To make a stable (crypto)currency it basically needs to be tied to a thing of value that can not be just flooded onto the market with minimal effort. I think energy is the ideal thing to tie a currency to because basically everything in modern society is dependent on energy or creating or using energy in some form.

But energy can not be easily stored and traded for normal persons so you need some form of stand-in as a currency so i am thinking like 1 "currency coin" is worth 1 kwh. And that to make new coins for the system you have to produce/extract the same amount of energy to the grid. And when that energy is used the "currency coin" is destroyed so there will be a pretty fixed amount of money in the system at any time. And i want it to be decentralized.

But how can this be done? How do you verify that you have supplied the energy to the grid in a secure way? And how can you make sure that the currency value is always tied with the energy value?

I know that bitcoin is kind of tied to energy because you have to use X amount of energy to mine one coin, but this is wasted energy, not energy supplied to a grid to benefit the population.

  • $\begingroup$ I think if you do some reading about energy markets you’ll discover that there isn’t any fixed value to 1 kWh. The nature of electricity is that it has to be used when it’s generated (there’s very limited storage capacity in most places), demand fluctuates, and transport costs are real and transport capacity is limited. So the value of energy depends on where and when. Simultaneously it might be hot in Maryland and prices will be high there, while strong winds in Texas will lead to negative prices (seriously, Google “negative wind power prices”). That’s no basis for a currency. $\endgroup$ Commented Jan 13, 2021 at 2:06
  • $\begingroup$ It is safe to say that there is no useful way to fix the amount of electrical engineering in the grid. At best, you can store some energy, but it would sit there stored, and not do much for the grid. There’s no way to tie that to a currency. A currency could be backed by oil reserves, but those will deplete. $\endgroup$ Commented Jan 13, 2021 at 3:07
  • $\begingroup$ Create an electricity exchange where you are only allowed to use tokens you created that go with the exchange. Since you're in charge of this currency now, you can set the rules, and since it's part of an energy exchange system, you can naturally tie it to electricity. It won't be decentralized, of course. Verification of supply is part of the exchange, not the currency. You will have a problem because electricity can't be stored and therefore the total balance is 0 (but maybe you allow negative balances), and you'll have a problem because the real value of electricity fluctuates. $\endgroup$ Commented Jan 13, 2021 at 16:57

3 Answers 3


But energy can not be easily stored and traded for normal persons so you need some form of stand-in as a currency so i am thinking like 1 "currency coin" is worth 1 kwh. And that to make new coins for the system you have to produce/extract the same amount of energy to the grid. And when that energy is used the "currency coin" is destroyed so there will be a pretty fixed amount of money in the system at any time.

This concept does not work with electrical energy.

If we look at “conventional” electrical grids, they ideally would have no resistance, and the grid transmits power (units of energy/second) through the grid without loss, and there is no stored energy. (In practice, the grid has capacitance/inductance, and some energy is temporarily stored.)

The outlined currency scheme would result in a currency unit created and immediately destroyed as used.

The rise of intermittent renewable energy has created a greater need for storage. However, the storage is not in the form of electrical charge in the grid, it is is in some mechanical/chemical store of energy. All storage technologies have inefficiencies, so that energy is lost. There is no one-to-one accounting between input and output energy a currency implies. Furthermore, storage is only useful if it is dissipated during production shortfalls, so the currency backing would disappear each night.

Meanwhile, market prices for intra-day electricity are extremely volatile (since there is no way to carry inventory), so it is not useful as a unit of account.

A currency could be backed by oil reserves - a form of potential energy - but one may note that no oil producer has pegged their currency to oil prices.

  • $\begingroup$ Ok. Maybe you can add a delay in the system then. So if you put 1 kwh in that will last for 1 hour even though the energy in practice is used pretty instantly. That will still leave a more or less fixed amount of "currency" in the system. And the fact that energy prices fluctuate is true for traditional currency's to. It cost more to buy one bottle of Pepsi in Norway than in India, and even in the same area it cost more to buy one bottle of Pepsi in a resturant than in the convenience store. $\endgroup$
    – Stormer
    Commented Jan 14, 2021 at 3:53
  • $\begingroup$ From what I remember, spot electricity prices can move by a factor of 1000 within a day. That does not happen to bottles of Pepsi. In any event, the “backing” is gone, so it does not help the value of the currency. You need something like a barrel of oil, which can be stored and then exchanged for the currency. $\endgroup$ Commented Jan 14, 2021 at 13:14

Crypto-currency depends on blockchain which is a technology for producing evidence that claims to be tamper-proof. The legal context is described in this short article Blockchain as Evidence:


Despite the hoopla, most attorneys know absolutely nothing about blockchain. Bitcoin—a virtual currency—is the first and most popular application of blockchain technology, but blockchain has much broader applications. Over the next several years lawyers can expect to be dealing with blockchain issues with increasing frequency. Blockchain will be an issue in divorces, business acquisitions, estate planning, real estate, employment, personal injury, and practically every aspect of business. This technology will create new opportunities for business owners and lawyers. And it will create issues during trial as courts struggle to understand it and deal with it.

The Terra White Paper by Bernard Lietaer:


The Terra is a complementary, privately issued, demurrage-charged, Trade Reference Currency, that is backed by an inflation-resistant, standardized basket of the dozen most important commodities and services in the global market.

The Terra is backed by a standardized basket of the most important commodities as well as some standardizable services traded in the global market. Though conceptually similar to a fully backed gold standard, the Terra backing would consist not of one single commodity, but a dozen of the main international commodities, including gold. Since it is fully backed by a physical inventory of commodities, it would be a secure, very robust, and stable mechanism for international contractual and payment purposes.


If you create a currency, you can decide how it works.

Suppose you create an electricity trading system - i.e. a big substation with lots of high voltage wires going in and out and an electricity meter on each wire. (I'm sure it's more complicated than that, but that's the principle)

Now since it's your system you get to decide how it works. You can make a database of balances and you can say that anyone who supplies 1 MWh of electricity gains 1 token, and anyone who uses 1 MWh of electricity loses 1 token.

Verification is easy, you just check the energy meters. Tying the value to electricity is easy, you've done it by definition.

Ta-da, this is now the currency you want.

But you still have significant problems to overcome. For one thing, the grid doesn't store electricity - at least not in any significant quantity (it stores a little bit). People have to produce and consume it at the same time. So what happens when a power plant shuts down and more people want to consume than produce? Or on a sunny windy holiday when more people want to produce than consume? Some of them can't?

Even if you build a big battery station or pumped hydro station attached to your exchange, you'll still end up printing infinite amounts of currency over time, because the energy loss in your storage system will still give the producer a token, but nobody will ever consume that token because the energy was lost.

The value of electricity fluctuates based on market conditions. Does that mean a loaf of bread is worth 2 microtokens in the middle of the night, but 0.5 microtokens in a hot afternoon when everyone's got their air conditioning on? The value is not as stable as you would like. You would rather adjust the price of the electricity, than the price of the bread.

It's also not decentralized. And it probably can't be. Energy has different value at different locations. 1 MWh at Niagara Falls is much cheaper than 1 MWh in New York City. Normally, some wealthy oligarch would pick up on this and build a power line from there to here, and make a profit based on the price difference, while also providing the useful service of moving electricity (that's the core tenet of capitalism). But if you force them to be the same price, that doesn't happen.

To see the difficulties involved in running an effective currency like this, you may be interested to read about the Capitol Hill Babysitting co-op.

  • $\begingroup$ Well that was one of my big points. For it to be decentralized. So not one person owns the grid, and you need some secure way to verify that you have supplied the energy to the grid that you say you have. Even if you give some smart meter with crypto to every supplier there is no way to make sure that supplier is not just running energy trough the meter that he is using him self and not supplying to the grid. $\endgroup$
    – Stormer
    Commented Jan 14, 2021 at 3:59
  • $\begingroup$ @Stormer nobody's figured out any way to make a decentralized commodity-backed token because there's no way to know what happened to the commodity $\endgroup$ Commented Jan 5, 2023 at 22:25

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.