In Part 1 of this series, we reviewed the internal mechanisms of how blockchain works and why it is a secure mode of conducting transactions. For Part 2, we shall explore how blockchain can be used in the energy sector. Note that presently much of the discussion regarding the application blockchain, outside the scope of mining for bitcoins, is sketchy. The discussion could be described as “pie in the sky”. Nevertheless, a theoretical foundation for application does exist. Here are three key areas.
- Smart Contracts – Take the example of an energy supplier and an energy consumer. Blockchain could be used to create a system where electrical power is automatically shutoff at a certain date if payment is not received. This is best done for routine services. Another example would be the regular delivery of propane to a site. When payment is received, the blockchain technology automatically arranges for product shipment.
- Delocalized Storage of Records – Important records can be lumped into a blockchain and stored, not only securely, but on many other computers within the network. Such items for storage include contracts, titles, metering, billing, and transaction records. I call it the ultimate backup system.
- Asset Exchange – This is in essence, a payment system. Currently payments are made through banks. A Federal Reserve is needed to provide oversite and management. Banks facilitate payments to sellers and deduct the funds from the accounts of buyers. With blockchain, payments can be done with cryptocurrencies. No banks are needed. Now that is fast.
In Part 3, we will discuss the problems associated with blockchain technology in the energy sector. In my opinion, the barriers are substantial and insurmountable.