Cryptocurrency, sometimes referred to as digital currency or alternative currency, has been making waves in the news lately, mostly due to the rapid rise in value of Bitcoin. But there are other cryptocurrencies out there that are less well-known, including one new digital currency that is backed by the generation of solar electricity.
It seems appropriate 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.
“SolarCoin is an alternative digital currency. SolarCoin is backed by two forms of proof of work. One is the traditional cryptographic proof of work associated with digital currency.
The other proof of work is a Solar Renewable Energy Certificate (SREC) that has been generated and 3rd party verified. SolarCoin is equitably distributed using both of these proofs of work as a means to reward renewable energy production.”
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“:
“One alternative asset for a central bank to hold consists of electricity delivering assets. Electricity delivering assets don’t need to be physical assets such as fuel or power plants, but rather may be claims in the form of standardized Power Purchase Agreements for the delivery of electricity from power producers.
Electricity delivering assets can hold their economic value more effectively than gold or debt due to price stability and resistance to devaluation from over-issuance. The DeKo-backed currency concept advocates a portfolio of diversified electricity delivering assets that offers more social benefits than gold and retains monetary value better than government debt.”
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.”
According to CoinDesk, there are some drawbacks to this digital currency:
“One of them is that, whereas most altcoins are designed to be independent of geography or government, the OCA’s paperwork may have to be retooled for different countries. They all have different regulatory and incentive frameworks which would affect how the coin works, and the OCA – which doesn’t even have a charter yet – will need to work with each of them independently to get the coin up and running.”