You may be familiar with the term “blockchain” from the post a few weeks back, or from the many news stories about Bitcoin and other new cryptocurrencies. Blockchain is the way that such currencies track the holding and exchange of currency units — a secure, transparent ledger system that all participants can see and use to track their own assets.
Money is not the only asset that can be tracked and exchanged using blockchain, and this is where the real potential of the technology rests — in exploring and developing the ways it can be used to manage everything from medical research to charitable giving. The energy sector is particularly ripe for such innovation.
Energy Innovation is a Life or Death Issue
It is not an exaggeration to say that our civilization literally rests on the infrastructure that allows us to access the power needed to run everything. If this grid were to be severely damaged or destroyed, not only would higher technology like computer networks and phone systems be lost — most of us would not be able to light and heat our homes, or safely store or cook food.
That infrastructure is already outmoded and under great strain, and is grounded in technology that is over a century old. It is insecure and vulnerable to natural disaster and deliberate attack. And the energy it distributes is largely created by means that have contributed greatly to the climate crisis we currently face.
For civilization to continue to survive and grow, we need updated ways to generate, distribute, and consume energy. To make the system safer from disaster and physical sabotage, it needs to be far more decentralized. It also needs to be more protected from cyber attack. Blockchain technology can play a large role in meeting these needs.
Blockchain for Cybersecurity
Blockchain-based cryptocurrencies depend on the highest levels of encryption and protection from tampering to maintain the trust that gives them their value. As the currencies gain traction and face real-world tests of their security, blockchain technology continues to be made more robust and able to stand up to attack.
Thus using blockchain to run everything from grid distribution to controlling consumption to collecting payment will shore up the system and make it less vulnerable. There is a long way to go on this front, but the research shows promise, and pilot programs are already being explored for incremental adaptations of blockchain in energy applications.
Blockchain Technology for Decentralized Production
Older forms of energy generation based on oil, natural gas, and coal by their nature depend on a highly centralized system of production and distribution. Individuals cannot mine their own coal or refine their own crude oil.
As renewable energy production continues to become cheaper and more accessible, however, individual people and businesses will be able to use solar, wind, or other means to make their own energy. Moreover, these producers will often make more energy than they can use for themselves, allowing them to sell excess capacity to others.
This is already occurring on a limited basis, such as when solar users feed excess production into the grid in return for rebates or payments from the local utility provider. But as more people have access to renewable production, the coordination of distribution and payment will become far more complex.
Blockchain offers a way to manage this through ledgers of energy credits based on individual production and consumption. It can also provide a way for people and businesses to buy power directly from neighbors rather than large utility corporations facilitating all the transactions.
The technology shows even more promise for developing nations. The lack of a large but technologically outmoded power delivery infrastructure could be a blessing in disguise as these countries and regions can leap directly into clean, decentralized energy production. Blockchain-based energy credits will allow individuals and groups in those areas to set up their own local utilities to generate energy for their own use and to sell to neighbors. The technology will also make it easier for donors in other countries to help finance the projects through charities, NGOs, or even peer-to-peer microfinance.
These ideas are only scraping the surface of the ways in which blockchain technology can provide a path to future developments in the energy sector. As the technology is adapted and refined into different uses, even more possibilities will emerge.