The inherent value in basic blockchain is its resistance to corruption, allowing parties not known to one another to transact in complete confidence. Transactions can be added to, but not altered. In fact, a fraudster attempting to tamper with the history contained within the blockchain would have to alter every preceding block to present a new version of “truth.” Blockchain also makes intervention from a third-party bank or central authority redundant and, in doing so, speeds up transactions and reduces manual processing and overall costs.
Building blocks in energy markets
Though it is still early days for blockchain, there is a growing realization that the underlying technology could be used in other transactional industries too, to transformative and disruptive effect. The power and utility industry is one of them. It is, essentially, an ecosystem of multiple parties, all transacting with one another.
Every interaction sets off multiple reactions, creating long chains of paper and mountains of data, as well as transparency and compliance issues. Blockchain technology could, potentially, solve all that, storing every interaction from one end of the process to the other as immutable blocks, connecting parties across the platform to distributed common ledgers that capture data about identities, contracts, pricing, transactions and payments. Forever.
The possibilities are numerous. Blockchain could deliver a payment mechanism for charging EV batteries; it could enable EVs and other devices to provide stored energy back to the grid to balance demand; or allow energy users to switch suppliers in real time to take advantage of fluctuating rates. On a network level, it could help to diagnose and remedy disruption in supply and, on a trading level, make energy commodity transactions unchallengeable and transparent.
Where will the benefits of blockchain really stand out?
A process or environment that involves some or all of the following criteria might be suitable for blockchain:
- Transaction — the greater the number of parties in the ecosystem and the higher the transaction volumes, the more secure blockchain can make it.
- Trust — multiple points of verification in the blockchain heighten trust between participants.
- Traceable — blockchain records are permanent and cannot be edited or deleted.
- Tangible — blockchain logic prevents double-counting of assets, records ownership and transfers.
- Transparent — ownership or control of assets is public and transparent.
Despite all of blockchain’s apparent benefits, proceed with caution. Though blockchain is being cited as the secure and irrefutable technology that will enable a virtual marketplace in energy and secure microtransactions between participants, it is no panacea. While there is merit in the transparency of public blockchain, it comes with privacy issues. Thinking back to the example from the beginning: Do Mrs. Brown, Mr. Smith and Mr. Poole really want every transaction they make visible on a public platform?
In it together
Taking lessons from the finance industry, joint ventures, acquisitions or consortiums are a proven means for interested parties to get behind initiatives that enable the transition from experimentation to adoption.
Of course, one of the major advantages of blockchain is that it facilitates multiparty endeavors. It provides a secure, trustworthy and transparent environment that lends itself to collaboration between industry allies and competitors, where each party contributes value, including investment capital, intellectual capital and technology.
Collaborating, cocreating and investing in blockchain solutions as a community, rather than as stand-alone players, will deliver proofs of concept more quickly, drive blockchain’s acceptance as a transformative technology and enable the industry to tackle and conquer the tipping points ahead.