Blockchain & the Future of the Energy Industry
The energy sector as it exists today can rightly be referred to as an efficient industry with growing inefficiency problems. On the one hand, it’s almost astoundingly capable, at least in developed nations. Energy is produced and delivered to people so seamlessly that the average consumer doesn’t even give it much thought. It is in a sense, as one write-up put with regard to the U.S. grid specifically, the largest machine in the world. On the other hand, despite its vast capability, the modern energy industry is also burdened by significant inefficiencies when it comes to evolution and democratization. And some are beginning to speculate that blockchain technology and cryptocurrency might be able to solve some of the problems.
1. Energy Sector Inefficiencies
The first of the problems just mentioned is that energy today is heavily centralized. The aforementioned article discussing the U.S. power grid described the energy sector as “a system designed around big, centralized power plants and one-way power flows” that is “grinding against the rise of smarter, cleaner technologies.” Another way of putting this is that established, “old” energy providers hold most of the power and influence. Indeed, with a handful of energy giants worth tens of billions of dollars each, it’s an industry that appears exclusive to say the least. New players in the sector, and creative thinkers pedaling modern energy solutions, simply don’t have a clear means of influencing these companies, or of cutting into their markets.
The second problem is that this massive sector as it currently exists is, in a word, expensive. On both the consumer and industry level, energy is not just costly to purchase, but costly to obtain — meaning the energy itself is expensive, but the fees associated with its transfer and acquisition are as well (which is why utility bills so often seem more burdensome than they ought to).
Considering these primary issues — a centralized industry resistant to innovation, and burdensome expenses — blockchain technology and cryptocurrency usage do begin to seem as if they can offer promising solutions, or at least become influencers in an energy sector facing an increasingly urgent need to evolve.
2. Energy & Cryptocurrency Right Now
Interestingly enough, blockchain technology and cryptocurrencies are already associated with energy to some degree — and not necessarily in a good way. For many, any discussion about cryptocurrency and this sector begins with the unfortunate fact that the crypto world actually consumes a great deal of energy. Some estimates suggest that bitcoin alone uses more energy than some medium-sized country. If this sounds somewhat dramatic, we should stress again that these are very much estimates. Even so however, the energy required to mine bitcoin and then track and validate payments across blockchain networks is significant.
The good news, however, is that as more people have become aware of the vast energy consumption of bitcoin (and some other cryptocurrencies), there are efforts being undertaken to minimize the negative effects. In some cases, these efforts involve things like moving away from proof-of-work validation used in mining, coming up with alternative mining methods, and even building more energy-efficient blockchains. Additionally though, there is expanding focus on the use of blockchain technology and cryptocurrencies to facilitate energy-efficient practices in other sectors, and thus offset some of the ill effects.
Energy itself has become a primary candidate to be an industry in which blockchain and cryptos can have a positive effect. And in fact, there could be some mutual benefits.
3. How Blockchain & Cryptos Help the Energy Industry
The most important aspect of this whole discussion is that blockchain has the potential to decentralize the energy industry. Our past exploration of the intersection of AI and the blockchain actually outlined, to some extent, how this can work. In that piece, we wrote about the blockchain’s potential to be a marketplace for algorithms — the idea being that when access to computing and data is democratized, AI can become a “community-driven development opportunity.” AI, going by this theory, wouldn’t be proprietary or private. Rather, the involved algorithms would be publicly available for consumption, purchase, or even alteration, all through a transparent blockchain system.
This same concept can be applied to developments (AI-related and otherwise) within the energy sector. Through the blockchain, we are likely to see emerging clean energy production methods, and detailed clean energy plans turned into open-source data. Additionally, the actual trading of clean energy can be conducted via blockchain, leading to a market that is both more transparent and more affordable (which we’ll address further in a moment). Already, a number of names have emerged as pioneers where these efforts are concerned. WePower, for instance, is linking customers with clean energy providers directly, facilitating transparent transactions and providing them with traceable energy; Energy Web has already gotten some of the biggest energy companies in the world on board in an effort to make clean energy solutions more democratic. And the list goes on.
As for the impact of cryptocurrencies specifically, it stands to reason that as blockchain networks gain greater influence in the energy industry, there will be energy-related transactions conducted with cryptocurrency.
In some cases, these transactions are going to involve crypto options that already exist, and which are designed for the purposes of innovative applications and low-fee transactions. Looking at the state of how cryptocurrency are being traded today, there are already a few prominent options that stand out as being particularly well suited to applications in energy. IOTA, for instance, is a cryptocurrency that was specifically built for the fee-less exchange of data and value, between both humans and machines. It was made with new-age technological networks in mind, and is the sort of distributed ledger that can facilitate cheaper modern energy transactions. Somewhat similarly, Ethereum is another crypto network that was created for innovation. The popular bitcoin alternative is designed to enable “smart contracts” by which collaborating entities can design their own exchanges of information and value, all with low fees.
All of this illustrates how together, blockchain and cryptocurrencies can address the main issues we outlined at the beginning of this piece. The blockchain can help to decentralize the modern energy, bringing about a more open exchange of methods, ideas, and energy that will give clean energy providers a fighting chance. And cryptocurrency can help to facilitate the actual transactions at far lower costs to related consumers and companies alike.
4. How Energy Helps Blockchain & Cryptos
We mentioned above that there could be mutual benefits, which is to say that the energy industry can also help blockchain technology and cryptocurrencies. This is a simple point, but a significant one. Essentially, should blockchain and cryptocurrencies impact the energy sector in the ways discussed above, the evolving industry would come to represent one of the most prominent and important supporters of these technologies.
A potential worldwide adoption of blockchain methods and cryptocurrency transactions by both existing energy giants and emerging clean energy alternatives would represent a significant step forward in the process of making people (and companies) more comfortable interacting with the crypto world.
5. In Conclusion
There is a lot to be gained for the energy industry and the world of cryptocurrencies alike. As capable as it is, the modern energy sector involves significant inefficiencies that could hamper responsible expansion. Despite their own issues with energy, blockchain technology and cryptocurrencies are already emerging as potential solutions. Should they continue to be applied in some of the ways described above, they can transform the industry, and become more ubiquitous themselves in the process.