Currency solves the mismatch in time and demand between value creation and value consumption by providing a token to present the values. The ideal currency functions as a temporary store of value, a unit of account to measure value, and a medium of exchange.

A public blockchain is essentially a decentralized ledger which allows you to record value transfers. In theory, such a ledger will eliminate the need for a physical medium of exchange because the ledger is universally accessible to everyone.

Under a ledger system, we still need a token to measure the unit of account, so there will be numbers on the ledger which represent specific values. The number of tokens multiplied by the value of one token will give us the total value of the system. When new value is created in the system, the correct amount of new tokens have to be created to present these values.

There are in fact two consensuses that apply to cryptocurrencies. The first is a consensus for the record of value exchanges (e.g. Alice transfers value to Bob). This consensus is observable to all and prevents double spending.

The second consensus is how much new value has been added into the system. This consensus is hidden and can not be directly observed.

Existing cryptocurrencies mix the two consensuses, meaning that new tokens are created as rewards for the miners who record the value exchange ledger. However, the amount of energy needed for the two forms of consensus is very different, as are their respective impact to the security of the overall system. This causes Bitcoin miners to consume energy at a rate similar to the country of Ireland, and play a role in the confrontation among miners, developers, and stakeholders.

Using Bitcoin to measure value is like using a ruler made of rubber. It stretches or contracts based on changes in supply and demand, making it impossible to use as a unit of account. The numbers in the ledger become meaningless because their units change constantly.

To address this, we are making a steel ruler to measure value. The length will not change, though the quantity will change accordingly with the supply and demand for tokens. With a constant measure of value, entries in the ledger will remain meaningful.

We will achieve this by dividing the consensuses and implement them separately. We leverage the profit-chasing behavior of miners in a Proof-of-Work system to drive the consensus on newly created value. It is then a Proof-of-Stake system that maintains the value transfer ledger. Separating the consensuses reduces the conflicts between miners, developers, and stakeholders.

This separation of consensuses will make the monetary system more efficient and secure.

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This article was originally published on the Meter blog.