gold standard”. In other words, a reserve currency must be backed by a real-world resource of universally agreed-upon intrinsic value.
In the past, fiat currencies were backed by precious metals, like gold and silver. Such currencies derive intrinsic value by virtue of the fact that if you hold the currency, you can exchange it with the issuing government for the underlying commodity. This has led Vitalik and others to suggest virtual commodities, like file storage or computing cycles, could be the appropriate backing for a new world reserve currency.
But such virtual commodities so far fail the test of universality; most people on the planet have no use for terabytes of file storage. But we all have use for energy, if only to power reading lamps and cell phone chargers.
Engineering Economic Inevitability
Game theory predicts under certain scenarios how people — who would all be best off cooperating — get stuck competing in a “prisoner’s dilemma.” The mathematical predictions of real world behavior are extremely reliable when the incentives match the prisoner’s dilemma criteria, making a tragedy of the commons an “economic inevitability” in those scenarios.
Conversely, incentives can be engineered to align everyone’s rational self-interest to “force” them to cooperate, even when it seems politically or socially unlikely.
An example of such engineering can be found in crowdfunding campaigns which incentivize early contributors with bonuses and special rewards. Without such incentives, the rational thing to do is wait until other people have contributed, signaling it’s worthwhile and safe to do so.
The cryptoeconomics of EnergyCoin will be engineered for the inevitability of a reserve cryptocurrency backed by renewable energy and backing a global UBI.
How Proof-of-Work (PoW) Does Not Work
The dominant blockchain mining protocol today is Proof-of-Work (PoW), the protocol underlying Bitcoin. PoW was designed to require exponentially increasing computation to verify each new block, and unlock the concomitant mining reward. Since energy is what both powers the mining CPUs and what cools them, PoW blockchains require an exponentially increasing amount of energy to function and remain secure.
In the beginning, individuals could mine Bitcoin very profitably using spare CPU cycles on their cell phones and laptops. Due to the exponential economics though, it was inevitable that Bitcoin mining would favor centralized production and the cheapest sources of energy. Hence, the rise of mining collectives located in geographies where energy cost is cheapest and most plentiful. Today 60% of all Bitcoin is mined in China.
Another economic inevitability has been the colocation of mining server farms at the source of energy production (see also here and here). The inevitability comes from a form of arbitrage unlocked by PoW mining: energy storage and transport costs disappear when you convert energy to cryptocurrency. So rather than produce, store, transport and sell your energy for dollars, you can simply produce and convert it to currency on the spot.
Thus, in the limit, PoW favors not mining collectives, but rather energy incumbents (conglomerates, utilities and sovereign states). PoW is agnostic with respect to energy source, and favors strictly the lowest overall production cost. And to the extent that fossil fuels maintain this dubious title, Bitcoin and its PoW brethren are accelerants of global climate change.
What’s more, those who actually need to consume energy (but don’t have the ability to produce it locally) will have to pay for not only transport and storage costs, but also the producer’s opportunity cost of crypto mining.
Our aim is to create a blockchain protocol in which mining can only be done by verified renewable sources of energy. We are exploring high-tech verification, but at the very least we can incentivize decentralized witnesses to enforce the policy (see for example Steem Witnesses).
By incentivizing the mining of EnergyCoin (rather than delivering energy to the grid), we have a potential problem: if producers of renewable energy are incentivized to mine, who will provide power to households and businesses?
With Bitcoin (and other PoW tokens) once energy is spent on mining, it is no longer usable. With EnergyCoin, each mined token comes with an obligation (on the part of the producer) to deliver clean energy to the holder of the token, on demand.
This is analogous to the way gold-standard currency was redeemable on demand for gold. These “smart futures contracts” will be enforced by the PoWRE protocol, and Miner-Producers who violate a contract will be blacklisted and banned from the PoWRE network.
If and when an EnergyCoin is redeemed, the coin is destroyed, so that the price of EnergyCoin is loosely pegged to the market value of all the outstanding future contracts. The amount of energy due under each new contract will be dynamically set to minimally clear actual energy demand; in other words, EnergyCoin mined in excess of the world’s actual energy needs will become a growing reserve of value owned by the network of EnergyCoin holders.
What About Wealth Inequality & Other Externalities?
Regardless of how we define “renewable” there are always going to be externalities of energy production which are not properly accounted for, and which lead to geographic and socioeconomic inequities. Just for instance, photovoltaic solar cells require rare earth elements which are not evenly distributed around the planet; plus the manufacturing process for PV cells produces toxicity and pollution. And the same, of course, is true for the manufacturing of CPUs used in the cryptocurrency mining process.
Even if we could somehow reduce and offset externalities to a socially- and politically-acceptable level, unlocking a new form of wealth creation based on economies of scale, will only serve to accentuate global and national income inequality (see also here, here and here). While the Left and Right can argue indefinitely about how to balance wealth equation just about all serious thinkers and policy-makers agree that if it continues to widen, a bloody revolution or world war is the likely outcome (see here, here and here).
Thus, solving for renewable energy without simultaneously solving for economic inequality, will only serve to destabilize the global economy and geopolitical landscape even further. It is for these reasons, as well as basic human decency, that EnergyCoin and the PoWRE protocol are being created with a Universal Basic Income guaranteed for all individual participants.
Universal Basic Income
Some Blockchain pundits believe Proof-of-Identity is a key missing protocol element for bringing about the convergence of the fiat economy and the emerging alternate universe that is the crypto-economy. Regardless, developers are already building protocols which can uniquely identify individuals who opt in, and tie those identities to digital wallets and smart contracts. EnergyCoin and PoWRE will leverage one or more of these protocols to allow people (but not organizations or groups of people) to register for and receive UBI dividends.
For every EnergyCoin mined, an additional EnergyCoin will be created by the PoWRE protocol and distributed in equal fractional amounts to each and every registered individual in the EnergyCoin network. “Proof of Life” will be required to spend EnergyCoin or otherwise transfer it out of a UBI wallet, so that when a member dies, their UBI distributions effectively stop. Thus, inheritance and generational wealth are not a part of the EnergyCoin protocol.
Checks & Balances
Cryptocurrency (as others have noted), is a misnomer in the sense that these digital tokens have more in common with equities and financial derivatives than they do with currency. For instance, when you hold Decred, you hold governance rights which allow you to control the future functioning of the currency, including mining rewards, ability to transact and transfer tokens, and just about everything else. In effect, the holders of Decred are like shareholders of a public company, who can collectively rewrite the articles of incorporation if they deemed it beneficial to the stakeholder base.
By contrast, the Bitcoin protocol is fixed and can only be changed once there is consensus between enough of the miners to use a new protocol; this is called a “fork” and it comes with technical risks and conflicts of interest between the miners and the other stakeholders.
Given the inherent power imbalance between EnergyCoin miners — which will undoubtedly be large companies, utilities and governments — and individual UBI recipients, the PoWRE protocol will confer all governance rights to individuals: one human, one wallet, one vote.
Bitcoin gains much of its value from the fact that it is absolutely scarce: a total of 21 million BTC will ever be mined. EnergyCoin, which is issued by the production of energy (and backed by its future delivery) is inherently inflationary. But unlike sovereign currencies, the EnergyCoin inflation rate is not controlled by fiat, but rather is tied to the intrinsic value of the growing supply of underlying energy.
Unlike most new cryptocurrency efforts — which are commercially-motivated creations by either a core group of developers or an existing corporate entity — EnergyCoin is common good; for the people, by the people. Thus, no tokens will be set aside for interested parties or any privileged class (which is the standard practice in most token offerings these days). A small number of pre-mined tokens may however be for sale in an open and equitable crowdsale, if necessary, to build the protocol and infrastructure for EnergyCoin.
Call for Community
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