Judging from the exploding number of startups out there, one might think blockchain is going to transform energy trading. But the technology might be a poor fit for the solicitations that a lot of companies are eager to use it for.
The blockchain is being hyped as a way to cost-efficiently manage thousands of transactions across hundreds of uses, ranging from billing and metering to P2P energy trading.
According to Stephen Woodhouse, the chief digital officer for Pöyry in the U.K. blockchain is neither particularly cost-effective nor easy to scale to support massive transaction levels.
For peer-to-peer trading, in particular, blockchains would need to handle transactions of just a few kilowatts, spanning time periods of as little as 15-minutes. Blockchain’s strength is its distributed nature, which means no central authority must be paid to manage the data. However, the need to update a transaction on every single blockchain node creates significant inefficiencies
Blockchain transactions are not confirmed until a reasonable number of blocks in a chain have been updated. With bitcoin, the “reasonable number” is six blocks, and the process takes around 10 minutes per block.
That means it could take at least an hour for a 15-minute energy transaction to be confirmed on the blockchain. But in December, at the height of bitcoin’s popularity, congestion on the bitcoin network meant delays of up to 16 hours.
Another option is a ledger that uses a voting system to overcome blockchain’s proof-of-work limitations. It is unclear if these technologies could be put to work in energy-related applications.
Today’s blockchain technology sounds like the opposite of the kind of cheap, fast and massively scalable system that would be ideally suited to peer-to-peer energy trading. The blockchain is no more than a system for recording information securely in a distributed way it is just an embedded part of some of the transactions that we do, says Green Tech Media.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]