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Introduction
In the energy industry, blockchain technology is being developed to dramatically alter the supply, demand, and distribution of energy. Importantly, such digital platforms are likely to exhibit network effects. That is, digital networks of energy providers and consumers are likely to become more valuable to their users as they gain more users and, at some point, an expanding energy network may prevent competitors from entering the market.
Accordingly, pioneering energy platforms may have a head start to dominate energy-related industries through the power of network effects. The database of the U. Patent and Trademark Office USPTO suggests that energy-related blockchain patent application filings have continued to increase since the first of such applications was filed in Nevertheless, the energy-related blockchain patent landscape is currently not a crowded one. Thus, the time is ripe for energy innovators to claim valuable patent rights.
Patent owners may use patents defensively and offensively to gain an edge over competitors and realize significant business value. A defensive approach to patenting allows patent owners to benefit without suing. For example, patents can deter competitors from copying and encourage them, instead, to seek a licensing agreement or focus their research efforts elsewhere. An offensive approach to patenting allows patent owners to enforce their rights through litigation in a federal district court, or at the U.
As importantly, the ITC provides a quicker process than the courts and is able to stop patent infringers from importing infringing products or services into the U.
To adequately benefit from patent ownership, a patent application must be prepared to overcome the statutory hurdles to patentability, without giving up valuable scope of protection. Software-based technologies, like blockchain technology, are often rejected under the subject matter eligibility hurdle of the U.
Patent Law 35 U. For example, patent claims describing a method of renewable energy trading using IoT sensors, processors, and memory to autonomously measure, record, and analyze energy supply and usage data through a blockchain ledger may be rejected by the USPTO based on the grounds that they are directed to a method of organizing human activity that is, measuring, recording, and analyzing energy data may be considered as organizing human activity or a fundamental economic practice.
Furthermore, the USPTO may reason that merely recording and analyzing energy-related data through a generic blockchain ledger provides no practical application of the fundamental economic practice and that the recitation of generic IoT sensors and computer hardware does not provide an inventive concept beyond the fundamental economic practice.
This approach would help ensure that the patent claims are not drafted to preempt all future technological improvements, but to focus more reasonably on the relevant technological area of invention.
For example, claims incorporating features of an energy-specific data structure to be stored in a blockchain to improve the processing of transactions would likely remove the claims from the abstract idea realm, because the invention would not threaten to preempt virtually all applications of blockchain technology as applied to energy trading. Furthermore, inventions that improve the functionality of blockchain technology itself may avoid or overcome a rejection under 35 U.
That is, improvements to distributed storage, distributed processing, cryptography, security and authentication, data structures, and data exchange protocols would not likely be interpreted as being directed to an abstract idea. For example, proof-of-work consensus algorithms provide security for many cryptocurrencies, but they intentionally slow down processing and waste electricity.
Accordingly, an invention involving an energy-specific consensus algorithm that provides adequate security with greater energy efficiency and faster processing would not likely be rejected under 35 U.
Additionally, patent claims should be drafted to facilitate investigation and the collection of facts to support an infringement allegation. For example, patent claims related to distributed renewable energy assets and linked via blockchain technology should allow for a finding of infringement by one infringer in one location, rather than requiring a series of steps to be performed by multiple parties in multiple jurisdictions.
While blockchain technology is in its infancy, choosing to invest and become a patent holder for early blockchain inventions could pay dividends as the technology matures to become widely popular and useful, particularly in energy-related industries. To benefit from the maximum scope of patent protection, it is important to seek out counsel with the experience and sufficient understanding of the legal and technical issues to handle the challenges associated with patenting software-related technologies.
Tabandeh and Kurt S. Power generators continue to expand their use of digital technologies. Data analytics, artificial intelligence, and machine learning are…. Blockchain—a distributed database technology that allows a network of parties to securely transact with each other—has been hailed….
Various utilities and startups globally are planning projects within this arena. Furthermore, larger energy firms are also participating in energy trading platforms. British Petroleum p. Another potential use-case is utilizing distributed ledger technologies in wholesale autonomous trading procedures.
It is well known that the services of third-party intermediaries such as brokers, exchanges, trading agents, price reporters, banks, regulators, and logistic providers are required within the mass-energy markets.
Hence, there are key entities and procedures that are required in any financial trades between companies. This currently involves manual post-processing and increased communications, in order to consolidate information that is held separately by each part of the transaction. As a result, current procedures are slow and time-consuming, as transactions need to be verified and reconciled multiple times from initialization to final settlement. This results in additional costs due to the low speed of transactions, which can unnecessarily impede small-scale and distributed energy generators.
With regard to data management, the blockchain acts as supporting technology and can perfectly manage all data collected through electricity meters, and facilitate real-time consumption monitoring. In addition, providing the ability for consumers to securely share subsets of data to the market, results in more efficient data management.
Furthermore, blockchain offers the possibility to provide consumers with control over their energy sources, as being an immutable ledger, this offers real-time and secure updates of their used energy. Wholesale energy and gas markets require coordination between a wide range of participants including brokers, exchanges, logistics providers, banks, and regulators. Legacy data management tools make coordination between these participants slow and expensive. In some markets, current procedures require manual post-processing.
In other markets, stakeholders have developed centralized proprietary trading systems, that due to high costs, effectively lock out smaller participants. Commodity trading systems built on decentralized ledgers provide the required security, immutability, and real-time view of pricing and transaction status.
This is necessary to replace expensive proprietary systems, and hence open the door to a wider variety of market participants. Smart contracts can enable automation of processes like KYC and payment upon receipt, further improving market efficiency. The most unique advantage for this use case in the commodity and energy trading market is the creation of an ecosystem that encompasses the start-to-finish transaction life cycle, in essence, a private blockchain network.
Finally, this results in potential cost savings coupled with improving processes more efficiently. In general, electricity power providers are usually large and complex organizations that generate their energy from power plants, solar farms, and various other energy sources. An opportunity exists here to utilize blockchain in order to provide shared, immutable data between the actual utility providers. This can prove to be beneficial for both the utility companies and the end customers, as unlike in the financial services and banking industry, these providers are happy to share their data, which could be implemented on a shared blockchain ledger.
Distributed ledger technology offers distinct benefits to utility providers, as blockchain can process, validate, and secure the data from numerous network elements and devices at the power systems' grid edge.
In addition, energy providers can utilize blockchain in order to create a system for transactions of critical distribution data. The gas and oil industry is a vast sector in its own right and consists of numerous companies worldwide. These companies can be broken down into three categories: downstream, midstream, and upstream.
To acquire the actual end products this often necessitates that many separate companies and entities are involved, coupled with the required legal agreements and processes, so many possibilities to utilize the benefits of blockchain exist.
Various use cases, such as digitizing crude oil transactions for one, which would ensure enhanced security, improved transparency, and optimized efficiency exist. A blockchain solution has already been developed for commodity trading for US crude oil transactions by a French corporate investment bank called Natixis. Furthermore, as the oil and gas industry is among the most heavily regulated in the world, with protocols deriving from various regulatory authorities from environmental to taxation; blockchain can augment the all-important compliance requirements.
Improved visibility by the regulatory authorities within the industry can be achieved, as the transactional data can be stored in an immutable blockchain network. Finally, deploying such a cryptocurrency could enable direct transfer of value between various parties within the industry, without the need for the usual trusted intermediaries such as banks. In the world of oil and gas, blockchain implementation in trading platforms offers the possibility to reduce associated costs regarding the maintenance of numerous trading platforms.
Furthermore, additional costs with regard to data management, labor, inter-system communication, and settlement delays can also be reduced. Another area of improvement exists with regard to integrated distributed power generation. It is well known that conventional power generation utilizes large-scale facilities such as coal-fired, hydro, gas, and nuclear-powered plants.
Traditionally the power generated at these facilities is typically transmitted over extended distances, which limits the flexibility, and further results in significant costs being incurred in order to supply the power over a wide area. DER systems [ 17 ], by contrast, consist of small-scale facilities such as solar and wind farms and are located close to the location which requires their generated power. DER has become more feasible nowadays especially with the latest technological advances.
For example, solar panel installation is growing swiftly in numerous regions. However, using legacy data management tools, it is difficult to price, distribute, and integrate DER into both local micro-grids and wider regional grids. Unfortunately, much of the aggregated power generated ultimately goes to waste, as conventional grids lack the flexibility to adjust output and accommodate the distributed energy input.
Blockchain supported electrical grid management accelerates the integration of DER by providing an interoperable platform for secure, immutable, automated, and transparent transactions. The end result here translates to ultimately lower costs for the consumers, as the grid becomes more resilient; and furthermore offers a higher potential for the usage of renewable energy sources.
Both the energy certification and the carbon credit markets face structural processes and political barriers that need to be addressed, and which cannot be rectified by using the existing governance and legacy data management systems.
The result is an inefficient market where participants are unable to adequately quantify carbon risks. This in turn impedes the market from effectively responding to growing climate risks. Using blockchain technology, a decentralized trading and governance platform can enable efficient trading, pricing, and management of carbon credits, low carbon investments, and renewable energy certificates on a global basis. Both international and local political barriers can be overcome with the implementation of a robust and transparent governance framework.
A transparent, verifiable, and immutable ledger can provide market participants with both the confidence and required level of trust to initiate transactions. With the deployment of these features, this can in turn enable a reduction in carbon trading costs, which is highly beneficial if climate risk is to be priced into investments. Furthermore, the tokenization of low-carbon financial instruments can drive the uptake of climate-sustainable investments, and also increase accessibility for investors.
The remainder of these funds is allocated to distribution and transmission systems. With the advent of blockchain, the Asian development banks' energy sector activities can have even larger development impacts and finally provide further momentum throughout the APAC region, towards the ultimate objective of economic de-carbonization.
Smart grids have the ability to manage and monitor the transport of electricity to meet the end-users' varying demands. This in turn enables all segments of the power network to operate as efficiently as possible, minimizing costs and environmental impacts, whilst maximizing system stability, and reliability.
Smart grids coordinate the requirements and capabilities of all grid operators, generators, end-users, and electricity market stakeholders. A smart grid network encompasses numerous connected IoT devices, which can react to electricity grid signals by adjusting their power consumption accordingly, as and when required.
Hence, certain devices, for example, water pumps and battery chargers exhibit flexibility in terms of when they actually require power. This offers the possibility to control them with regard to supplying their power requests, only when the power load and demand on the network is low, hence resulting in a lower price.
The current centralized legacy grid management systems struggle to facilitate the integration of both IoT devices and distributed electricity generation. However, using blockchain to support these systems, enables these functionalities and processes to be realized in an efficient, resilient, and cost-effective manner.
The potential to decentralize energy markets and improve flexibility with blockchain technology is huge. Blockchain solutions can also be used to control energy performance and accurately monitor in real-time, which in turn results in increased supply-side efficiency. In essence, blockchain offers the possibility to provide energy companies with efficient and resilient methods, to efficiently track both energy usage and generation.
Furthermore, identification of network issues and outages can immediately be tracked, resulting in improved response times. One example that has already been deployed by an existing energy company, is being used to monitor water, natural gas, and energy flows. In addition, further plans are in the pipeline with regard to implementing security and infrastructure solutions using blockchain technology.
Energy systems today are undergoing rapid and fundamental changes in order to accommodate the embedded renewables, such as solar photo-voltaics and wind. These renewable energy sources are currently undergoing massive development due to the unbundling of the energy sector, which is further boosted by both energy and financial policy incentives.
In today's world advanced communication and real-time data exchanges between different sectors of the power network on a nationwide scale are paramount. Local distributed management and control techniques are necessary to accommodate the new decentralization trends. The advent of blockchain, which plays a primary role here in facilitating distributed transactions, which negates the requirement of central management, will ultimately dominate the future infrastructure of the entire energy sector, thus addressing many of today's unwanted challenges.
The energy companies running blockchain pilot projects are working towards the restructuring of information management that will reform supply chain management, security, and back-office processes.
Testing and experimenting with blockchain applications is already well underway within the energy industry. A fundamental change here is the move from legacy processes and technical debt, to a new set of trust-based, scalable, and automated procedures. This has led to the elimination of current costly requirements such as third-party brokers and reconciliation practices, which at a time when an avalanche of newly available data; including the mass deployment of sensors, rising security threats, and increasing machine-to-machine communication is overwhelming the outdated legacy systems.
Technical Writer. Stay up-to-date with the newsletter. Introduction It is a well-known fact that energy markets sustain both our economies and our daily lives simultaneously. Challenges in Energy Markets One of the major challenges today is with regard to fossil fuels and where their future usage now lies. Benefits for the Energy Sector The introduction of blockchain into the energy sector offers numerous advantages such as improving visibility, increasing operating efficiencies, and streamlining regulatory reporting.
Blockchain Increases Efficiency in the Energy Market The power industry is one of the major end-users of blockchain.
One of the main benefits of blockchain implementation in energy trading is that every transaction is allocated a particular signature. The signature then forms a decentralized system over time that does not depend on any entity. Norman Pieniak, BEST project manager, said that blockchain is also vital to energy transition as it allows power to be traded between producers and consumers. He added that the whole energy system reaps some benefits from this trading since it is flexible and able to react faster to fluctuations.
More and more efforts are being put towards energy transition and addressing the issue of demand and supply imbalance. Energy transition will help the government fight against climate change and reduce greenhouse gas emissions. For example, solar panel installation is growing swiftly in numerous regions. However, using legacy data management tools, it is difficult to price, distribute, and integrate DER into both local micro-grids and wider regional grids.
Unfortunately, much of the aggregated power generated ultimately goes to waste, as conventional grids lack the flexibility to adjust output and accommodate the distributed energy input.
Blockchain supported electrical grid management accelerates the integration of DER by providing an interoperable platform for secure, immutable, automated, and transparent transactions.
The end result here translates to ultimately lower costs for the consumers, as the grid becomes more resilient; and furthermore offers a higher potential for the usage of renewable energy sources. Both the energy certification and the carbon credit markets face structural processes and political barriers that need to be addressed, and which cannot be rectified by using the existing governance and legacy data management systems.
The result is an inefficient market where participants are unable to adequately quantify carbon risks. This in turn impedes the market from effectively responding to growing climate risks.
Using blockchain technology, a decentralized trading and governance platform can enable efficient trading, pricing, and management of carbon credits, low carbon investments, and renewable energy certificates on a global basis. Both international and local political barriers can be overcome with the implementation of a robust and transparent governance framework. A transparent, verifiable, and immutable ledger can provide market participants with both the confidence and required level of trust to initiate transactions.
With the deployment of these features, this can in turn enable a reduction in carbon trading costs, which is highly beneficial if climate risk is to be priced into investments. Furthermore, the tokenization of low-carbon financial instruments can drive the uptake of climate-sustainable investments, and also increase accessibility for investors. The remainder of these funds is allocated to distribution and transmission systems. With the advent of blockchain, the Asian development banks' energy sector activities can have even larger development impacts and finally provide further momentum throughout the APAC region, towards the ultimate objective of economic de-carbonization.
Smart grids have the ability to manage and monitor the transport of electricity to meet the end-users' varying demands. This in turn enables all segments of the power network to operate as efficiently as possible, minimizing costs and environmental impacts, whilst maximizing system stability, and reliability. Smart grids coordinate the requirements and capabilities of all grid operators, generators, end-users, and electricity market stakeholders.
A smart grid network encompasses numerous connected IoT devices, which can react to electricity grid signals by adjusting their power consumption accordingly, as and when required. Hence, certain devices, for example, water pumps and battery chargers exhibit flexibility in terms of when they actually require power. This offers the possibility to control them with regard to supplying their power requests, only when the power load and demand on the network is low, hence resulting in a lower price.
The current centralized legacy grid management systems struggle to facilitate the integration of both IoT devices and distributed electricity generation. However, using blockchain to support these systems, enables these functionalities and processes to be realized in an efficient, resilient, and cost-effective manner.
The potential to decentralize energy markets and improve flexibility with blockchain technology is huge. Blockchain solutions can also be used to control energy performance and accurately monitor in real-time, which in turn results in increased supply-side efficiency.
In essence, blockchain offers the possibility to provide energy companies with efficient and resilient methods, to efficiently track both energy usage and generation. Furthermore, identification of network issues and outages can immediately be tracked, resulting in improved response times. One example that has already been deployed by an existing energy company, is being used to monitor water, natural gas, and energy flows.
In addition, further plans are in the pipeline with regard to implementing security and infrastructure solutions using blockchain technology. Energy systems today are undergoing rapid and fundamental changes in order to accommodate the embedded renewables, such as solar photo-voltaics and wind.
These renewable energy sources are currently undergoing massive development due to the unbundling of the energy sector, which is further boosted by both energy and financial policy incentives. In today's world advanced communication and real-time data exchanges between different sectors of the power network on a nationwide scale are paramount. Local distributed management and control techniques are necessary to accommodate the new decentralization trends.
The advent of blockchain, which plays a primary role here in facilitating distributed transactions, which negates the requirement of central management, will ultimately dominate the future infrastructure of the entire energy sector, thus addressing many of today's unwanted challenges.
The energy companies running blockchain pilot projects are working towards the restructuring of information management that will reform supply chain management, security, and back-office processes.
Testing and experimenting with blockchain applications is already well underway within the energy industry. A fundamental change here is the move from legacy processes and technical debt, to a new set of trust-based, scalable, and automated procedures. This has led to the elimination of current costly requirements such as third-party brokers and reconciliation practices, which at a time when an avalanche of newly available data; including the mass deployment of sensors, rising security threats, and increasing machine-to-machine communication is overwhelming the outdated legacy systems.
Technical Writer. Stay up-to-date with the newsletter. Introduction It is a well-known fact that energy markets sustain both our economies and our daily lives simultaneously.
Challenges in Energy Markets One of the major challenges today is with regard to fossil fuels and where their future usage now lies. Benefits for the Energy Sector The introduction of blockchain into the energy sector offers numerous advantages such as improving visibility, increasing operating efficiencies, and streamlining regulatory reporting. Blockchain Increases Efficiency in the Energy Market The power industry is one of the major end-users of blockchain.
Blockchain Prevents Data Manipulation and Boundary Attacks In today's increasingly connected, data-centric environment, the management of sensitive data is paramount. Peer-to-Peer Energy Trading A peer-to-peer energy trading model is another advantage of using blockchain technology. Wholesale Electricity Distribution Another potential use-case is utilizing distributed ledger technologies in wholesale autonomous trading procedures. Energy Data Management With regard to data management, the blockchain acts as supporting technology and can perfectly manage all data collected through electricity meters, and facilitate real-time consumption monitoring.
Commodity Trading Wholesale energy and gas markets require coordination between a wide range of participants including brokers, exchanges, logistics providers, banks, and regulators.
Utility Providers In general, electricity power providers are usually large and complex organizations that generate their energy from power plants, solar farms, and various other energy sources. Integrating Distributed Electricity Generation DER Another area of improvement exists with regard to integrated distributed power generation.
Climate Finance Both the energy certification and the carbon credit markets face structural processes and political barriers that need to be addressed, and which cannot be rectified by using the existing governance and legacy data management systems. Next-Generation Smart Grids Smart grids have the ability to manage and monitor the transport of electricity to meet the end-users' varying demands. Conclusion The potential to decentralize energy markets and improve flexibility with blockchain technology is huge.
Benefits of the initiative: Enhanced management of the energy sectors growing complexity. Decentralized storage of transaction data, leading to increased security and greater independence from a central authority. The distributed energy and peer-to-peer electricity sales are some of the major factors which are expected to drive the market growth in the next 5—6 years.
Due to the increasing automation in energy utilities, organizations are making real-time changes to the infrastructure that will help them to convert into blockchain-powered software and reduce TCO.
Blockchain-powered solutions also help the energy utilities in improving their overall productivity. The study covers and analyzes global blockchain in energy utilities market by components, by services, by applications, by industry verticals, and regions.
Bringing out the complete key insights of the industry, the report aims to provide an opportunity for players to understand the latest trends, current market scenarios, government initiatives, and technologies related to the market. In addition, it helps the venture capitalists in understanding the companies better and make informed decisions. North America is leading the market followed by Europe with Asia Pacific emerging in blockchain in energy utilities market.
The report contains an in-depth analysis of the vendor profiles, which includes financial health, business units, key business priorities, SWOT, strategy, and views.
Use cases and strategy in the face of ambiguity
In addition, to increase the supply side efficiency, blockchain can also be used to accurately monitor and control energy performance in real-time, hence resulting in being mutually beneficial for both suppliers and consumers.
In today's increasingly connected, data-centric environment, the management of sensitive data is paramount. This in turn prevents data manipulation, safeguards customer privacy, and data confidentiality. This is known as boundary or perimeter protection and is ranked as the top industrial control system weakness for the previous two years by the U. Department of Homeland Security. Boundary protection refers to the measures taken at the enterprise information perimeter, in order to protect internal assets and data.
For example, where an attack on a network device may occur, the associated recorded data cannot be manipulated due to blockchain's immutability. Furthermore, due to the decentralized nature of the consensus mechanism, it prevents any illegal transactions from being executed. In addition, the network can be configured to continue operating despite node failures.
To conclude, due to its unique distributed design, blockchain technology provides a new line of defense in the face of rising threats and cybersecurity vulnerability. The Energy Web Foundation, EWF [ 11 ] is a global nonprofit organization that focuses on unleashing blockchain's potential in the energy markets.
Currently, they maintain offices in Switzerland, Germany, and the United States, and using blockchains decentralized technologies, are promoting a low-carbon, customer-centric electricity system.
Last year the first open-source, enterprise blockchain platform known as the Energy Web Chain was created and launched by the EWF, specifically for the energy sector. Some of the most well-known use cases for deploying blockchain technology consist of peer-to-peer energy trading, wholesale electricity distribution, energy data management to next-generation smart grids, and many more. These are described in further detail below. A peer-to-peer energy trading model is another advantage of using blockchain technology.
Distributed Energy Grids DERs , offer the possibility for consumers to actually sell unwanted power, mostly generated by solar panels, back to the grid. Using the blockchain's decentralized approach, can assist in enabling customers to sell excess power to each other within a given area, and executing numerous, small-sized energy transactions in a cost-effective manner. Hence, consumers could have an increased incentive to act as suppliers of the excess energy, whilst simultaneously keeping an immutable record of all transactions.
Various utilities and startups globally are planning projects within this arena. Furthermore, larger energy firms are also participating in energy trading platforms. British Petroleum p. Another potential use-case is utilizing distributed ledger technologies in wholesale autonomous trading procedures. It is well known that the services of third-party intermediaries such as brokers, exchanges, trading agents, price reporters, banks, regulators, and logistic providers are required within the mass-energy markets.
Hence, there are key entities and procedures that are required in any financial trades between companies. This currently involves manual post-processing and increased communications, in order to consolidate information that is held separately by each part of the transaction. As a result, current procedures are slow and time-consuming, as transactions need to be verified and reconciled multiple times from initialization to final settlement.
This results in additional costs due to the low speed of transactions, which can unnecessarily impede small-scale and distributed energy generators. With regard to data management, the blockchain acts as supporting technology and can perfectly manage all data collected through electricity meters, and facilitate real-time consumption monitoring.
In addition, providing the ability for consumers to securely share subsets of data to the market, results in more efficient data management. Furthermore, blockchain offers the possibility to provide consumers with control over their energy sources, as being an immutable ledger, this offers real-time and secure updates of their used energy. Wholesale energy and gas markets require coordination between a wide range of participants including brokers, exchanges, logistics providers, banks, and regulators.
Legacy data management tools make coordination between these participants slow and expensive. In some markets, current procedures require manual post-processing. In other markets, stakeholders have developed centralized proprietary trading systems, that due to high costs, effectively lock out smaller participants. Commodity trading systems built on decentralized ledgers provide the required security, immutability, and real-time view of pricing and transaction status.
This is necessary to replace expensive proprietary systems, and hence open the door to a wider variety of market participants. Smart contracts can enable automation of processes like KYC and payment upon receipt, further improving market efficiency. The most unique advantage for this use case in the commodity and energy trading market is the creation of an ecosystem that encompasses the start-to-finish transaction life cycle, in essence, a private blockchain network.
Finally, this results in potential cost savings coupled with improving processes more efficiently. In general, electricity power providers are usually large and complex organizations that generate their energy from power plants, solar farms, and various other energy sources. An opportunity exists here to utilize blockchain in order to provide shared, immutable data between the actual utility providers.
This can prove to be beneficial for both the utility companies and the end customers, as unlike in the financial services and banking industry, these providers are happy to share their data, which could be implemented on a shared blockchain ledger.
Distributed ledger technology offers distinct benefits to utility providers, as blockchain can process, validate, and secure the data from numerous network elements and devices at the power systems' grid edge. In addition, energy providers can utilize blockchain in order to create a system for transactions of critical distribution data. The gas and oil industry is a vast sector in its own right and consists of numerous companies worldwide. These companies can be broken down into three categories: downstream, midstream, and upstream.
To acquire the actual end products this often necessitates that many separate companies and entities are involved, coupled with the required legal agreements and processes, so many possibilities to utilize the benefits of blockchain exist.
Various use cases, such as digitizing crude oil transactions for one, which would ensure enhanced security, improved transparency, and optimized efficiency exist. A blockchain solution has already been developed for commodity trading for US crude oil transactions by a French corporate investment bank called Natixis. Furthermore, as the oil and gas industry is among the most heavily regulated in the world, with protocols deriving from various regulatory authorities from environmental to taxation; blockchain can augment the all-important compliance requirements.
Improved visibility by the regulatory authorities within the industry can be achieved, as the transactional data can be stored in an immutable blockchain network. Finally, deploying such a cryptocurrency could enable direct transfer of value between various parties within the industry, without the need for the usual trusted intermediaries such as banks.
In the world of oil and gas, blockchain implementation in trading platforms offers the possibility to reduce associated costs regarding the maintenance of numerous trading platforms. Furthermore, additional costs with regard to data management, labor, inter-system communication, and settlement delays can also be reduced. Another area of improvement exists with regard to integrated distributed power generation. Payment is made up front, including a deposit for the battery, and any refund due — for example, for any remaining charge — is made at the end of the rental.
Its 30th project is currently in funding. For the energy sector, the report highlighted that blockchain could enable both decentralized mini-grids and negative carbon tax. Despite this promise, UNDP itself has been involved in rather few such projects, one being the establishment by Sun Exchange of a solar power marketplace in Moldova. In environmental applications, blockchain has been showing promise in developing a global solution for transparent emissions verification and carbon trading.
Clearly, there remains considerable potential for innovative blockchain offerings in emerging market energy sectors. With this we will be able to reduce the costs. Ultimately for the end users, that will be an additional push towards improving their access to electricity. Blockchain solution Liquidstar, a spin-off from the Hong Kong blockchain research lab Chain of Things, uses the Blockpass framework, which was developed as a reusable digital identity.
It is, therefore, very energy-efficient for large-scale systems. Accordingly, based on our arguments regarding the energy consumption associated with operating transactions in Sect. It is primarily for this reason that the community of the cryptocurrency with the currently second-highest market capitalization, Ethereum, is trying to switch from PoW to PoS.
There are, however, controversial discussions in the community. However, one can also argue that PoS has less of a tendency to centralize mining has economies of scale and is, thus, more secure in the long run. We will not enter in this discussion up here but want to highlight that the outcome will likely decide which consensus-type for permissionless blockchains prevails and, therefore, impacts the energy consumption of future open decentralized applications.
On the other hand, blockchain technology can also be useful in constellations in which only a restricted group of participants take part in consensus. These are referred to as permissioned blockchains. Therefore, it is not necessary to tie voting weight to a scarce resource here, and one can reach consensus using some kind of election in which everyone has a single vote. Therefore, this kind of consensus mechanism is sometimes called Proof-of-Identity or, very often, Proof-of-Authority PoA.
Popular implementations of such permissioned blockchains are Hyperledger Fabric and Quorum. The more secure these PoA consensus mechanisms are, the greater their complexity and, therefore, the greater their energy consumption. For example, PBFT consensus overhead scales at least quadratically with respect to the number of nodes in the network and is hence — by contrast to PoW and PoS — highly sensitive on the network size.
This, in turn, correlates with the energy consumption associated with consensus. Beyond these popular consensus mechanisms, there are several more, an overview of which is provided by Eklund and Beck An example is Proof-of-elapsed-time, which intends to establish trusted random number generators through secure hardware modules. Since many of these types of consensus mechanisms are not currently prevalent in relevant applications, and because they usually have low energy requirements compared to PoW, we will not investigate these consensus mechanisms in more detail.
The main result of the discussion about blockchains with alternative consensus mechanisms is that, by getting rid of energy intensity by design, their energy consumption is orders of magnitude lower compared to PoW-blockchains.
Consequently, the energy consumption of non-PoW blockchains can hardly be considered problematic for the climate. Yet, beyond PoW and, thus, on a completely different scale, the type of consensus mechanism can have a significant impact on energy consumption.
We have seen that for PoW blockchains, the energy consumption related to consensus outweighs the energy consumption associated with operating transactions, so the redundancy aspect is usually not discussed in detail. For non-PoW blockchains, however, the energy consumption related to consensus is no more enormous, and, therefore, the contribution to total energy consumption by redundant operations may be significant.
Hence, it is not only alternative consensus mechanisms that one should look at to further reduce the energy consumption of blockchain technology, but also concepts which allow reduced operation redundancy.
Generally speaking, the primary motivations behind all of the concepts presented in this section that may help to reduce redundancy are increased scalability, throughput, and privacy for blockchain solutions. Conveniently, these all happen to reduce the degree of redundancy and, therefore, improve the overall energy consumption. We can distinguish between two approaches to reducing redundancy: reducing the degree of redundancy, i.
In attempts to reduce the degree of redundancy, a concept called sharding is often mentioned. How easily sharding can be achieved largely depends on the consensus mechanism. For example, sharding is very difficult to apply to PoW blockchains, because one has to make sure that, within a shard, computing power is roughly equally distributed to maintain a balance of voting weight among the associated nodes.
In a PoS blockchain, voting power is tied to the capital deposited by each node. This information is publicly available and can, therefore, be freely used in creation of shards. Other concepts to reduce the degree of redundancy include off-chain payment channels between two parties who repeatedly interact.
Such channels usually require a transaction on the blockchain, in the course of which off-chain payment channels are created and terminated. Ideally, however, all interim transactions are operated purely bilateral and do not involve a transaction on the corresponding blockchain. That is to say that, ideally, only balances, or accumulated deltas signed by the members on the payment hub, are periodically recorded on-chain.
Payment hubs, a generalization of payment channels to multiple parties, e. A similar basic concept is the use of sidechains e.
These are small blockchain networks which periodically refer to the main chain as a highly reliable root. Generally speaking, however, reducing the degree of redundancy also makes a blockchain network more centralized and must, therefore, be carefully weighed against concerns about security, liveness, and trust. Finding a good compromise between these interests could enable a reduction of the total workload in the system, and, therefore, a reduction of its total energy consumption.
On the other hand, the workload associated with redundant operations, e. One very straightforward improvement is, therefore, optimization of the computational complexity of the used cryptographic algorithms, e. This could be significantly improved by storing and verifying only short correctness proofs on a blockchain and distributing the larger, plaintext data on another layer to the relevant participants.
This is because, unlike methods that lower the degree of redundancy, these do likely not have a negative impact on security because every transaction is still verified by every node. In summary, there are various ways to reduce the intrinsic redundancy of blockchains and, therefore, to reduce also their energy consumption.
The relative energy saving potential is, however, negligible for PoW blockchains as the energy consumption of mining dominates all other contributions. However, it may still be relatively high for networks in which consensus is not energy-intensive, in particular, if the network is large.
We can now use our results from the previous chapters to make a first comparison of the energy consumption of typical blockchain architectures. The role of consensus has already been discussed in Sect. By contrast, for large systems consisting of many nodes, the natural redundancy in a blockchain can lead to much higher energy consumption. If a PoS or alternative non-PoW blockchain replaces Bitcoin or another PoW cryptocurrency in the future, we have to expect that there will still be tens of thousands of nodes.
Although the energy consumption of such a network will be negligible compared to Bitcoin, it will, therefore, remain high compared to a non-blockchain centralized system with minimal redundancy i. We decided to display the energy per transaction. However, as discussed in Sect. A rough comparison of the order of magnitude of energy consumption per transaction for different architectures.
A simple server can operate transactions with very low energy consumption. A typical non-blockchain, centralized system in applications will use a more complex database and backups, thus mildly increasing the energy consumption. A small-scale permissioned blockchain as used in cross-enterprise use-cases has a similar degree of redundancy, but some additional yet limited overhead due to, e.
A non-PoW permissionless blockchain with a large number of nodes can already exhibit a significantly increased energy consumption due to the high degree of redundancy. However, compared to a major Proof-of-Work blockchain, energy consumption is still negligible. On the other hand, an Ethereum full node on Geth which does not mine consumes approximately 0.
All numbers given here should be taken with caution as they are highly dependent on the precise architecture, security measures, type of hardware, and other parameters.
They should therefore be regarded a ballpark estimate, and reliable numbers have yet to be established. We suggest this interesting topic for further work, including a more thorough investigation of the role of consensus mechanism and the energy efficiency of transactions depending on transaction type or choice of blockchain implementation. For permissioned blockchains, this might be particularly relevant when enterprises have to decide for or against a particular blockchain implementation.
While their energy consumption is, indeed, massive, particularly when compared to the number of transactions they can operate, we found that they do not pose a large threat to the climate, mainly because the energy consumption of PoW blockchains does not increase substantially when they process more transactions.
We also argued that although the energy consumption of non-PoW blockchains and in particular permissioned blockchains which are used in enterprise context is generally considerably higher than that of non-blockchain, centralized systems, it is many orders of magnitude lower than that of PoW cryptocurrencies such as Bitcoin.
We also observed a close interrelationship between security aspects and the choice of consensus mechanism and redundancy characteristics, and therefore, energy consumption. Our contribution demonstrates that the energy consumption of blockchain technology differs significantly between different design choices. We argued that using blockchain technology with non-PoW consensus — which is the case in an increasing number of business applications — already substantially mitigates sustainability issues.
However, we also illustrated that due to consensus and inherent redundancy, blockchain-based solutions in general still require more energy than non-blockchain, centralized architectures. Reducing the workflows operated on-chain to a minimum, therefore, also mitigates concerns about the energy consumption. On the other hand, we know from other areas of IT that significant energy savings can be enabled by process optimization and digitization.
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The solution energy a container-based solar powered battery charging station and Internet of Things-connected blockchain storage batteries that are rented out to customers, with all usage and payment records managed on the blockchain. But in order to capitalize on those development innovations, the industry needs to address the fundamental issues of security and trust, which are basic requirements for doing business. Written energy. This blockchain that, overall, there would be no noticeable blockchain in total energy consumption. One can also determine an upper bound for the energy requirement of energy mining process for a PoW development, assuming honest and rational miners whose utility from mining is development financial profit: Participation in the mining process is only profitable as long as the expected revenue from mining is higher than the associated costs:. For example, patents can deter competitors from copying and encourage them, instead, to seek a licensing agreement or focus their research efforts elsewhere.
The Energy Consumption of Blockchain Technology: Beyond Myth
First, buyers and sellers share their orders during a predetermined time frame. Then, a computer server matches buy and sell orders according to the common trading goal. It shares the results with the involved parties.
Finally, all servers receive the results and generate a new block by selecting trades that meet the shared goal. The shared goal can be adjusted according to changes in the market environment, such as maximizing surplus energy in the market, maximizing profits or raising the lowest profit.
Maximizing surplus energy may seem counterintuitive, but at certain times of day, a consequent drop in prices could stimulate demand, such as for recharging electric vehicles. In environmental applications, blockchain has been showing promise in developing a global solution for transparent emissions verification and carbon trading. Clearly, there remains considerable potential for innovative blockchain offerings in emerging market energy sectors. With this we will be able to reduce the costs.
Ultimately for the end users, that will be an additional push towards improving their access to electricity. Blockchain solution Liquidstar, a spin-off from the Hong Kong blockchain research lab Chain of Things, uses the Blockpass framework, which was developed as a reusable digital identity. Piloting projects To date Liquidstar has completed two small pilots in Nigeria, one in the capital Lagos and the other in the south, with 20 batteries in the field and a further 20 about to be deployed.
You may also like. Cookies This site uses cookies: Find out more. Okay, thanks. For the industry to handle this issue, electricity has to be traded locally. As a result, bottlenecks and surpluses are able to balance one another in real-time. SMBS development has to consider factors like its fitment with the current power law and maximum auction mechanism.
The last six months of the project will be used to carry out a trial in actual conditions by power supplier e-regio, near Bonn. One of the main benefits of blockchain implementation in energy trading is that every transaction is allocated a particular signature.
The signature then forms a decentralized system over time that does not depend on any entity.
The approach to date has largely been development "bolt on" blockchain, such as centralized Internet of Things IoT cloud computing, to manage distributed solutions such as VPPs and microgrids, blockchain energy development. The main result of blockchain discussion about blockchains with alternative consensus mechanisms is that, by getting rid of energy intensity by design, their energy consumption is orders of magnitude lower compared to Development. The evolution of blockchain such as cloud computing, cognitive computing, and machine learning are paving the way for growth of blockchain in energy utilities. Truby Energy Decarbonizing bitcoin: law and energy choices for reducing the energy consumption of blockchain technologies and digital currencies. Based on such investigations and more reliable numbers, and the development of the most influential blockchain use-cases in practice, we will finally be in a position to decide whether or not the energy development of blockchain technology outweighs the savings in a specific scenario.