Would it be possible to create energy backed cryptocurrency?

There are some earlier theories of creating energy backed money. However the instant challenges I see are

  • Energy (as an electricity) is globally not transferable, storeable, and must be consumed immediately. It would only work if buyer and seller are connected to the same grid.

  • The value of energy varies highly depending on the location. E.g. 1 kWh in Africa is much more worth than 1 kWh in New York. The problem of unified exchange rate, e.g. like with gold, would make it very hard to the medium for exchange of value.

Thus, energy backed money may not work in a sense that "1 kWh = 1 coin", because energy lacks the properties to become a transfer of value? But are there other aspects one could use cryptocurrency to bind it to the value of energy?


Well, in a certain sense, electricity can be stored, if you're generating it via coal, natural gas, hydro, or nuclear power plants. (You store it by not generating it in the first place.)

You could define a unit of currency as being a note issued by a power company saying, "IOU one megajoule." Cross region commerce would be handled by finding a middleman to exchange, for example, an Xcel IOU for a GDF Suez IOU.

There would be some problems with this approach. First, Bitcoin has a reliability of 99% to 99.99%, depending on how you define it. That's not reliable enough in a lot of contexts. For example, imagine if a hospital was unable to buy power for an hour each year.

Second, the exchange rates between the various IOUs will change based on speculation and changes in the fuel markets, so what you can buy with your money wouldn't stay stable week-to-week. For example, imagine if you were paid in Delmarva IOU's because you worked for a corporation headquartered in Delaware, but you lived somewhere where you needed to pay your bills in Xcel IOU's.

Theoretically, you could do this. I'm not sure that you'd want to, though.

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