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Battling climate change with SolarCoin: a solar-powered cryptocurrency

The world of cryptocurrencies took another dramatic turn this week with the announcement of a bug discovered on one of the major bitcoin exchanges. As a result, the MtGox Bitcoin exchange stopped allowing withdrawals of Bitcoin from the exchange and this then caused the value of Bitcoin to drop, falling from about $900 USD a week ago to the current price of around $600.

Meanwhile another cryptocurrency has brought a new perspective by tying itself to renewable energy. The SolarCoin has been created to promote the use of solar energy. Although SolarCoins can be earned by mining in roughly the same way that Bitcoins are, the majority will only be available in exchange for generating Megawatt Hours of electricity back to the grid. The plan is for consumers who generate solar-powered electricity to receive 1 SolarCoin per Megawatt Hour. In essence, this becomes a “proof of work” which is the basis of creation of other cryptocurrencies. The problem with proofs of work is that they are currently implemented by getting computers to perform repeated calculations. This uses a significant amount of power which is effectively wasted. Using a renewable electricity proof of work is obviously far more attractive from an energy conservation perspective.

According to Nick Gogerty, the SolarCoin Foundation spokesman, the target value for a SolarCoin is $20-$30 USD. How the target will be achieved and maintained is not clear.

Like all of the cryptocurrency, the actual value depends on what people are prepared to buy the currency at. With SolarCoin, the tie in with solar power generation may prove attractive to the renewable energy sector generally and consumers who are supportive of any effort to reduce greenhouse emissions by using clean energy. As the recent surge in value of the Dogecoin has shown, even a cryptocurrency that started as a joke can become an asset with exchangable value. The Dogecoin, partly as a result of Bitcoin’s woes, currently has a market capitalisation of $90 million USD.

The idea of concept-based currencies is a very new idea and one that holds enormous potential. Taking a concept, in the case of SolarCoin, renewable energy, coupled with the idea of using a “proof-of-work” as the basis for the creation of the currency means that these currencies could be tied to any type of work, especially one related to the concept. Imagine for example a UniCoin which is awarded for every course a student completes at University. The coins could be used to pay for books or food on campus or even offset their eventual student loan.

If you are having trouble conceptualising the idea of these types of cryptocurrencies, it is worth remembering that they are not that different from currencies like the US dollar that are no longer backed by gold. Currencies like the USD are are a “fiat currency” which only works because collectively we have chosen to believe that a dollar has value.

In the meantime, if you want to get SolarCoins, you will be able to exchange Renewable Energy Certificates (RECs) for them. A REC usually represents a certificate for the generation of a Megawatt Hour of electricity. In Australia, RECs are usually given to the consumer based on an estimation of the amount of electricity the installed panels will generate over a 15 year period. They are usually handled by the solar panel installation company who discounts the installation costs and claims the RECs on your behalf. This does mean that it would be difficult to be able to use RECs in Australia to get SolarCoins unless you handled them yourself. It would be possible however for electricity companies to become involved with distributing SolarCoins in addition to providing the usual feed-in-tarrifs that they give to people contributing electricity to the grid.

Whatever the fate of the SolarCoin, there are undoubtedly going to be many more concept currencies that will follow.

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8 Comments sorted by

  1. Account Deleted

    logged in via email @drdrb.net

    I dispute the idea that introducing a new currency is as simple as making it believable/popular. Fiat currencies do not function as stable means of exchange and reserves of value because "people believe in them" - they function because they are backed by the force of law stating that taxes must be paid in them, and that they are legal tender for the settlement of all debts, and that government monetary creation (reserve banks) and taxation powers will be used to maintain the currency's value if necessary…

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  2. Peter Smith

    (None)

    Ridiculous when you consider the energy required to power machines to mine these crypto-currencies.

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  3. Luke Weston

    Physicist / electronic engineer

    Cryptocurrency "mining" in the usual fashion makes sense because the computational work required cannot be faked or spoofed in any way.

    In this case, how do you propose to have secure authentication that a particular person really has generated 1 MWh from their solar cells, in a way that can not be trivially faked given a financial incentive to do so?

    And what happens to the traded RECs, anyway? As with existing REC trading schemes, do they all just end up being bought up by coal-fired big generators, who count them as "x-percent renewable generation" to meet political quotas, even though they do absolutely nothing in terms of real-world reduction or replacement of the amount of coal-fired generation required?

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  4. Julian Bontay

    Equities Analyst

    Crypto-currencies are a non-sense - fuelled in part by novelty and naive, adolescent rebellion against traditional banking/fiat currency.

    I am amazed at the people who are concerned about banks charging a 1% fee on transactions or the idea that central banks tolerate 2-3%pa inflation (degradation of the value of the fiat currency) BUT are happy to accept something which is not backed by any legal force, open to fraud and whose daily value can fluctuate by up to 50%.

    The 2 most important factors that determine trust in a currency are:

    1. price stability (low levels of inflation + trust in future value); and
    2. universal acceptance/convertability through it being legally backed by regulators and central banks.

    Crypto-currencies achieve neither of these and therefore doomed to fail. Wake me up when this latest Ponzi scheme collapses.

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    1. Luke Floorwalker

      Solar Engineer and Researcher

      In reply to Julian Bontay

      I am not sure if you are completely understanding the crypto-currency algorithm. Just a note. Please research a bit about "block-chain", "SHA256-algo" and "scrypt" algorithms. These are a major breakthroughs and disruptive technologies.

      I've also been working in solar energy 16 years, that is a disruptive technology, please research "Swanson's law" and also look at some of the latest articles coming out about how traditional utilitiy companies business models are failing in the technology race…

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  5. Michael Shand

    Software Tester

    Interesting, I can't see how it will work long term nor drive renewable energy generation but that probably says more about me than the currency

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  6. Johnothan Sledge

    Crypto Market Analyst

    This is a perfect example of how ingenuity will ensure the cryptocurrency market will survive. Granted there are a lot of meaningless and possibly counterproductive coins being released every week now. Those make SolarCoin shine, since SolarCoin has a specific purpose, goal and niche to fullfill. This coin will be a sure winner, and I will be picking some up on the exchanges as soon as its available. For more insight come see:
    http://crypto-market-news.weebly.com

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  7. Ken Taylor

    Research Scientist at CSIRO

    Concept currencies are fascinating and perhaps people would be willing to crowd fund solar energy. This one seems too ambitious though. There will be over 50 million more mined in 2014 according to http://solarcoin.org/faq-frequently-asked-questions/ which at the hoped for value of US$20 per SolarCoin would mean the miners have created another US$1 billion worth by 2015. Soaking that up would need a lot of buyers.

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