Why the Blockchain?
Blockchain technology is facilitated in an interconnected society where participants are willing to conduct peer to peer transactions.
Add to this mode of communication the need to sort out problems in a direct way without a central authority which will assist our endeavors. From here the need for a method to validate our transactions without the presence of external central authority.
Blockchain is offering offer all participants the trust necessary to consider the method as secure as possible. We talk about distributed trust between peer to peer participants in an automated way to validate the trust.
All these attributes and methods are encompassed into the concept of blockchains.
The definition of Blockchain as a distributive validating process
A blockchain is a digital, distributed transaction ledger, with identical copies maintained on the network’s members’ computers called nodes. All members can record new entries and review previous ones.
Transactions are grouped into blocks those are then recorded one after the another in a chain of blocks –called ‘blockchain’. The link between blocks and their content are protected by cryptography and cannot be forged.
Once entered into a blockchain, information cannot be erased. Thus, a blockchain contains an accurate, time-stamped and verifiable record of every transaction ever made and the network does not need a central authority.
Smart grid, Microgrids, and Blockchain
Total decentralization of electrical grid is based on Smart-Grid Technology and Peer-to-Peer connections between individual power generation plants as part of a microgrid ecosystem type. Such a system does not have a central authority. Proprietary protocols are shipping the information from one user to another in real time, replicating almost instantaneously the information on all the nodes of the microgrid.
Each node can set his own rules to interact with that grid, making them public to all the participants. It is the software who will digest the node information and it will make the integration seamless. All those nodes can trade Kwh at their dollar face value with any other node inside the ecosystem. Any node can sell or buy kWh without a common contract. They use digital blocks of information known as a blockchain.
In this way, the microgrid ecosystem becomes a real-time marketplace where the individual producer or consumer is trading energy at own pace. Pretty nifty isn't it?
Smart grids, Blockchain and Utility Company
The utility companies are keeping control of the industry with a tight fist and they set terms for contracts and kWh price. To disrupt them must be done using a different type of thinking.
That is what the smart grid and the blockchain are doing. They do shortcut the big utility grid company eliminating the need for a common contract between users and utility company and taking from utility company the leverage when it comes to price per kWh. That is done at the local level based on the smart grid ecosystem.
The utility company will still provide grid functions and maintenance service like line repairs, electric conservation facilities and so on, where they can monetize. The benefit is on the consumer side where the consumer can harmonize their need and avoid paying high rates at pick hours, or they can build their own protection against price gouging on the distribution side. Another huge benefit, a smart grid offers a buffer against browning, blackouts and natural disasters.
Peer-to-peer, Blockchain, and Smart Contracts
In order to use smart grids, a marketplace for supply and demand of electrical power is required at the roots, on the local level. Rather than create a centralized marketplace, smart contracts on the blockchain can be used to balance demand and supply and enable peer-to-peer trade. Each user can register his preferences without a middleman in the decentralized ledger (the blockchain). We talk about peer-to-peer transactions and decentralized smart contracts using an energy social network as background support where we will use blockchains for all financial transactions.
Smart grids, Blockchain, Smart Contracts - Industry Trends
Such peer-to-peer business deals — conducted directly from consumer to consumer — are very cost efficient and have great potential. The total value of the assets now being administered via blockchain all over the world is more than $1.6 billion, and according to Coinmarketcap, a cryptocurrency platform, these assets grew by an impressive 1,600 percent between 2013 and 2016. Seamus Cushley, a blockchain expert at PricewaterhouseCoopers in Belfast, says that $1.4 billion was invested in blockchain-related startups in the first nine months of 2016 alone.
In the US, LO3 Energy launched its peer-to-peer energy transactions system, which is called "The Brooklyn Microgrid". The miniature utility grid connects people who have solar panels on their roofs in several parts of Brooklyn(NY) with neighbors who want to buy locally generated green energy. Like other microgrids, it operates alongside, but separate from, the traditional energy grid.
Blockchain makes the Brooklyn Microgrid possible. Participants install smart meters equipped with the technology, which tracks the energy they generate and consume. Records of the automatic “smart contracts” that enable neighbor-to-neighbor transactions are also tracked using blockchain. LO3 Energy hired the software maker ConsenSys to build the system, which is based on the blockchain-based distributed computing platform Ethereum.
This pilot project was possible because it was able to fulfill three criteria. First of all, thanks to LO3 Energy’s “TransActive Grid,” which is a blockchain platform – a technology that timestamps each transaction as a chain of secure blocks – every energy transaction was documented. Second, thanks to the Siemens Digital Grid Division, microgrid-specific technical solutions were offered; and third, Siemens startup financier next47 supported potentially disruptive technologies like this one through financing, project expertise, and technical advice.