Backing Futuristic “Credits” with Energy?

Question

A lot of worldbuilders that I know and have spoken too, insist that unbacked currencies and items with constantly changing values would be what the economy is based on. I, however, am skeptical of this.

Now, I am aware from reading lots of Atomic Rockets and my education, that in space pretty much any material resource isn't going to be terribly expensive. Gold could be made worthless, with the resources and technology one would use to get to Pluto in a few days.

I, however, own a few books about writing sci-fi and have books on history. I know that whoever controls the source of energy for each Era, stands to be the most powerful nation, empire, or faction in that Era. I know that pretty much every single nation values oil, and despite it going up and down in supply and price, there is always a huge demand for it. I know that oil companies do well on the Fortune 500 and Global 500.

Would it be feasible to back currency with energy, assuming I could hold all of the energy produced in a storage medium that didn't leak too fast?

Energy is used to get raw materials, energy makes them into finished goods, energy moves them from place to place, energy powers the tools to make buildings, it cools the houses, it warms the houses, it powers the lamps for the indoor farms, and it's used to make fertilizer for the outdoor farms.

If I can't back it with energy, can I back it with anything? Can currency be backed feasibly by people who travel from system to system in days or hours?

Answer 1

Don't use stored energy to back your currency, use energy production capacity to back it.

Imagine there is a space colony somewhere on some forgotten planet. They have a problem: They don't have enough energy. So you as a friendly intergalactic entrepreneur settle down there and build a cold fusion power plant to cover their energy demand. But you are of course not doing this just because of the goodness of your hearth. In order to be allowed to use the energy your power plant generates, they need to provide you with the goods and services they produce.

You are now buying things for energy.

The amount of energy you let each colonist use will likely depend on how much goods and services they provide to you. One colonist might create those tasty green protein bars you like so much. You are willing to provide him with several GW of energy in exchange for a crate every month. But the guy who makes them doesn't actually need that much energy. However, there is also that guy who creates tools for all the colonists. In order to create tools, he needs to smelt metals, which is very energy-demanding. But you brought your own tools, and they work better than those made by tool-guy. There is nothing tool-guy could offer you for the right to use your power plant. But there is a solution: tool-guy provides his tools to protein-bar guy and in return protein-bar guy gives tool-guy some of the energy he bought from you with protein bars.

You just inadvertently turned energy into a currency.

Keeping track of all these deals among the colonists will become cumbersome to you. You want some easier way to keep track of who is entitled to how much power. So you create some kind of token which the colonists can trade among them and then give you in exchange for your energy.

You just created a currency backed by energy.

Answer 2

The energy-backed currency in your world could be a form of rationing coupon for the use of energy.

The government recognized that the increasing energy demand around the world creates an unacceptable strain on the natural resources of the planet. The free market failed to regulate this problem. So they decided to ration the use of energy by distributing energy rationing coupons.

If you want to consume 1 kWh worth of electricity or burn some kind of fuel worth 1kWh for heating or propulsion, then you need to return a 1kWh energy coupon to the government. The government does of course realizes that some people need more energy than others. So the energy coupons are transferable. When a big industrial plant needs huge amounts of power, they need to acquire the necessary energy coupons from people who don't need all of theirs.

Regarding for what system the government used to determine who gets how many coupons: I could imagine lots of different distribution systems. Give them to natural people or to companies; equally to everyone, based on need or based on merit. Which method you choose could have severe socioeconomic consequences for your world. But the only thing which really matters about the distribution system when it comes to turning the coupons into a currency is that the government doesn't sell them for fiat money. If they do that, then their value would be coupled to that of the fiat currency.

Although they are called coupons, they might not actually exist as physical pieces of paper. They might just exist electronically in some government database or in a public blockchain.

When you have a good which is fungible, easy to transfer and needed by everyone, then it is ideal commodity currency material. After a few fiat money finance collapses, stock market crashes etc., these energy certificates might have proven to stay stable in value. So they might have become the de-facto currency at some point in history.

Answer 3

Currently this is kinda already the case. The USD is backed by oil. If you have $100 (give or take) you can exchange it for a barrel of oil, and vice versa. Now the USD is only loosely pegged to the price of oil, (The price is adjusted by things like: sell military equipment cheap for a few favours on production output, release some reserves when prices get a bit high, go to war with any smaller countries that try sell oil in euros, that kind of thing)

A good currency needs to be:

1. Divisible (so you can get change)
2. Transferable
3. Have some sort of backing
4. Is reasonably stable price

As a side note Bitcoin does really well at 1&2, but poorly on 3 (a combo of it's utility of 1&2 + the size of the Bitcoin economy (the amount transferred daily which currently is much smaller than the whole pool of coins)) And point 4, Bitcoin is currently too volatile to be a useful currency

The USD used to have gold as a backing. But because of the French gaming the system President Nixon changed it to be backed by the US Government, or effectively the US economy. Which for reasons also includes almost all of the International oil trade.

So for your world building, raw material commodity prices fluxuate wildly; as astroids get brought into the Luna dockyards, some worth dozens of credits, others just piles of useless gold and gravel. However the lowest common denominator is always energy, antimatter to be precise.

Antimatter is divisible (you wouldn't want to fuel up a ship with more than 100 milli (grams) now would you.

Antimatter is Transferable. One gram (one credit worth) is easy enough to move from (person) A to B; even in it's containment vessel. FWIW one gram is enough energy to be equlivent to that released on Hiroshima and Nagasaki by the US in WWII

It is backed by it's own value and utility.

Any ship larger than a fusion powered rock-hopper is going to need antimatter. In the same way virtually all of present day's transportation (air, train, plane, automobile, truck) uses oil.

Creating antimatter requires a Huge investment in cyclotron infrastructure. The "Corporation" was the first and only entity to build a luna antimatter factory and basically captured and controls the market.

After some big price fluxuations in gold, titanium, water etc., as the first antimatter delivered astroids started coming in, a lot of mining outfits started going bust because they could not afford to refuel their ships. The "Corporation" started issusing "Antimatter Credit future's ", which can be exchanged for antimatter, on delivery of an astroid; irrespective of the current commodity spot price. Before long Credits became the defacto currenency of the off world economy.

Because Credits can be exchanged for something of fixed value (1g of antimatter), which has great utility, and the whole space economy runs on it; its value is very stable. Plus the future's contracts, helped even out the price fluxuations of astroid derived commodities.

One Credit is worth a fortune so when someone refers to a credit ( credit with lower case c or ¢) what they really mean is a micro credit, one millionth of a credit. Change is given in mil or milli, one 1000th of a small ¢redit. For perspective 2 mil will buy a can of cola.

Answer 4

I am afraid that using only energy is not enough. Take a simple system: a brick hung 10 meters above the surface of a pool. We can say it has a certain amount of energy, in form of gravitational potential energy.

If we now cut the rope and let the brick fall in the pool, we will have at the end the same amount of energy, dispersed into heat.

Is the content of energy the same? YES

Is the value of energy the same? NO

If my whole universe was the system above, I would value 10 credits of potential energy way more than the same 10 credits in thermal energy.

Lesson is: take into account the entropy.

Answer 5

Storing large amounts of energy is hard. Batteries don't hold very much. So where are you getting energy from? Nuclear, rare isotopes. Eg U235. The nuclear fuel is hard to extract and is a great source of energy, hence valuable.

Nuclear, common isotope eg H1. The limit on producing energy is reactor time, not raw materials. A gigawatt (Big power plant) fusion reactor needs the hydrogen from a tap that drips once every 2 minutes. Reactors could still be valuable, raw materials aren't. Storing energy in batteries is stupid unless batteries are cheap and reactors expensive and demand spikes a lot.

Solar, Panels may be valuable, as might be a promise of energy at some future time.