Can Blockchain Technology be used in Utilities?

Introduction: Block chain was originally invented by “Satoshi Nakamoto”, an alias used by the inventor. Alias? Yes, an alias, which many believe was a clever move because the kind of disruption it was about to bring across the economies and corporates of the world would have resulted in danger to his/ their life. Blockchain is a term widely used to represent an entire new suite of technologies. In layman terms, blockchain technology allows a network of computers to agree at regular intervals on the true state of a distributed ledger. Such ledgers can contain different types of shared data, such as transaction records, attributes of transactions, credentials, or other pieces of information. The ledger is distributed across many participants in the network — it doesn’t exist in one place. Instead, copies exist and are simultaneously updated with every fully participating node in the ecosystem. A block could represent transactions and data of many types — currency, digital rights, intellectual property, identity, or property titles, to name a few. Despite its apparent complexity, a blockchain is just another type of database for recording transactions – one that is copied to all the computers in a participating network. A blockchain is therefore sometimes referred to as a “distributed ledger”. Data in a blockchain is stored in fixed structures called ‘blocks’.

Anatomy of Blockchain technology: In brief, Block chain is a distributed database that is used to maintain a continuously growing list of records, called Blocks. Each Block contains a timestamp and a link to a previous block. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks.

Confusing? Let us relook into what is Blockchain. Blockchain is a public ledger of all the cryptocurrency transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order.

The important parts of a block are:

1. Its header, which includes metadata, such as a unique block reference number, the time the block was created and a link back to the previous block.

2. Its content, usually a validated list of digital assets and instructions statements, such as transactions mode, their amounts and the addresses and their balances right from the genesis block to the most recently completed block.

By design, blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. Functionally, a blockchain can serve as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.

Main applications of Blockchain:

1. Distributed Ledger: insure traceability and certification of legal documents of all types

2. Assets Transfer: peer-to-peer transactions of assets of all types, without intermediary

3. Smart contracts: autonomous programs executing pre-defined actions under immutable terms

Advantages of Blockchain

- Money transfer without any intermediary, so low costs, delay removal and no counterparty risk

- Transparency: No blockchain transaction can be tampered or deleted post-execution. All changes to public blockchains can be publicly viewed

- 24X7 Trading

- Shared control

- Audit Trail

- Process integrity: Users can trust that transactions will be executed exactly as the protocol commands removing the need for a trusted third party.

Disadvantages of Blockchain

- Because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of holdings does not exist.

- Since the prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.

- Cryptocurrencies are not immune to the threat of hacking. In Bitcoin’s short history, the company has been subject to over 40 thefts, including a few that exceed $1 million in value.

- Uncertain regulatory status

- High initial investment

What is Cryptocurrency? Cryptocurrency is a virtual or digital currency that uses cryptography i.e., encryption techniques to regulate the generation of units of currency and verify the transfer of funds, operating independent of a central bank. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.

The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by Satoshi Nakamoto i.e., the inventor of Blockchain. Today Blockchain has more than $40 billion of market cap. Bitcoin’s success has spawned many competing cryptocurrencies across the globe. Today, more than 100 prominent cryptocurrencies with a market cap of more than $90 billion are being used aggressively. This list excludes local or startup cryptocurrencies. The top 5 cryptocurrencies being used for transactions are Bitcoin, Ethereum, Ripple, Litecoin and Dash. India is not far behind, “ATC” is the cryptocurrency which is becoming popular slowly.

Such is the extent of cryptocurrency popularity that it is not restricted to transactions but also being traded like stock markets in cryptocurrency trading platforms. There are more than 50 trading platforms currently being used for trading cryptocurrencies. Few of the popular cryptocurrency trading platforms are Coinbase, Poloniex, CEX-IO, Bitstamp, Shapeshift, Zebpay, etc.

Blockchain technology in Utilities: Utilities industry have always been laggards in terms of technology adoption. However, in the last decade there has been a paradigm shift in utilities industry. Utilities have started experimenting on various technologies including Blockchain.

Few of the Use cases where Utilities across the globe can work on are as below:

1. Electric vehicle charging: Currently, charging infrastructure for Electric vehicles is a challenge and is hampering EV adoption. However, adoption of blockchain technology is reinventing the way electric vehicle roaming charging costs are tracked and billed. In the future, you could foresee automated authorization processes, paired with wireless charging devices, that allow vehicles to charge while waiting at traffic lights—with billing done automatically by interconnected devices. In short, the EV becomes a virtual wallet, which could lead to other opportunities. It would allow electric vehicles to charge anywhere (with the help of a smart plug), and to be billed for the electricity they used in a simple, common, and blockchain-based way. The EVs would interact automatically with stations and the electricity payment process would be autonomous.

2. Distributed Generation / Prosumers / Microsystems: In the energy sector, we are witnessing the development of prosumer characters that i.e, individual consumers who are also producing energy (homes with solar panels for instance). In that respect, blockchain technology represents an opportunity for a wider development of those behaviors by increasing the number of people who could buy and sell energy directly with a high degree of autonomy. In theory, we can imagine a market place where consumers exchange their own production without needing energy companies to organize the transactions. No 3rd intermediaries are required.

3. Energy Trading: A distributed ledger makes it possible to facilitate machine-to-machine, smart contract based interactions. Devices can understand each other and are able to automatically cooperate & transact. For eg: smart home appliances—such as a smart plug or smart meter—connected to an energy trading platform could continuously look for the best offer and automatically alternate to a new energy provider through a smart contract. This would become an effortless experience for the customer, yet allow them to interact via their home directly to energy spot markets.

4. Billing: A smart grid network supported by blockchain technology would ensure an efficient local relationship between production and consumption of renewable energy. Participants could publicly track their energy usage and production, and sell any unused energy to other participants. They would have the ability to reduce their energy bills by making more informed purchasing decisions, avoiding consumption peaks or switching into a lower subscription. Smart meters and blockchain technology would ensure a simplified billing process (efficiency, transparency) and faster switching times. A blockchain solution identifying where the energy is coming from, at what unit price and any mark-up passed to the consumer would result in more competitive pricing and in better integrity from public perception.

5. Energy Saving certificates : Energy producers, suppliers or distributors are pushed by regulators to promote energy efficiency activities. An amount of obligations and compliances are defined in regulations over a specified period. Each action indicating the amount of energy savings must be described and filed, and can then be controlled by the authorities. Authorities must track the evolution of these certificates in registers. It has been noticed that authorities have a lot in their hands and sometimes lack the time to control filed actions. In the future, registers could be managed via blockchains, requiring little action from the authorities whilst being accessible to all players in the Energy sector, guaranteeing the uniqueness and traceability of certificates, and even managing the certificates’ trading.

Conclusion: Though Blockchain technology is at a very nascent stage, its adoption is being widely experimented. For ex: In New York state, neighbors are testing their ability to sell solar energy to one another using blockchain technology. In Austria, the country’s largest utility conglomerate, Wien Energie, is taking part in a blockchain trial focused on energy trading with two other utilities. Meanwhile in Germany, the power company Innogy has teamed up with UBS and auto company ZF to offer a blockchain-based electronic wallet that can be used to track payments for charging electric cars. In Denmark, Swedish energy company Vattenfall has launched Powerpeers, a blockchain-based energy sharing marketplace. Australia is not too far and is embarking on similar projects.

Disclaimer: The article is the independent opinion of the author and does not represent views of any organization