A new peer-reviewed design for an asset-backed stablecoin is being proposed by materials scientists at Lawrence Livermore National Laboratory. Protocols are proposed that allow for decentralized conversion of data and electricity, with kilowatt hours as the backing asset for a stablecoin.
The stablecoin concept is a central price stability system that aims to provide stability in decentralized markets. A group of researchers has come up with a new idea: electricity is the backbone asset.
Two materials scientists from Lawrence Livermore National Laboratory describe a method for converting electricity to a proposed crypto token.
The paper’s abstract describes how electricity can be used as collateral to a stablecoin so that each token can exchange for one kilowatt hour (KWh) or vice versa without any central authorities.
Current stablecoins are dependent on collateral which complicates exchange. Fiat-pegged stablecoins have been subject to scrutiny for their centralization. This has led to doubts about whether token holders will ever be able redeem their stablecoins in exchange for the underlying assets. Tether, , the largest stablecoin in market capital, briefly lost its peg last month.
Algorithmic stablecoins aim to decentralize, eliminating trust and centralized stablecoin issuers. Last month, Terra crashed in a highly publicized fashion. This raises doubts about whether algorithms can secure hold value.
The electricity coin
The paper proposes to allow stablecoin holders to remain anonymous, convert their holdings to electricity and then keep them anonymous. This is useful for everyone around the globe and has remained relatively stable despite the efforts of “scientists and engineers” to lower costs over the past 50 year.
A Szilard engine is the actual mechanism that allows data to be converted into electricity. It is a device that uses information to extract useful work out of ambient heat.
Maxwell Murialdo, the first author, explained to The Block that Szilard engines are already in use in laboratory applications, but their “scale is minimal,” so they’re not practical at the moment.
The paper proposes a system that will not be practical in the short term. It is however a very innovative application of Szilard engines crypto-systems to, which would hypothetically connect them with a physical asset.
However, electricity is stable if there is a stable economy. But its prices can vary widely based on where you live and what fuel source you have. This disparity causes bitcoin miners to move to find the lowest price power. This disparity in electricity prices could in theory encourage early adopters to the proposed system.
Muraldo stated that arbitrage will be at least initially the driver of adoption. “But, ultimately, what we believe will happen is that this will drive electricity to an unaltered or at least very close to an unbeatable price for the commodity.”
Lawrence Livermore National Laboratory (Nasdaq: NA27344_8900_-NONE-_-NONE) is one of the 17 national laboratories in the United States. The US Department of Energy has granted the lab a 20-year. It primarily conducts research for defense applications.