You may well have heard of blockchain as part of hot-then-not cryptocurrency Bitcoin. Oftentimes, people confuse the two terms – but Bitcoin and blockchain are not in fact the same thing.
While Bitcoin is grabbing the headlines, blockchain could be set to transform everything from the energy industry through to grocery shopping. At least that’s the claim of future-focussed strategists across the globe. But… what is it?
What is blockchain?
Blockchain is a shared, digital record. Think of it like an accounting logbook, which records all your transactions (debit, credit, etc). Each element of data in that record is encrypted, with only users with the right key able to access that data. Each transaction is also permanent and cannot be altered. Users maintain and verify the transactions, which contribute to the transparency and security offered by blockchain.
Here, we must not confuse between blockchain technology with cryptocurrency. Blockchain is the underlying technology which enables encrypted transactions, whereas cryptocurrency (there are over a thousand currently!) is the virtual currency created using blockchain technology.
Brands across the world are starting to adopt blockchain technology. Walmart is one real-world example. Applying blockchain, Walmart was able to trace the original source of its food in seconds. Due to the permanent, unalterable nature of blockchain technology, businesses can now utilise it to improve supply chain transparency.
How is blockchain different from other digital accounting?
It’s the ‘shared’ element that offers the unique capabilities of blockchain technology. Computers in a blockchain network are individually verifying and updating ledgers using complex cryptography. What this does is create a shared ledger that is individually verified across the entire blockchain network. That creates detailed and secure global transparency of records unrivalled by other methods of digital accounting.
Where does the ‘block’ come in?
Let’s imagine you buy a bag using a cryptocurrency created on our blockchain technology. This purchase makes up a transaction. In order to maintain accurate records, a log is made of this transaction. In simple terms let’s say X bought a bag from Y at 10AM on the 1st of January 2018. That transaction is added to the digital ledger of transactions, which is referred to as the ‘block’.
How does blockchain make transactions transparent?
Let’s go back to our bag. Imagine you take a note of a bag purchase in your invoice book. To verify that invoice is correct it has to be witnessed by the 10,000 other customers in the network. The 10,000 figure is just an example of course, blockchain networks come in all sizes. The point is those fine people of the bag-purchasing network all then go away and create a note of the transaction in their own invoice book at home.
That updated record is only accepted as accurate if the 10,000 individuals as part of our extensive network, all with their own records in separate, secure locations, verify it. That makes it rather hard to sell someone a bag and pretend it’s a shirt. It would also be an impossible challenge to break into every house on the list to cheat the records without someone noticing. The healthcare industry, for example, is using blockchain technology to prevent counterfeit pharmaceuticals.
What does blockchain mean for energy?
Blockchain provides a system to transact verifiable data that can be widely trusted. In an energy context, blockchain can provide a shared record of energy transactions that opens up significant industry opportunity. The World Energy Council cite blockchain as one of the most potentially transformative technologies in future energy, and blockchain is already being utilised to deliver energy solutions around the world.
Blockchain can provide more efficient, transparent energy networks by enabling a transaction ledger of generation and supply. That not only means better monitoring of diverse power suppliers, but also brings in transparent opportunity for consumers to become ‘prosumers’, generating their own energy to be sold back into energy networks.
Blockchain can provide more efficient, transparent energy networks
Similar energy opportunities are already being pioneered through systems such as Ethereum Smart Contracts, an open-source style blockchain technology designed to support a wide range of shared ledger applications. By moving beyond the more rigid restriction of cryptocurrency, smart contracts provide the opportunity for bespoke energy transactions and agreements. While recent security concerns highlight some of the hurdles that still need to be addressed, the ultimate potential could be transformational.
These technologies could also help build a more resilient power infrastructure for the energy challenges of the future. US firm EMotorWerks are utilising blockchain technology to provide a peer-to-peer network of electric car chargers, providing an innovative solution to emerging needs of EV charger networks.
Renewable energy(RE) is one area that could be particularly empowered by blockchain. A traditional hurdle for RE generation has been how to enable fair and transparent oversight for power generation and consumption across diverse locations. That’s especially true when you consider opportunities like that of rooftop solar. Blockchain could facilitate transactions that allow self-generation with the opportunity for consumers to sell excess electricity back into the network, or even between each other, providing a more flexible energy network to meet growing demand.
What’s next for blockchain?
According to Ruben Tan, Chief Technology Officer at Neuroware, “the blockchain industry, on a global level, is still in its infancy. There’s a significant gain in traction since 2016 into the technology, and we’re seeing a lot of ideas reach maturity in recent months, with more to come in the near future. We hope that as people understand blockchains more, they will be able to figure out better use cases, and as a result, turn blockchain technology into an essential cornerstone of our modern lives.”
Click here to read Ruben Tan’s full interview with Energy Watch.