Energy as a Global Currency

Fiat Currency: Challenges and Alternatives

Ever since the global Covid-19 pandemic, markets have been unsettled, supply chains strained, and currencies inflated. And when currencies become unstable, banks collapse, and governments’ need for fresh money exceeds peak performance of their central banks’ printing press, we are faced with the challenge: Is there a currency on which one can rely these days?

The short answer is no. We know from history that all fiat currencies are destined to fail at some point. Unbacked paper money has had a tendency to cause runaway inflation, and history tends to repeat itself. In the short term, money as we know it is a perfect transaction and settlement method, but as a store of value it is next to useless. To store value, you need precious commodities like gold and silver. Even industrial metals such as copper and nickel could be used, provided there is constant need from the industry side. But as of yet there is no good replacement for a transaction currency, since precious metals are too costly to be easily transported, and the digitization of precious metals in the form of fungible tokens for payment purposes, or a de-facto “private money without counterparty risk,” faces staunch resistance from regulators.

Of course, there is a growing trend to use Bitcoin and other cryptocurrencies for that purpose. But Bitcoin is no solution either. It is highly volatile, which means that companies don’t want to hold it and must rely on an intermediary to convert it back into fiat currency immediately. So, they are actually transacting in the corresponding currency, not Bitcoin; all their goods and services are still priced in their fiat currency, wages are based on that currency, etc. And if companies or private persons decide to hold the Bitcoin rather than convert it to fiat, they become subject to its high volatility. Combined with the hostility of governments and banks towards Bitcoin (and crypto in general), there is always a looming risk that some action by the aforementioned entities will lead to a significant drop in prices and loss of value. All this means that, unfortunately, Bitcoin is not a practical alternative for businesses. What they need is something that has low volatility, is not as much exposed to regulation as an asset-backed token, and is widely accepted.

One alternative to crypto are vouchers/coupons with utility value, otherwise known as utility tokens. These are less risky from a regulatory perspective than gold backed tokens are, but utility tokens are not “money” in the classic sense because they only have value for a specific purpose, and nothing else. This means they aren’t a viable currency alternative. It’s easy to understand this when you think about how coupons or tickets work. In theory, you could go to the grocery store and ask if you can pay your $49.90 bill with $50 worth of movie tickets at a local cinema. But of course, the store is not going to accept cinema tickets as tender, even if they have the same monetary value; cinema tickets are not really fungible. So, an alternative currency needs to be something that is generally accepted.

A new kind of standard

Which brings us to energy. Everyone needs energy. Industry, business, private individuals — everything is powered by some form of energy, and the price of energy is reflected in the price of goods and services in a country. The problem is you can’t really store energy, at least not affordably or for long periods of time. The bulk of energy is consumed at the same time it is produced, and because it is consumed immediately and not stored it counts as a perfect utility token, priced by the kilowatt hour.

Let’s assume the world goes on an energy standard rather than a gold standard. You can’t hoard the energy — it doesn’t make sense. If you want to hoard, you’d better use the energy to buy gold. This also makes sense, because the extraction of gold consumes a lot of energy, which is reflected in the price, so you can just use it as a transaction currency.

But here comes the tricky part. Who would control and issue the currency? If someone assumed the role of a global energy-token issuer, the regulators and governments would give them a hard time. And no single government would allow another one to control its currency. The answer is: There is not a single issuer, there are many. Each and every energy producer on the planet can issue their own energy token, and they would be responsible to take it as payment for energy delivered to the grid. Give and take a few percentages that are lost in the grid, this would work pretty well — perfectly decentralized and “utility style” with an “economic” regulatory profile. However, we’re back to where we started if there are thousands of different currencies, all denominated in kW h but issued by different parties. What’s needed is someway to convert between the different issuer’s “currencies.”

Making it all possible

This kind of use case is why we invented the TokenWARP protocol, which makes assets seamlessly convertible with each other, and can even match up trade pairs in order to make just about anything tradable with anything else. Given a sufficient liquidity in the decentralized market, where one energy token is converted into another one by providers, large consumers, or simply market makers, you can for example pay an invoice that is denominated in “yellow kW h” with your “blue kW h” tokens without even noticing.

All of this might seem a bit far fetched, but we like to think of innovative solutions to real world problems that we can realistically help make possible. A more stable currency is something that would benefit everyone, and after food and water, energy is one of the most universally needed commodities on the planet. The big advantage of energy here is that its value is relatively stable, because it is the basis of nearly all business and private activity. TokenWARP technology can help make this visionary use case a reality, but it also works just as well for more less ambitious enterprise blockchain applications involving digital assets and tokens.

At CoreLedger, we believe that blockchain is a practical technical solution to improve and solve a wide variety of issues across industries and sectors, which is why we try to cut through the hype and focus on real-world applications, not just what’s technically possible.

CoreLedger’s mission is to help businesses of all sizes quickly and affordably access the benefits of blockchain technology. From issuing a simple token to enterprise-grade token economy solutions, we have all the tools and components you need to quickly and affordably integrate blockchain into your business whether you’re a new startup or a big multinational enterprise.

Interested in our results-focused, real-world approach? Visit our website for more information, or get in touch with us directly to discuss your project.