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A lower-carbon cryptocurrency

February 26, 2014
tags:#carbon emissions, #Cryptocurrency
by:Itai Lahat
There is plenty of hype in the last years around crypto-currency. This new form of digital money that has spread around the world is mainly known thanks to the likes of BitCoin and LiteCoin, but these are just two out of more than a hundred digitally encrypted coins in existence.

Some of them use stronger encryption, others are easier to mine, and some have started as a joke and turned into real assets. In other words, crypto-currency is just growing and gaining more and more momentum and users.

But there is something at the core of all these coins that is similar to the currency system that we all use today. Our money, called FIAT money, does not stand for anything more than the believe of people in the worth of that currency. It does not represent how economically strong a nation is, does not represent its riches, nor its resources, nor the energy it uses, or the society wealth and happiness. It stands for nothing. You can print as much as you want from it, since in Latin fiat means “let it be so”! Why is our fiat money worth anything? Cause we want it to be so.

But in the last two decades there has been a growing call to reform our monetary system and to create a currency and an economy based on real value, mainly on the resources and energy which are available to each nation. This approach does not only make common sense, but also is a step forward in creating a steady state economy, that understand it cannot grow to infinity, and is dependent on managing its resources in an environmentally responsible way.

However, the first try to combine the future of currency in the form of digital one, with a monetary system that is not a fiat system, is happening these days. Meet the Solarcoin. It is a combination between a crypto-coin, to the real world economy, and it represents a much needed resource to us all – energy.

It seems only natural that a new method of earning, spending, and trading value or assets, such as cryptocurrency enables, can be tied to a relatively new method of generating energy. And that’s the idea behind SolarCoin, an alternative currency backed by solar electricity production, which is designed to incentivize the production of 97,500 TWh of global solar generation over the next 40 years.

Each SolarCoin represents the generation of 1MWh of solar electricity, and the cryptocurrency can be used to pay for goods or services from individuals and businesses that accept it. SolarCoin, which is managed by the Open Currency Association (OCA) can be “earned” by solar power producers, can be mined (such as other cryptocurrencies are), or bought through an alternative currency exchange. The goal of SolarCoin is to incentivize the global production of solar energy, which contrasts with some other alternative currencies, such as Bitcoin, which seeks a decentralized currency. The maximum issuance of SolarCoin is said to be about 98.1 billion (compare to Bitcoin’s maximum issuance of 21 million). The basis for this crypocurrency is a 2011 paper co-authored by Nick Gogerty, of Thoughtful Capital Group, titled “DeKo: An Electricity-Backed Currency Proposal“.

In addition to being an incentive for wider adoption of solar electricity generation, SolarCoin is also said to be a lower-carbon cryptocurrency, as according to their Wiki, “SolarCoin is believed to be 50 times more energy efficient than Bitcoin by its design rapid mining reward decay rate.”

All that is left is for the solar energy sector to adopt this coin as the official local crypto currency of the industry, and watch it work.

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Itai Lahat