Scientists link stablecoin to electricity

Through the combination of statistical mechanics and information theory, scientists have been able to design a class of stablecoin that is linked to electricity, known as the Electricity Stablecoin (E-Stablecoin).

According to the research published in Cryptoeconomic Systems, the E-Stablecoin would be minted through the input of one kilowatt-hour of electricity, plus a fee. This new blockchain concept would allow electricity to be transmitted between users who are spread around the world, without the need for interconnecting wires or a grid-based transmission system.

E-Stablecoin could therefore be the first fully collateralised stablecoin, as its value would be pegged to a physical asset – electricity – that is dependent on its utility. 

Due to its nature, this stablecoin could solve many of the challenges cryptocurrencies currently face, mostly related to their market volatility. These extreme price fluctuations magnify risks and discourage consumer transactions, long-term smart contracts and other applications built on the blockchain. Instead, the value of E-Stablecoins would be secured by the price and demand for electricity.

Like other digital currencies, E-Stablecoin could be used for transactions in the same way as any stablecoin, or the energy could be extracted by burning it, also for a fee. The entire process would be controlled by smart contracts with a decentralised data storage cloud.

"Any anonymous party can mint an E-Stablecoin token with the input of roughly one kilowatt-hour of electricity,” explained Maxwell Murialdo, one of the paper’s authors.

“They can then transact with the digital token like any other cryptocurrency, or even turn it back into usable electricity—all without the need for electrical power companies, electrical transmission lines, permissions or authorities. It is a trustless system from top to bottom."

Because of its design, E-Stablecoins could be mined using sustainable electricity, and investors would be able to mint the currency in regions where electricity prices are low and burn the tokens where electricity is more expensive.

In the future, the researchers hope to use E-Stablecoin to help to distribute electricity to remote locations that are not connected by an electrical grid system, or combat climate change by enabling intermittent, renewable energy to be transmitted to the places where it is needed most for efficiency.

"Through thermodynamic reversibility – to the extent that it is allowed by a modern understanding of statistical mechanics – we envision a future blockchain that is not only rooted in real-life assets like energy usage, but also is a more responsible steward of our natural resources in support of the economy," said co-author Jon Belof.

Despite the promising calculations, made using advanced mathematics, Murialdo and Belof described their work as a proof of concept. To make a working E-Stablecoin, “further advances that increase the speed, transfer entropy, and scalability of information engines will likely be required,” according to the scientists.