9 thoughts on “Should currency be denominated in kilowatt hours?”

  1. Posted 16/01/2014 at 16:45 | Permalink

    Actually no more silly than “how about having paper” as a currency, but a little mor silly than “how about having gold” as a currency.

    The fact is that when meltdown comes, as certainly it will, is it likely that the population will turn to KwH or will they turn to gold as an alternative to barter?

  2. Posted 16/01/2014 at 23:28 | Permalink

    Dear Mr Senior

    Whilest a currency denominated in kilowatt hours would not be debaseable short of corrupting all of science and engineering (not impossible) two problems present: one is ensuring good delivery, the other is the possibility that energy becomes so plentiful its exchange value drops to near enough zero, echoing the claims of the energy industry in the mid-twentieth century that nuclear power would be so cheap that it would not be worth charging for. In a universe awash with energy, it would be a sad joke if humanity ended up freezing to death at the bottom of a gravity well just because the oil had run out.

    I would suggest that the world’s most precious resource is not energy, but time, specifically human time and more specifically approaching infinity for each individual.

    The man-hour as a basic unit of exchange could encapsulate the total human condition, including education and skill.


  3. Posted 17/01/2014 at 15:02 | Permalink

    Dear DP

    We are actually thinking upon similar lines. Time and energy are two absolutes that drive ALL economic behaviour. As described in my new book “Time and Energy”, individual (and cooprorate) utility = energy divided by time expended; or

    U = E/T.

    If new boundless energy was discovered, for example by atomic fusion using thorium, the world would enter a new golden age of cheap though not free energy. Production and distribution of energy, however generated, will always require substantial capital investment and so cannot be free.

    Roines, a currency denominated in KWatt hours and based on energy supply, would reflect a claim on real utility. By contrast phoney money, printed on behalf of politicians by central banks and treasuries and called quantitative easing, is an illusion which already is wearing thin.

    Ian Senior
    Author, Time and Energy – Understanding Human Behaviour Past, Present and Future

  4. Posted 24/01/2014 at 13:31 | Permalink

    This is an unusual blog post for IEA.org.uk.

    The first four paragraphs of this seem pretty unobjectionable from a Classical Liberal/Austrian
    perspective but after that it wanders some what off the reservation. The main argument is that energy is becoming scarcer, & that a currency denominated in energy units would help to ration this energy in an automatic way like the gold standard did.

    The gold & precious metal standards were not however about rationing a scarce supply of gold. The scarce supply is an incidental but useful factor in stabilising its value for monetary uses. A market in energy would ration itself & the currencies job is to facilitate trade in a market. The claim that

    “All consumers, both industrial and domestic, would recognise the need to economise on their consumption of energy so as to have more Roines left over for other purchases”

    is redundant. Any reliable & functioning currency will facilitate that effect. The price of energy does not have to be in energy units to reveal to economic actors that the supply is going down.

    The other claimed virtue of keeping money supply out of government hands is diluted when we consider that any commodity standard will do that, along with other schemes from Hayek’s competing currencies to bitcoin. Energy is at least no better & probably worse as foundation for a currency compared to many of those given the dispersed & fragmentary nature of global energy markets due to the storage & transportation problems for ‘energy’.

    Which leads me on to the more fundamental point. Energy may be an important & valuable good but that does not mean it is a reflection of value. Goods production varies with heterogeneous inputs such as labour, time, raw & manufactured parts of all types. While one may reduce all activity down to energy in physics there is no reason why in terms of economic calculation that it is more fundamental then other factors.

    Another concern is that the apparatus required to put this kind of thing in place does not sound conducive to liberty. The whole thing has the ring of Technocracy inc. & the Zeitgeist movement about it.

    Ian Senior is also woefully uninformed about Bitcoin.

    “Further, since the ‘central bank’ that generates Bitcoin is anonymous it potentially offers huge prospects for the enrichment of the ‘central bankers’ concerned who are at liberty to issue Bitcoin as and when and in whatever quantitites they wish”

    The total amount of bitcoins is caped at 21 million, and the generation of bitcoin is done by a process of ‘mining’ by using computer power & time to solve cryptographic problems. It was deliberately designed to mimic precious metal mining. All this is hard-wired into the DNA of bitcoin. To imply that there is some sort of shadowy anonymous authority writing themselves cheques at will amounts to libel.

  5. Posted 24/01/2014 at 13:50 | Permalink

    What a nonsense ! This line shows that the auditor has no idea how Bitcoin works at all:

    “Further, since the ‘central bank’ that generates Bitcoin is anonymous it potentially offers huge prospects for the enrichment of the ‘central bankers’ concerned who are at liberty to issue Bitcoin as and when and in whatever quantitites they wish’

    In contrast: Bitcoin, isn’t generated by a central-entity at all…All the coins are already present (21 million) but are mathematically RELEASED by 25 coins per 10 minutes. There is no way what so ever that there will be released more coins then this, and this release isn’t controlled by a central bank, its just a decentralized mathematical procedure encoded in the Bitcoin-protocol.

  6. Posted 24/01/2014 at 14:07 | Permalink

    Well your whole article is garbage because you started with the wrong facts. There is no central authority issuing coins in Bitcoin. What you described is central banking and why those of us so distant from it don’t trust it. Because we don’t trust a bunch of rich bankers not to enrich themselves and their friends. It has been happening for nearly 100 years, unknown amounts of wealth swindled from those forced to suffer under central banking. Horrible. [expletives deleted by moderator]

  7. Posted 24/01/2014 at 16:00 | Permalink

    If and when all 21 million Bitcoin have been mined and are being released at 25 coins per 10 minutes, the release rate is 1.3 million per year. All Bitcoin will have been released over a period of 16 years. Their value for conversion into real goods and services may fluctuate considerably. Investing in Bitcoin in expectation of capital gains will be like investing in stocks and shares but it is hard to see Bitcoin replacing fiat money as the basis for millions of daily economic transactions. The application of energy (kilowatt hours) is essential for the production of all goods and most services. Hence my arguments in favour of KWatt hours becoming the denominator of a currency of last resort.

  8. Posted 25/01/2014 at 02:27 | Permalink

    Mr Senior, it would seem painfully evident, both through your article and and now here in the comments that your critique of Bitcoin has a very poorly researched foundation to rest upon. For instance, even after a commenter has pointed out to you that Bitcoin’s supply is limited and another commenter gives you a small part of the picture on how Bitcoins are issued, you make yet another mistake in assuming that Bitcoin is issued in a linear fashion when in fact the supply is an exponentially declining one estimated to take anywhere from 60 to 130 years to complete. I would explain the variable factors but I think you have a great deal more learning to do before we, the hapless commentariat, in the face of the esteemed author, try to tackle that.

    I suggest that you read the original Bitcoin whitepaper authored by the pseudonymed creator of Bitcoin, Satoshi Nakamoto. It’s a fascinating read if you’re at all interested in the concept of cryptographic currencies and given that you’ve written this critique, I should hope you’re at least moderately so. I leave this link for your convenience.


    Further, I think that critics like yourself should be cautioned that you’re wandering into waters much more expansive than you seem to realize. That is to say that Bitcoin is not only fascinating from the perspective of someone interested in mediums of exchange and payment networks, but as well, someone who is at all interested in computer science.

    You would do well to realize that Satoshi Nakamoto came along, out of nowhere, and solved the Byzantine Generals problem, a problem that had baffled the best minds in computer science for at least 30 years. For this alone, (never mind the other innovative qualities of Bitcoin) the Bitcoin protocol’s creation is as notable as the possible discovery of some new prodigy in mathematics amongst the rabble in some barely noted community college. Satoshi was first met with laughter and dismissal by those who revealed this innovation to before they quickly changed their tune.

    In short, I believe you have taken a very narrow view of Bitcoin as a concept. If you feel the need to dismiss Bitcoin with such zeal as you’ve done here, I think it would be better if you were more properly informed as to how it works. I don’t say this to be snide; rather, I say this only because I think it is the plain and honest truth.

    Please do some more research sir. Free market economic theory is a study that I embraced a long time ago and thankfully, despite my arrogance, it was what allowed me to understand why Bitcoin is so very important today once I had stopped being such a dismissive ass about it in the end.

  9. Posted 08/06/2015 at 11:02 | Permalink

    Bitcoin is a kilowatthour standard: it is created by computers that run on electricity: when electricity is cheap, bitcoin are created more cheaply. This is much like how 19th century gold-based money could fall in value (e.g. inflation) when, say, new a new gold seam was opened in South Africa.

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