SolarCoin monetary policy proposal to accelerate the renewable energy transition.
Monetary policy is typically a centralized activity. The goal of central banks is relative purchasing power stability in the base unit of currency. The US is exceptional with a dual policy mandate of full employment and price stability. 2% is the targetted inflation rate set by most central banks to prevent localized hoarding, facilitate trade and thus enable GDP growth.
Many are critical of currencies like the US dollar losing 98% of purchasing power since 1913. The truth is that US real median household income went from $15,000 in 1913 to $71,000 in 2018. This a 470% increase and win for all.
SolarCoin’s Goal: incent global solar energy production.
The SolarCoin currency’s goal is to incentivize Solar energy to accelerate the energy transition by creating an economy leveraging the positive economic externality associated with currency use. On the currency supply side, this is done by issuing SolarCoin into circulation upon proof of 1MWh of solar energy generation in exchange for §1.00 SLR. On the demand side, the thesis is that each new acceptor/user of a currency protocol contributes to the emergent network utility or value of the protocol. Research on this effect using $17 trillion in traditional assets is here.
Crudely put, research shows most currency protocols represent $500-$15,000 in emergent value per willing participant acceptor/holder. SolarCoin’s brief economic history and small economic network appear in line with theory since 2014.
Economics of the initial SolarCoin recipient
The average residential rooftop with 5KW generates roughly §6.5/year. With an average age of 5 years, each new SolarCoin claimant claims and freely receives §32.5 SLR issued into circulation while a theoretical network protocol value of $500-$15,000 also emerges. This yields a target value range of $15.38-$461.00: §1 SLR. This is in-line with the original 2013 thesis behind SolarCoin to create a $10–$20 MWh global solar energy incentive. Note current price is different due to the first year POW mining.
Lifetime claimant inflation
Ignoring deflationary factors such as lost passphrases 5–20%; a 30 yr 5 KW residential solar rooftop facility likely generates 195 MWh or §195 SLR, leading to a target value range of $2.56 to $76.92 per participant.
Global solar economy potential
In the extreme the estimated 20m solar installations growing 20% yearly represent an aggregate economic user potential (exclusive of outside participants) of $10 bn to $300 bn in market cap. At 100% uptake, this is clearly an unrealistic scenario. Bitcoin currently has 20m users and a $70 bn market cap. equivalent to $3,500 per participant.
Due to SolarCoin’s early launch and the immaturity of Proof of Stake, SolarCoin originally used Proof of Work. This created significant early supply inflation with limited network demand growth. When coupled with larger claimants this lead to an inflated monetary base significantly above target.
SolarCoin currently trades around $0.05. SolarCoin grants have been given freely to over 4,200 installations with 3,500 claimants representing over 0.5% of the global solar energy installed based. This has created a circulating monetary base (M0) of §51.5m, with §13.5m having been freely granted to solar energy producers in 73 countries. The SolarCoin foundation believes the long term reward value will shift as more new residential claimants onboard with new monitoring platforms such as SMA’s Sunny Portal with 260,000 users.
We don’t have 35 more years.
The Original scope of SolarCoin in 2013 imagined a 40-year goal to incent all solar energy. Based on 2013 solar production and an estimated 20% growth factor, the SolarCoin protocol was created with §98 bn pre-mined and sitting in cold storage for issuance into circulation upon energy generation verification.
Urgent action is now required within 11 years to mitigate climate change. The SolarCoin economy needs to act.
SolarCoin monetary policy levers & community decisions.
Traditional central banks have a few policy levers such as changes to REPO rates, fed funds rates, bank capital requirements and open market securities purchases and sales. These are used to manage mature money, currency + credit for economic stability and growth.
Mature currency protocols have stable network users and supply issuance leading to low volatility and the emergence of credit denominated in the protocol. Credit reflects future value flow expectations and is often many times the size of an M0 currency base. This multiple of credit over base currency protocol is seen in the M1, M2, M3 and M4 monetary aggregates. Credit is logically higher for rapidly expanding economies requiring capital growth. It should be noted that credit (the bulk of money in circulation) is mostly created by public sector demand.
Bitcoin is an immature currency protocol reflected in the high volatility leading to an effective yield curve that is a few days vs. years. This curve reflects the short lending markets offered by exchanges for leveraged speculative trading. The huge asymmetry of offers from HODLers means BTC yields are low, primarily reflecting implied expectations of exchange failure as risk premia.
SolarCoin monetary policy tools
SolarCoin is simple with few monetary policy levers. SolarCoin by design is issued into circulation at §1 SLR/1 MWh plus the genesis pool with its 5% circulation restriction in operation for 5 years. This is visible in the blockchain reserve wallets. There is no securities lending or open market activity. SolarCoin “central bank” activity is effectively a one-way market of supply issuance with a focus on passive demand value emergence at the individual node/actor level. The SolarCoin Foundation does not encourage or solicit the speculative acquisition of SolarCoin. The SolarCoin Foundation has never had an ICO or taken outside funding. That being said the SolarCoin protocol has a large 40-year mandate with §98.00 bn SLR overhang. For context, it is estimated that 500GW of installed solar produced 650 TWh of energy was produced in 2018. This would be equivalent to §650m SolarCoin.
SIP 27: Future monetary tightening via program acceleration.
The community aspect of SolarCoin means forming consensus is helpful to determine monetary policy to prevent software forks and protocol abandonment. To that end, the SolarCoin foundation proposes and wants comments on SIP 27 (SolarCoin Improvement Proposal) accelerating the program and shrinking the non-circulating monetary base from §98 to §10 bn. This would reflect Solar Energy production until 2024 granted on a first come basis with smaller installations receiving priority over time retroactive to Jan 2010.
Traditional monetary policy works on changes applied to the circulating currency, credit and short term rate adjustments. This leads to changes in inflation expectations and credit demand. The SolarCoin Foundation believes that reducing the program term and available future SolarCoin while also putting place a first come first serve basis for smallholders may accelerate the uptake of the SolarCoin program by individuals and monitoring platforms and utilities. We welcome comments on the proposal and/or in our Slack Channel.
Disclaimer and Notes:
the comments above are not recommendations to buy or sell any security or token. They are merely requests for comment on a change to non-circulating SolarCoin. They do not guarantee any change or shift in the currency protocol or policy. All comments and references to prices are based on internal models and projections. These references do not imply, guarantee or in any way offer to make or be used as investment advice or future price projections of SolarCoin or other tokens. SolarCoin is an open community software project. It is subject to multiple forms of technical or operational failure at any point in time. All users or acceptors of SolarCoin do so at their own risk.
The SolarCoin foundation and its affiliates will never ask for passphrases, private keys. The SolarCoin foundation makes conditional grants to producers of Solar energy and never requires an upfront fee or payment for applying for or receiving such grants. The SolarCoin foundation currently assesses a 10% Network Development Fee (NDF) to grants for large holders to help pay for network development. This fee is taken out in SLR at the time of granting.
The SolarCoin Foundation has KYC/AML policies in place, adheres to all OFAC restrictions and may refuse grant request for any reason specified or not. Current grant recipients have no guarantee of future grants. As such the SolarCoin Foundation accepts no responsibility for projections or actions taken based on future expectations of receiving SolarCoin grants.