Does energy currency make sense?

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The discussion explores the evolution of currency, starting from barter systems to commodity money, representative money, and fiat currencies, emphasizing the challenges of value assignment in modern economies. It suggests the intriguing idea of creating a currency based on energy, which could provide a more stable and universally accepted value due to its physical nature and inherent utility. The conversation highlights the potential benefits of an energy-based currency, such as setting a reference point for the value of goods based on the energy required for their production and distribution. However, it acknowledges the complexities involved, including the current limitations in energy storage and the need for a robust economic framework to support such a system. The thread concludes by questioning whether energy or cryptocurrencies can effectively serve as a long-term store of value, suggesting that the topic has been thoroughly examined.
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Let me start by saying the idea isn't mine at all. It's actually somewhat usual within Science Fiction works. Maybe one of the most popular appearances of the concept is the videogame Stellaris where there is commerce with aliens so a universal currency is very convenient.
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In economics, money is a little bit like potential energy in Physics, don't you think? It represents the capacity to do things. The Kardashev scale also comes to mind when thinking about this. However, I'm trying to focus the thread on the concept of currency.
In a nutshell:
  • Barter is good and simple but it makes commerce hard. Currencies were created to overcome that although barter still sees use and will always exist.
  • Currencies used to be based on materials such as gold. It's durable, limited, and shiny so people put value on it. That is commodity money. I guess we're a little like crows trying to gather the shiny things around us for the sake of it.
  • Bank notes were issued to represent the gold which was useful to facilitate trading. That's representative money.
  • Then Fiat currencies came in and now the money is just paper we're told it's valuable which is true as long as we all agree it is. The problem is now it can be printed with the push of a button in the power of a few people.
  • Cryptocurrencies can (as far as I know) be created so their supply becomes more difficult to increase as time goes on unlike fiat currencies but it's still based on nothing. We have to agree on its value so it's valuable.
Wouldn't it make sense to create money whose value is based on energy? Energy represents the true physical quantity to do things (work) so it's everything but arbitrary. It's universal, physically bound to the real world, etc. Basically, moving back to representative money but using energy instead of something like gold as the backing source of value.

At the moment, we have the problem of storing energy but that could be a technological problem to be solved in the future. Or maybe the value could be defined by the potential energy production within a time period. Assigning value to power or energy could require two different currencies that are somehow related. I most definitely don't have a solution or plan for it. I'm just exploring the possibility because I think it's interesting.

Additionally, generated goods could have a true value based on the energy associated to make the product and get it to you although its true value would still be assigned based on supply and demand by the individuals using it. But at least the currency would set a reference point besides the benefits previously mentioned.
 
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Juanda said:
The problem is now it can be printed with the push of a button in the power of a few people.
It's not that easy, IMO. Whether democracy or dictatorship, you must have a strong economy to survive politically. There are some good reasons we left the gold standard.
 
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Successful currencies have historically had two uses: a medium of exchange and a store of long term value. I am unsure if energy (or cryptocurrencies) successfully meet the second use.
 
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It seems we have exhausted this topic and so it's a good time to close the thread.

Jedi
 
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