Currency Efficiency
Introduction
As a neutral digital currency research lab, the MIT DCI has fielded many questions about the energy consumption of Proof of Work (PoW) cryptocurrencies (e.g. Bitcoin). Given the potential environmental impacts of unjustified energy use, we recognize the importance of this issue—but despite the stakes, we see a disturbing lack of rigor, neutrality, and concrete data pervading the conversation. To that end, our Currency Efficiency research project is an attempt to isolate the root concerns underpinning the environmental considerations, offer a usable framework, and gather rigorous data on various crypto and fiat currencies in order to help move the larger conversation forward in a productive manner. We hope this work will eventually allow for a meaningful, rational assessment and comparison of the environmental impact of many cryptocurrencies and payment systems.
At heart, currency efficiency is an organizing philosophy that we’ve found helpful for framing questions and concerns about the energy requirements of any given currency. At a high level, this is a refocusing of the energy consumption question such that, instead of just asking how much raw energy a currency uses, we also assess how efficiently a currency achieves what it purports to achieve. In other words: what are we actually getting (in terms of value secured, features, ease of storage/transport, etc.) in exchange for the energy required to operate and guarantee any given currency? As a concrete example, consider a hypothetical currency (Currency A) ecosystem that consumes 1TWh of energy per year, and this energy covers issuance, transport/transactions, counterfeit protection, and storage costs. A different hypothetical currency that is exactly the same in all respects but requires 1.5TWh of energy/year is less efficient than Currency A, as it offers the exact same features and affordances but requires more energy. Similarly, a currency that uses 1TWh of energy and has novel programmatic abilities but is otherwise exactly the same as Currency A would be more efficient, as it can do everything Currency A can do—and more—in exchange for the same amount of energy. Thinking about the energy consumption of currencies in this way opens the door to a variety of research questions and objectives.
Project Components
Currency Efficiency
The underpinning of the currency efficiency research project is to bring rigorous data to the discussion surrounding Proof of Work’s energy consumption. In many ways, our stretch goal is to offer a framework to, as much as is possible, make apples-to-apples comparisons between currencies. We take a fairly intuitive approach by comparing the functionality of a given currency against estimated energy use, rather than independently examining the total energy consumption of the currency.
Currency Data
A large part of what we hope to do is add to the growing body of data. We plan to dive deep into currency efficiency, but also gather, organize, and distribute relevant data that we find surrounding, for example, the energy consumption of various PoW networks, the resource consumption of CBDCs, etc. We will also be doing our own analysis of existing data. In this way, we hope that our work can be seen as a neutral contribution to this important debate.
Currency Ontology
These explorations offer a unique opportunity to ask interesting questions about the very nature of currency. This is an intuitive necessity in order to ask about things such as the energy use of a currency like the US Dollar—what ought to be included in this calculation? While this is a fascinating starting point, it opens doors to explore, among other things, the what, the why, the how, and the theoretical future of something as critical to modern life as currency.
Events and Education
We are aware that we are one part of a larger ecosystem, and see the value in intentionally de-siloing ourselves to avoid working in a vacuum. To that end, some of the things we plan to push forward are information-sharing, sensemaking events. These may include a) roundtable discussions to surface new perspectives and reap the benefits of cross-pollination of ideas and research questions between disciplines; b) summits to allow others to distribute their thoughts and research to the wider audience; or c) other educational content to help spread these ideas.
Research and Writing
…coming soon…
