Could blockchain technology be the answer for a more green and fair planet?

With the current political climate, where every 7 out 10 Americans disagree with the recent Trump decision to withdraw from the Paris Agreement, one can say that there is little a single citizen can do. It is in the President’s constitutional authority to make executive agreements and withdraw from them. We do not want to get too political or legal here, but there always was a tradition of distrust of the US government by the people in the United States.

This is why US citizens, since the founding days, took up certain tasks into their own private hands. This gave rise to the civil society in the USA: a collection of private, voluntary groups that are independent of the government and sometimes even commercial markets. It is also the American individualism, part of the American political culture, which boosts this civil society. It is a fact that Americans are more likely than any other people in other democracies to join voluntary groups in order to cooperate and develop a community: churches, libraries, museums, charities etc.

So now comes another saga, where many wish to make individual decisions when it comes to the future of our planet, but some political representatives simply do not agree. Again, the mistrust of the government comes out, but there is a way out. It is called blockchain technology which can be applied to the energy sector, as with almost virtually any other industry. The vision is clear: to create a decentralized energy-transaction and supply system where we no longer require energy companies or other intermediaries to help us with payments, or even government to heavily regulate such a vast market. Instead we could use blockchain-based smart contract applications which create a new breed of consumers: PROSUMERS. Such a prosumer creates his own energy, manages his own electricity supply, and his own consumption. Imagine consumers in the future owning their own solar systems, small-scale wind turbines and/or CHP plants, and having a say of how this energy is managed. The heavy regulated market can say goodbye, exactly what our Executive would love to talk about.

Let me give you an example of how this would look. In a recent project called the Brooklyn Microgrid, one neighbor sold his solar electricity (that was in excess supply) to his neighbor who was in demand. 50 participants are currently connected to this virtual trading platform built on a peer-to-peer energy trading system programmed on a blockchain.

Mike Mihaylov, a researcher with the EU-funded Scanergy project, is another blockchain visionary. Whenever someone has excess power they do not require, they simply inject the electricity into a local smart grid which generates one NRGcoin (or any other token with a cryptographic security back-up) for each kilowatt-hour. Or if they require extra electricity (it’s a rainy day) they can buy the energy they require. They can take the NRGcoin and exchange it for dollars using a separate exchange. Mihaylov says that this system has three advantages: (1) it creates incentives for people to participate, (2) protects prosumers from government policy changes and price changes by energy retailers, and (3) eliminates the need for real money intermediaries who profit from providing their services.

“NRGcoin gives you protection against policy change because now the payment is built into the protocol, which is decentralized. One kilowatt-hour always equals one NRGcoin –nobody can change it,” Mihaylov says.

Blockchain technology looks very promising. It makes it possible to control energy networks through smart contracts which many call “Blockchain 2.0.” Smart contracts can be programmed to start transactions, based on predefined rules ensuring that all energy and storage flows are controlled by supply and demand. This means that if more energy is generated by a household, then the smart contracts could ensure that this excess energy is delivered automatically into storage and later be deployed to satisfy output. Such decentralized storage of all transaction data on a blockchain would make it possible to keep a distributed, secure, tamper-proof record of all energy flows and business activities. Documentation of ownership can also be stored on a blockchain which can help in the verification and managing of renewable electricity certificates and in emission trading/allowances (for example in cap-and-trade programs). Blockchain can also be used to manage assets such a smart meters, networks and generators. In other words, the whole energy system can be integrated into the blockchain, creating a decentralized system, where a cryptocurrency is used as payment. And the best part of all of this is that it could be controlled through a smart-phone app. This will be the stage of “Blockchain 3.0.” Our history loves revolutions and this is exactly what it is: moving power from one group to the next, but this time it actually goes to the people.

So how does blockchain work and why is it safe? Let’s say that you, as the provider, agrees to enter into a transaction with a customer. The data of the transaction (ex. amount) is encrypted and distributed to many hundreds or thousands of computers (depending on how many computers are in the particular network). The data of the transaction (along with other individual unrelated transactions) is stored in a block. All number/letter combinations are continuously checked for correctness (verification) and the individual data blocks are combined to form a chain of individual data blocks – the blockchain. In other words, someone keeps solving pretty difficult math problems to verify the interlinking of these numbers between two sources. If any of the information is tampered with on a specific block, the changed block will therefore report an error, and the transaction will not go through.

Now, as I have said before remember, there is an economic concept called Schumpeter’s "creative destruction” which is behind the very beauty of capitalism. There is little that our political representative can do to stop the disruptive effect of innovation on the energy sector. For example, in 2009, the levelized cost of utility-scale solar photovoltaic was $359/MWh. This decreased to $79/MWh by 2014 and continues to decrease (Energy Innovation 2015). Add other renewables such as wind. Then we have entrepreneurs like Elon Musk. And then we have blockchain.

Community members could finally work individually and collectively to help meet energy demand in an efficient way. A true home-sharing economy. This is in the spirit of the American creed – individualism, community, and civil responsibility – to take things into one’s hands to solve problems that sometimes the government is reluctant to solve. It seems like blockchain was created with an American vision – intended or unintended. Blockchain will not only reduce cost, but will create a more fair and efficient system, where heavy regulation will not be as necessary. This could result in a planet that is greener. The main point is that blockchain technology resembles exactly what the United States stands for. Technology and economics are the forces of the day, but remember that nothing comes without its challenges and skepticism, but let’s be optimistic about our little green revolution.

Sources:

https://www.pwc.ch/en/2017/pdf/pwc_blockchain_opportunity_for_energy_producers_and_consumers_en.pdf

https://www.fastcompany.com/3058380/how-blockchain-technology-could-decentralize-the-energy-grid

https://www.nytimes.com/2017/03/13/business/energy-environment/brooklyn-solar-grid-energy-trading.html

#blockchain #bitcoin #energysector #greenrevolution #climatechange #NGRcoin