Researchers define new stablecoin backed by electricity

Researchers define new stablecoin backed by electricity

Researchers define new stablecoin backed by electricity

Amidst the recent news of failing stablecoins comes an idea that seems torn from the pages of a science fiction novel: a stablecoin collateralized by electricity, payable on demand and completely decentralized.

In a paper funded by the US Department of Energy and published June 13 in Cryptoeconomic Systems, Maxwell Murialdo and Jonathan L. Belof, scientists at the Lawrence Livermore federal research centre in California, offer a detailed blueprint for a new stablecoin that’s hard-pegged not to gold, dollars or crypto assets, but to a kilowatt-hour (kWh) of electricity.

And here’s the sci-fi twist: the protocol, dubbed “E-Stablecoin,” would actually transmit power as data rather than energy. How could this possibly work? Strap in and read on.


Electricity as a store of value

The authors argue that every stablecoin has an inherent contradiction: the more trustworthy the asset that backs it, the more trust-destroying centralization is required. For example, UST is backed only by other crypto assets and is fairly decentralized, whereas USDT is allegedly backed by dollar assets held centrally and not easily audited. PAXG is backed by gold, which must be stored in a central vault somewhere.

All of these, as well as coins like Bitcoin, fiat currency and precious metals, have to some degree an “Emergent Value,” a value determined by people believing it will hold value. If faith in the underlying asset disappears, the stablecoin collapses.

By contrast, E-Stablecoin is backed by an asset that’s expected to hold real utility value forever. Electricity has maintained a remarkably stable inflation-adjusted price for over 50 years, so it’s far less vulnerable to speculation. One E-Stablecoin can be traded or HODLed, or immediately converted to electrical power.

In addition, there’s no centralized electricity storage or conversion, so the protocol can’t be corrupted by bad actors.

Let’s bolt into the technology behind this.


How does E-Stablecoin work?

In 1867, physicist James Clerk Maxwell proposed the “Maxwell’s demon” thought experiment that appeared to violate a basic law of thermodynamics. To cut through a lot of tall grass, the result was a theoretical system called a “Szilard engine” that could convert electricity to data and vice versa.

With the proposed protocol, one person can, in essence, send an E-Stablecoin to another and receive a kWh of electricity in return:

  • Alice uses a Szilard engine to extract energy from the environment, losslessly converting it to one kWh of electricity that she can use. This generates random data on a storage device as a waste product.
  • Alice then spends one E-Stablecoin, plus a fee, to offload that waste data to cloud storage hosted on a network of “reversible computers” capable of running software forward or backward (see below). Her storage device is now free so she can generate more electricity.
  • Bob uses locally-obtained electricity (from any source) to erase this data, earning one E-Stablecoin as payment.

The net result is that Bob has input one kWh into the system and Alice has taken one out, for which she has paid Bob.


Bleeding-edge technology

Don’t expect E-Stablecoin to be available anytime soon. It requires several new technologies that aren’t even close to ready, to put it mildly:

  • A small-scale model of a Szilard engine was experimentally described and demonstrated in 2018, but a practical model is still several years away.
  • Data must be sent across the E-Stablecoin network such that it doesn’t transfer matter or energy, in order to eliminate energy dissipation. This form of data transmission, known as counterfactual communication, is used in quantum computers. It was first achieved by a university in China in 2017.
  • Reversible computing makes it possible for Alice and Bob to convert between work and data in either direction. Such a computer must be both thermodynamically and logically reversible, requiring a new generation of hardware. One recent advance in this area is the Fredkin gate.
  • Astronomical amounts of high-speed data storage are needed. One possible option is to make use of DNA. A 2017 experiment indicated that DNA could store up to 215 petabytes of data per gram.

Yes, this is all still a pipe dream. But once upon a time, so were mobile phones, superconductors and quantum computers. Unlike Bitcoin or any modern stablecoin, E-Stablecoin would derive its credibility from the real value of its underlying asset. Once science catches up to imagination, tokenized electricity could prove to be the ultimate world currency.

This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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