Physics-Based Cryptocurrency Transmits Energy (Not Just Information) Via Blockchain

Physics-based cryptocurrency transmits energy (not just information) via blockchain

Credit: Lawrence Livermore National Laboratory

Researchers at Lawrence Livermore National Laboratory (LLNL) have developed a physics-based cryptocurrency that connects electric power and blockchain technologies in a new way.

This new blockchain concept, dubbed “E-Stablecoin,” could allow electricity to be transmitted between users spread across the globe, without the need for interconnecting cables or a grid-based transmission system. The work solves critical digital asset stability issues and is the first cryptocurrency token design that is both backed by a physical asset and fully decentralized because it is secured by the laws of statistical mechanics.


The research appears in the journal Cryptoeconomic systems.

Digital assets and cryptocurrencies (such as Bitcoin) have seen explosive growth since their inception in 2009, prompting President Biden to sign an executive order to ensure the responsible development of digital assets. The executive order notes that digital assets have profound implications in areas such as “privacy and data security; financial stability and systemic risk; criminality ; national security; the ability to exercise human rights; financial inclusion and equity; and energy demand and climate change”. Accordingly, the executive order calls for coordinated interagency efforts for the responsible development of digital assets, including technological advancements and payment innovations.

The new concept of LLNL cryptocurrency is a step towards implementing responsible digital assets that go beyond the digital world and are instead linked to the physical world in a more tangible way. E-Stablecoin takes advantage of modern advances in thermodynamics to transmit energy in the form of information.

The seeds of this idea go back to the thought experiment “Maxwell’s Demon” posed in 1867 by James Clerk Maxwell. In this thought experiment, a “neat-fingered demon” could allegedly break the second law of nanoscale thermodynamics – a claim that has led to a wave of controversy over a century, ultimately unraveling a deep connection between energy and information.

In their new paper, Lawrence Livermore researchers Maxwell Murialdo and Jon Belof detailed how this connection between energy and information enables the creation of a cryptocurrency token that is directly backed and convertible into a kilowatt-hour of electricity. Although it requires the input of one kilowatt-hour of electricity to mint an E-Stablecoin token, this digital token can then be destroyed to extract one kilowatt-hour of usable electricity. Thus, the price of an E-Stablecoin token is pegged to the price of one kilowatt-hour of electricity in a robust, stable and trustless way (a system that does not depend on an institution or a third party for a network or a system payment to operate).

As Murialdo explained: “Any anonymous party can mint an E-Stablecoin token with the input of approximately one kilowatt-hour of electricity. They can then transact with the digital token like any other cryptocurrency, or even turn it into usable electricity – all without the need for power companies, power lines, permits, or permissions. authorities. It’s a trustless system from top to bottom.

A key problem plaguing many cryptocurrencies (such as Bitcoin) is the tendency for wild fluctuations in the exchange price of cryptocurrency. These extreme price swings magnify risk and discourage consumer transactions, long-term smart contracts, and other blockchain-based applications.

One solution is to create “stablecoins,” which are cryptocurrency tokens specifically designed to hold stable value against external assets. Stablecoins can peg their token value to the value of an external asset like a US dollar or a gram of gold by making the token directly exchangeable for the asset. However, to date, pegging the value of a cryptocurrency token to the value of a physical asset has required trust in a centralized authority (which can maintain and disburse the physical asset). Requiring trust in a centralized authority introduces a potential point of failure that is contrary to the decentralized ethos of cryptocurrencies.

E-Stablecoin is the first stablecoin concept to eliminate this point of failure, a feat made possible using the interplay of thermodynamics and information theory. In the future, E-Stablecoin could help distribute electricity to remote locations that are not connected by an electrical grid system, or combat climate change by allowing intermittent renewable energy to be transmitted where it is most needed for efficiency.

“Through thermodynamic reversibility – insofar as it is enabled by a modern understanding of statistical mechanics – we envision a future blockchain that is not only rooted in real assets like energy consumption, but is also a more responsible steward of our natural resources in support of the economy,” said co-author Belof.

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More information:
Maxwell Murialdo et al, Can a Stablecoin be Backed by a Fully Decentralized Physical Asset?, Cryptoeconomic systems (2022). DOI: 10.21428/58320208.adf5637a

Provided by Lawrence Livermore National Laboratory

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Physics-Based Cryptocurrency Transmits Energy (Not Just Information) Via Blockchain

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