A currency should perform three main functions, namely, serve as a: 1. unit of account, 2. medium of exchange, and 3. store of value. As an example, Bitcoin is often compared to gold due to their limited supply and similarly high perceived value. Yet, an examination of gold-based (or silver-based) financial systems reveals that those systems collapsed when the underlying economy rapidly expanded and gold could not scale with it. Both gold and Bitcoin will naturally tend to increase in value due to their limited supply but it is also the same reason why neither are suitable for powering an economy.

A deflationary currency ultimately discourages production and fundamentally damages an economy. As an example, imagine you are a baker living in a world of hyper deflation. You purchase ingredients with currency during the day, bake cakes at night, and plan to sell the cakes the next day. Your plans to profit from your labor is thwarted when you discover the next day that the market price of cakes has dropped below the costs you paid for the ingredients. You realize you were better off not doing anything and should have simply held onto your currency.

Meter is not pegged to the U.S. dollar at all. We believe that cryptocurrencies which are pegged to USD (or other fiat currencies) always have a much better alternative, which is USD itself. The goal of Meter is to create a fully decentralized currency that is native to the crypto land and long term stable in purchasing power to foster a sustainable decentralized financial system. It has the potential to be a universal global currency as the adoption grows. Meter may be thought of as a token for an amount of electricity consumed by a miner. We are aiming to have 1 Meter = 10 kWh, based on the most energy efficient and publicly available mining hardware. The process is driven autonomously by Meter's internal feedback algorithm instead of external oracles.

If the price of Meter was to rise above the production cost, miners would deploy more computing power into mining, increasing the production and driving down the price of Meter. When the price of Meter drops, mining becomes less profitable, and miners stop mining Meter in favor of using their computing power for other purpose including mining other cryptocurrencies. Miners’ profit-maximizing behavior would drive the price of Meter to a purchasing power stable long run equilibrium, determined by the global competition for the lowest price of electricity.

Many altcoins rely on oracles to relay external feedback to the blockchain. Like the Greek Oracles who were individuals with private access to gods, crypto oracles act as translators of information that is otherwise unreachable for blockchains. Oracles are usually centralized, meaning that they are susceptible to becoming points of failure and targets of attack. Most importantly, no software system can guarantee 100% reliability. One example of this is Amazon’s Web Services cloud. Even with multiple levels for redundancy and the best operation team in the world, AWS can only guarantee 99-99.9% uptime for its highest paying customers. As a result, its service is sometimes unavailable for minutes to hours during the day. When a regular token or public chain experiences such failures, the worst-case scenario is service interruption. However, when an oracle-based altcoin receives a malicious data feed, the results maybe catastrophic. Picture an altcoin issued using Ethereum as collateral. False oracle data for the price of Ethereum could trigger an unwinding of all the underlying collateral, causing a permanent breakdown of the entire system. Such risk may be tolerable for a software platform, but is too dangerous for a universal store of value.

Such pegging is ensured statistically by Meter’s underlying consensus feedback mechanism instead of through external oracles. In Bitcoin consensus, there is an existing feedback algorithm to adjust the crypto puzzle’s difficulty level based on the average block period of the previous blocks. The goal is to maintain a consistent 10 minutes block period for Bitcoin. Meter enhanced on top of the algorithm so that it not only has a consistent average block period but also a consistent average number of hashes per coin, which could be directly translated to energy needed to mine each Meter based on the target mining machine.

Proof of work denotes that a network requires some work (computing) from a miner before they are rewarded with their coin, this system makes it expensive to be a ‘bad actor’.

Proof of stake denotes that a network will choose representative miners who already have a good deal of coins, thereby reducing the likelihood that they will choose to harm the system that sustains them.

The typical complaints about proof of work are that it wastes energy, has slow processing speed and is subject to 51% hashing power attacks, especially at the early stage of the chain. The main problems for proof of stake systems are that the rich get richer, because they are granted more opportunity to validate and earn tokens. ‘Nothing at stake.’, because there is no sunk cost for the proof of stake miner, there is an incentive to produce blocks on different forks to maximize the expected profit. Long range attacks, where hackers obtain private keys that previously held high balances could go back and regenerate the entire blockchain, thereby re-writing false history, it is impossible to identify which chain is the real one.

In almost all existing cryptocurrencies, the activities for currency creation and record keeping are entwined. Currency is created as an incentive for miners to maintain the security of the public ledger. We consider this a simplified design for the first-generation system. History reminds us that gold miners acted independently from bankers and accountants, who recorded transactions.

We know this is true when we observe the actions of Bitcoin miners. By joining mining pools to share processing power, miners give up their record keeping rights in exchange for a steady stream of income. Ultimately, only about 10 mining pools even have a chance to write the Bitcoin ledger. Such consolidation of power were completely driven by economic forces even Bitcoin was designed as a fully decentralized system.

A proper separation of responsibilities allows for increased efficiency and security. With Meter, currencies are created with proof of work, while records are kept with proof of stake. Proof of work generates the randomness and notion of time required in a healthy decentralized system. Proof of stake provides high performance and instant finality, which are needed for processing transactions. Meter’s system is able to combine the benefits of both, while also avoiding the problems in each.

As a store of value, a single unit of currency denotes a certain amount. This measurement of amount is comparable to meters and degrees, which respectively measure length and temperature. We do not expect to ‘recover’ anything from a meter or a measure of temperature. Similarly, we should not expect to recover anything from a unit of currency.

Recoverability is a dated concept that originated with the first issued paper currencies. The Tang Dynasty was the first to issue paper printed ‘flying money,’ which were demand notes with corresponding amounts of gold. Paper allowed for faster transactions and was easier to carry. It also made it simple to cheat the system, as paper notes are relatively easy to reproduce. To deter cheating, holders could redeem their notes for gold at any time, allowing them to ‘recover’ value from the paper money. When gold itself is used as a currency, the physical quantity also functions as its unit of value. This is why there is nothing to ‘recover’ from a gold bar or coin, it is intrinsically valuable. This is why gold has historically been used as a currency: its value and cost of production function as the mechanism to prevent cheating.

The Meter token emulates the logic of gold money. Its intrinsic value comes from the fixed production cost of 10kwh of electricity. The value of the Meter token is inherently linked to the competitive price of electricity, which is relatively evenly distributed around the globe. Its direct use is to pay for the transaction and computing cost in the Meter blockchain system like the Ether in Ethereum. The following figure shows the competitive price of electricity in the U.S. since 1960. When measured by USD, the nominal value has increased 6.3x since 1960. After adjusting for inflation, we learn that the real price of electricity has largely stayed the same over the last 70+ years. It is not inaccurate to say that the competitive electricity price has been more stable in purchasing power than any national currency in the world.

We are now able to understand how Meter will satisfy the functions of money. The cost of production (10kwh) establishes the unit of account and the store of value. Its function as a medium of exchange is protected by the cryptography and blockchain consensus guarantee, making the units uncheatable. Therefore, it is clear that although nothing can be ‘recovered’ from a Meter coin, it effectively satisfies the three functions of money and can effectively be used as a currency.