This is the first post of the Electricity-Backed Currency blog series
Originally posted on the Mosaic blog on March 27, 2014.
Back in 2011, Nick Gogerty and Joseph Zitoli of the Thoughtful Capital Group wrote a proposal to back national currencies with electric power. They argued that electricity provides benefits to society, unlike gold, and retains monetary value better than government debt or mortgage-backed securities — the assets the US Federal Reserve Bank currently holds against dollars in circulation.
Naturally, central bankers and policymakers around the world ignored the academic paper. It’s difficult to convince large institutions to transform a system that seems to be working just fine — and most of the world’s major currencies are relatively stable.
So this year, Gogerty and an online volunteer community created an electricity-backed digital currency, in the vein of Bitcoin, to incentivize solar energy generation. If we show a little faith in the value of sun power, this new online monetary system will increase the rate of investment in solar electricity.
SolarCoin is a decentralized digital currency that we can trade person-to-person, with no need for a bank or other intermediary. Launched in 2014, it is not affiliated with a specific country.
Proof of computer work
SolarCoin is backed by two ‘proofs of work.’ The first is called a cryptographic proof of work, basically a math problem that’s difficult for computers to solve but easy to check that they got it right.
I don’t pretend to fully understand digital cryptocurrencies, but the possible positive impact of SolarCoin shines brightly with or without computer science knowledge. All we need to know is that a database called a block chain acts as a public ledger, holding a record of every SolarCoin transaction.
This innovation prevents anyone from trying to spend the same SolarCoins twice. More generally, the invention of the block chain marks the first time in human history that we have achieved decentralized trust.
Because of this new technology, it is no longer necessary to rely on a central authority to assure shared trust in agreements — a reality that could radically transform banking by reducing or eliminating legal fees and other transaction costs. Yet the block chain has potential applications well beyond the sphere of money (check out ProofOfExistence, a service that provides evidence of ownership of a specific file at a specific time).
Proof of solar work
What makes this currency a potential game-changer in the electric power sector is its second proof of work: authentication of solar electricity production through a third party-verified meter reading. One megawatt-hour (MWh) of generation earns one SolarCoin (SLR).
The SolarCoin Foundation created 98 billion SolarCoins to match the amount of solar electricity that the International Energy Agency predicts will be generated over the next 40 years. All but 0.5 percent of these SolarCoins will go to energy producers; the remaining 500 million will compensate the computer geeks and other volunteers who build and support the infrastructure behind the currency.
The peer-to-peer network of SolarCoin holders will build the currency’s transactional value upon the belief that solar-powered electricity is worth more to the world than its value in traditional energy markets. Ideally, it will work like electronic cash.
Up until Saturday, March 8, all the virtual money was held in reserve. That day marked the first SolarCoin pilot grant, in which Arizonan Lisa Shock received 23.4 SolarCoins by providing verification of the 23.4 MWh her rooftop installation generated between 2011 and 2013.
The pilot program represents the first steps toward developing a global system for verifying electricity generation and granting SolarCoins in a communally transparent way that still respects individual privacy. Residential solar system owners and investors in larger projects can participate in the grant program and start receiving SolarCoins for their power production.
First, you need a receiving address for your e-money. Download a SolarCoin QT wallet at SolarCoin’s website to join the solar-backed currency community.
Then head here to claim your coins. You’ll need a scan or photo of two documents: a Proof of Use that contains the physical address and nameplate capacity of the generation facility; and a Proof of Work that verifies solar electricity generated and time period from the meter.
The power generated by solar projects at a residential dwelling can earn SolarCoins for the resident, whereas the SolarCoins for large installations’ production can be claimed by the owner of the facility. This structure incentivizes the primary consumers of the electricity from rooftop solar arrays — the residents — even if the system is leased or financed.
In addition, granting SolarCoins to residents grows the SolarCoin community larger than dispersing all the rewards to a few solar leasing firms. Even better, the currency’s worth increases for everyone using it as it finds its way into more people’s digital wallets, because the value of SolarCoin is directly proportional to the number of people holding the currency.
You can also get small quantities of the currency absolutely free at a charitable faucet like this one. These faucets are third-party websites that give away SolarCoins in order to grow the economy of SolarCoin users. SolarCoins’ value as a means of exchange grows as more people hold them.
In addition, you can obtain SolarCoins on a currency exchange. Click here for a list of online sites where you can trade dollars, Bitcoins, and other currencies for SolarCoin, once you have downloaded your digital wallet.
But wait. Why would anyone want SolarCoins? Are they really worth anything?
Trust me, they’re valuable. Actually, trust SolarCoins — currencies are all about trust.
The next post in the series will explore why SolarCoins have value and how their purchasing power will increase over time.