In the final part of this series, let us discuss the consequences of using blockchain in the energy sector. After hearing business executives discuss the value of blockchain, the discussion can be summed up in one word: trust. Or perhaps more accurately, the lack of trust.
Business leaders want to avoid centralized control, which they believe leads to mismanagement and corruption. Furthermore, centralized control leaves the door open to poor oversight; and thus, theft, forgery, and fraud.
The blockchain, in business community’s estimation, eliminates trusting people because the business process is supervised by a decentralized network of peers. The mining process makes it difficult for one person to stand-in as a middleman and “stack the deck” – so the old phrase goes.
An example that is often given is the Federal Reserve. Blockchain proponents state that bitcoin does an “end around” the Fed. That is, relying on the Fed to control currency is a losing propositon in light of recent bank failures, rising federal debt, and the devaluation of the dollar via “printing money”. The blockchain guarantees the value of bitcoin by protecting transactions made using bitcoin – it does not rely on a central authority.
My previous article on bitcoin (click here), states that bitcoin is unsustainable because of the enormous energy consumed when mining the blockchain. Here are some items in the afore mentioned article regarding bitcoin mining:
- Bitcoin network consumes as much energy as Denmark or Ireland
- By July 2019, energy consumption will surpass USA consumption
- By February 2020, energy consumption will surpass current worldwide consumption
- Current energy consumption is 4 to 35 terrawatt – hours per year
- Google consumed 5.7 terrawatt – hours in 2015
- The “mining” of one bitcoin creates a 118 kilogram CO2 footprint, equal to driving a car 300 miles
Assuming that global warming is true, blockchain is untenable. As it is, the whole world is taking steps to promote electric cars, making trains lighter, and shifting from coal to natural gas. These efforts still may not head off a greenhouse cataclysm.
By the way, blockchain is not fool proof. Experts say that collusion on a grand scale is necessary to undermine the blockchain system. In my opinion, if it can happen, then it will happen. Take the last housing crises of 2008 as an example. The Fed has the responsibility to provide oversight and make sure that banks are solvent. Yet, untold numbers of banks operated in the “red”, the books were cooked, officials turned a blind eye, their balance sheets tilted towards liabilities. Our banking system crashed – except for those banks “too big to fail”.
It is unavoidable, people have to trust each other. Otherwise, we might cover the world in carbon dioxide just trying to protect ourselves from one another.