In this article, we will take a look at the current state of blockchain applications for the energy sector and what the future might bring.
Although the energy consumption of humanity is closely linked to the technological development that has enabled us to succeed as a species, it is also radically changing the world as we know it and could ironically become the cause of our disappearance.
The way we use and obtain the energy we consume is the most significant cause (the second is the production of food) behind the global warming trends we have seen in the modern age. The global energy sector is behind the emission of two-thirds of our total greenhouse gas production and scientists have recently issued severe warnings that if we do not maintain temperature rises below 1.5 ° C compared to pre-industrial levels, we will experience "rapidity, far-reaching and unprecedented changes in all aspects of society".
These changes represent much more than having warmer days. The balance of the natural systems on which we depend to grow food, have clean water and air are in grave danger, but despite these bleak realities, our energy systems have not been in step with the times. Energy production and distribution are still entrusted to centralized and fossil-fueled entities that drive power to the grid and invoice us. Although this system has worked so far, it seems that the big power plants are destined to end.
In recent decades, countries and people all over the world have increasingly turned to cleaner technologies such as solar or wind energy and electric vehicles. The increase in electricity consumption related to our technological progress is starting to put a strain on our current infrastructure, while service companies are struggling to provide reliable service and cope with the growing complexity of society.
We need a society to move our energy systems away from their current centralized structures and get involved in the decision-making process that could literally save our lives in the near future.
Thanks to its ability to enable safe, peer-to-peer, peer-to-peer transactions, blockchain technology is particularly suited to play an important role in managing our increasingly complex energy distribution systems, and many companies seem to be able to 39; agreement.
Investments in digital infrastructure for the energy sector as a whole have increased by more than 20% over the last 5 years, reaching a total of $ 47 billion in 2017. It is estimated that there are about 122 startups using blockchain applications related to energy sector, which raised over $ 324 million in 2017 alone. However, despite the huge injection of funds into these efforts, their potential has not yet been fully realized.
The current status of blockchain applications related to energy
In one of the most recent efforts to ascertain the current status of energy-related blockchain applications, the Council of Foreign Relations has interviewed representatives of numerous non-profit organizations, well-established companies and start-ups in the energy sector and has classified their activities in several large categories. Let's take a look at the numbers.
Energy trading markets
These applications are based on the most obvious aspects of blockchain technology that use the native capacity of the blockchain to manage energy related transactions and focus on reinterpretation, redesign, or incremental improvement of current system structures. supply.
- P2P transactions: About 36% of companies invested in the energy sector aim to destroy it using the blockchain to allow third parties to sell electricity generated from solar or wind energy. These are expected to become some of the least successful applications because the goal of these companies is to "eliminate" current energy systems rather than exploit their inherent complexity in new ways.
- Grid transactions: 23% of companies plan to use blockchain technology to enable transactions on the existing electricity grid. The efforts of these companies are focused on the use of blockchain as a tool to obtain validations of cheaper and faster transactions; managing "virtual power plants" by organizing energy resources distributed in concert and other applications. According to the CFR, since these business models take advantage of existing energy networks but substantially change form and / or function, they will probably prove more significant in the future of the sector. Furthermore, it is expected that these companies will have greater chances of obtaining commercial traction, since they would have less resistance from the utilities and regulators in charge.
12% of the companies studied proposed initiatives based on cryptocurrency aimed at raising funds for clean energy projects, which could provide access to a wider pool of investors. According to the CFR, it is not clear whether the blockchain is even necessary to achieve growth in the renewable energy sector.
Attribution of sustainability
Blockchain is the perfect tool to record and exchange sustainability attributes such as the number of emissions derived from the production of a given unit of energy, or if it has been produced cleanly. These capabilities would allow for greater efficiency and a reduction in fraud and error, while at the same time gaining more exposure to regional carbon offset and renewable energy credits. 11% of companies involved in this type of application can help governments and other institutions to better regulate carbon emissions and promote the development of clean energy projects.
About 11% of companies work with applications for electric vehicles (VE) and their use. Blockchain networks can help overcome some of the most important barriers to electric vehicle customers' adoption by allowing private parties to sell publicly available non-recharging services that could in turn increase the adoption of EVs. In addition, smart contracts could help the network decide when to load or unload specific electric vehicles, allowing them to use EVs as mobile batteries that could help stabilize the network.
The remaining 6% of the companies interviewed work in different areas of the sector. Some are trying to improve the IT security of existing energy systems using blockchain. Others want to improve the management of their network resources. Regulatory bodies want to pave the way for more fluid energy exchanges between customers and their chosen energy suppliers. Finally, some applications focus on the management of IoT-compatible appliances to help reduce the load on the electricity grid during periods of high demand.
What does the future hold for energy-related blockchain applications?
To get a clearer view of the future of blockchain applications for the energy sector, it is necessary to separate the hype from reality.
On the one hand, the future looks bright. Almost all the technological problems related to scalability, transaction speeds and carbon emissions are now resolved or in solution. Furthermore, investments in the sector are increasing, which is likely to change things.
Ironically, one of the first victims of this trend towards better performances could be the Bitcoin Proof of Work: an approach to solve the problem of the Byzantine generals that many already consider destined to fall because of its inefficiency. Michael Barnard, a low-carbon innovation strategist, was quoted by Forbes who declares,
All hysteria on the use of energy cryptocurrency will go away in the coming months. The bubble will break out for stale assets like bitcoin, places like China will block the waste of electricity on competitive mining and all the others will shift to proof-of-stake variants or maybe IOTA that seems to dodge the bullet in a way different.
The Ethereum network, although it is currently using Proof of Work, is going to implement the Casper Proof of Stake consensus system that will drastically reduce mining competition and energy consumption.
Other platforms such as NEO and Hyperledger are also working on even lower carbon footprints: NEO reaches consensus using an improved PoS implementation known as the Byzantine Delegate Fault Tolerance (dBFT), which allows larger transaction volumes that consume much less energy, while Hyperledger has devised a centralized blocking mechanism that still allows independent transaction validations.
On the other hand, it is very unlikely that we will experience decentralized peer-to-peer energy systems in the near future. We are more likely to see success from applications that seek to collaborate with existing solutions rather than those that are radically aimed at changing the status quo. Moreover, because the talent in the blockchain space is currently poor, we may still be far from using blockchain-ready solutions ready for the market and adapted to our needs.
Policy makers will also have a huge role to play in deciding how much of the blockchain's potential to solve our energy problems will be achieved. Because lobbyists will work for the interests of established capital and politicians are infamously slow to adopt regulations for the changing needs of companies, anyone involved in decision making should invest in the knowledge and protection of blockchain and its applications such as first important steps towards seeing it prosper.
Disclaimer: the information contained in this document is provided without considering personal circumstances, therefore it should not be interpreted as financial advice, investment or offer recommendation or solicitation for cryptocurrency transactions.