Re: Energy as the ultimate currency (was: Re: Ripple)

While it is clear that an energy based currency will always have a certain
value, I think a question remains regarding its value compared to other
resources in the economy (by resources I mean all the things in the
economy, from raw materials to services).

I believe that small inflation is critical for a currency that is used as
the main medium of exchange of a certain economy. Since high inflation make
people lose their trust in the currency and thus to use alternatives
instead  (other currencies or barter). This might make it harder for the
participants to trade with each other, which is one of the problem
currencies intended to solve. Deflation on the other hand make people hoard
money and avoid trade/consumption, which weakens the economy.

That's why I think Bitcoin will never become a medium of exchange that will
compete with the fiat currency - its finite amount makes it inevitable that
it'll be deflationary (I think it also has to do with Gresham's law people
will prefer hoarding their Bitcoins and keep using fiat currencies. Just
like they don't use gold coins for trade).

I do think that both Bitcoins and Energy based coins will serve people as
tools for wealth storing (again in the same way gold is used today).

In that sense I tend to admire the idea of fiat currency and a central bank
that controls its supply and demand in accordance to the price indices with
interest rate. I don't know any better way to create a tool to form a
stable currency with small inflation in the same way central banks can.

In an energy based currency, the supply and demand for energy will dictate
the currency value relative to other resources. An energy shortage will
cause deflation and a surplus will cause inflation. There won't be a good
way to stabilize it. Therefore while it is true that a constant amount of
62,342.75 MJ will appear in your account, and that these coins will always
have value - their value will be different over time.

I have another concern here, the immense amount of energy that will be
devoted to form this coin will compete with the other uses of industries
and consumers and will make energy more expensive, which I think is a bad
by product.

The ultimate medium of exchange in my opinion is one that is both stable in
accordance to the price indices with small inflation - but also
decentralized. I still have no idea how this can be implemented.

Daniel C. <http://theosp.github.com/>


On 21 November 2013 18:40, Fabio Barone <holon.earth@gmail.com> wrote:

> Thanks Manu,
> that's truly fascinating.
>
> And thanks for engaging in this conversation of great personal interest,
> which if it's hijacking this list's purpose I am happy
> to move elsewhere.
>
> (I would venture to say though that the moment we have abundant antimatter
> energy creation
> we may not need any currency, or better, any money, anymore.
> But that's completely off-topic so let's put that aside.)
>
> So what I'm interested in is if and how proof-of-work could be implemented
> for the
>  "amount of energy you have stored in the global
> energy network" by *current* renewable energy creation technology.
> You mention hydrogen gas, and I wonder if other solar, wind, biogas etc
> would be possible as well.
>
>  Any community world-wide would be able to contribute to an
> abundant money supply...
>
> I understand it should be kind of a hardware device matching energy
> generated
> to a crypto-currency. I lack the mathematical background to be able to
> devise how the proof-of-work should be devised though.
>
> Or maybe I'm even misunderstanding something crucial.
>
>
> 2013/11/21 Manu Sporny <msporny@digitalbazaar.com>
>
>> WARNING: This thread is somewhat off-topic for this mailing list. It's
>> speculative, we are not working on this at all. The only reason I'm
>> diving into it here is to give people an idea of the sorts of thought
>> experiments we've carried out in this area in the past.
>>
>> Only read it if you're intellectually curious about the area of the
>> "ultimate currency". This email has almost no bearing on the work we're
>> going to be doing here over the next 2-3 years since the technology or
>> infrastructure to accomplish what's outlined in this email doesn't exist
>> yet.
>>
>> On 11/20/2013 03:32 PM, Patrick Logan wrote:
>> > "Ultimately, I think humanity will settle on "energy" as the unit of
>> >  direct exchange since that's the only really stable currency over
>> > the long term."
>>
>> Arthur Britto wrote:
>> > We did not consider energy. That's an intriguing and elegant
>> > thought.
>>
>> Patrick Logan Wrote:
>> > Absolute naive lurker here... any recommendations for reading about
>> > this? I could be completely misunderstanding what this means.
>> >
>> > My first thought is, how could that be? Currency is virtual and can
>> > be exchanged virtually for relatively little energy.
>>
>> I think Joseph has provided a few links, but it'll take you quite some
>> time to go through the literature. I'm going to try and summarize the
>> thinking in this area in the rest of this email. None of it originated
>> in my head, I'm merely summarizing the thoughts of other people that are
>> much smarter than I am.
>>
>> This line of reasoning came out of the physics and mathematics
>> communities. Everything boils down to physics and mathematics at the end
>> of the day. :P
>>
>> Ultimately, there is only one currency that holds its value throughout
>> time and that is energy. It's the only thing you can store that will
>> keep its value over billions of years.
>>
>> 1 megajoule of energy is going to do the same thing at 1 billion years
>> from the big bang as it does at 10 billion years from the big bang. The
>> best way that humankind has dreamed up to store energy over long
>> timescales is storage as antimatter.
>>
>> Energy per unit mass:
>>
>> Anti-matter: 9   × 10^16 J/kg
>> Fusion     : 6.3 × 10^14 J/kg
>> Fission    : 8   × 10^13 J/kg
>> Gasoline   : 4.4 × 10^7  J/kg
>>
>> The technology to store antimatter at a large scale does not exist yet
>> (and may never exist). Putting that aside, there are less dense ways
>> than antimatter to store energy over long periods of time that doesn't
>> invalidate this theory.
>>
>> Now for the leap of faith: Assume a readily available machine and energy
>> grid that is capable of producing, storing, and retrieving anti-matter
>> over very large time scales. If that's too much of a leap of faith for
>> you, assume a mechanism for generating, distributing, and retrieving
>> hydrogen gas (which does exist today on a small scale, and could be
>> ramped up to become a global energy distribution mechanism if the
>> economies are there to do so).
>>
>> The way that you earn this energy currency is by directing energy into
>> the system (creating anti-matter or hydrogen gas), and the way that you
>> spend the energy is by transforming it into work of some kind ("burning"
>> the anti-matter or hydrogen gas to heat a home, power a car, etc.).
>>
>> So, that's the ultimate currency, but in order for the ultimate currency
>> to be of use to humankind, you must create liquidity and to do that, you
>> must virtualize it in some way. So, you store the reference to the
>> amount of energy you have generated in the Internet in the same basic
>> way that Bitcoin does, as a proof of work. Except in this case, the
>> proof of work isn't the "amount of energy you have burned to create 25
>> Bitcoins", it is the "amount of energy you have stored in the global
>> energy network".
>>
>> Imagine a power plant where you lease some of the power generation
>> equipment (anti-matter traps, solar-powered hydrogen gas generators,
>> etc.). You'd buy energy generation capacity at the plant, which would
>> then credit your energy account for energy it creates and feeds into the
>> global system. There would be a cryptographic protocol used (much like
>> what Bitcoin, Ripple, or PaySwarm currently use) to assign the energy to
>> your Internet-based energy currency account. So, after a few years, you
>> could see something like this:
>>
>> Energy Account Balance: 62,342.75 MJ
>>
>> That number is as stable as you get as far as a currency is concerned.
>> Since it's extremely stable, it would end up becoming the reserve
>> currency for the world. It will always be worth the same amount today as
>> it would be worth 2 billion years from now. Ultimately, this is where
>> humanity is headed.
>>
>> This is not to say that there won't be other currencies. Humans love to
>> speculate and take short-cuts to wealth creation. Other currencies will
>> also need to exist to model or drive the sort of behavior we'd like to
>> see. For example, we are still going to need to drive societies to do
>> things (like work/save/spend) by inflating or deflating a currency like
>> we do with fiat currencies.
>>
>> Like I said in the beginning of this email, this is an interesting
>> thought experiment. We are nearing the point at which the Internet can
>> support a global cryptographic energy currency. This could provide a
>> universal stable currency for humankind.
>>
>> The piece that is missing to enable energy-based currencies is an
>> equitable, global, uniform energy creation, storage, and retrieval
>> mechanism. Until that happens, we're going to see people approximate
>> energy-based currencies.
>>
>> Bitcoin proof-of-work is such an approximation, albeit as an accidental
>> side-effect of the mining algorithm. So is the research that Joseph
>> Potvin and his colleagues are doing on the Earth Reserve currency
>> (measuring solar energy densities per unit mass of land).
>>
>> -- manu
>>
>> --
>> Manu Sporny (skype: msporny, twitter: manusporny, G+: +Manu Sporny)
>> Founder/CEO - Digital Bazaar, Inc.
>> blog: Meritora - Web payments commercial launch
>> http://blog.meritora.com/launch/
>>
>>
>