Looking it from the number of startups that are in being, its likely for one to think blockchain is going to transform energy trading. According to one expert, the technology could be a poor fit for the applications that most companies are hoping to use it for.
Blockchain is being hyped in a way to efficiently manage thousands or millions of businesses across hundreds of applications, with a range from billing and metering to peer-to-peer energy trading. Rather, blockchain is neither particularly cost-effective nor easy to gauge to support huge transaction levels, Stephen Woodhouse chief digital officer for Pöyry in the U.K said.
“I’m a blockchain skeptic,” he stated at Electrify Europe, an event held in Vienna, Austria in June. “I am waiting to see the right use case.”
Blockchain is just a system for recording data securely in a distributed way, he noted. “It’s nothing revolutionary. It will just become an embedded part of some of the transactions we do.”
Blockchain’s advantage is its distributed nature, which means no fundamental authority must be paid to manage the data. However, the need to update transactions on all blockchain node creates significant inefficiencies, said Woodhouse.
This incompetence is aggravated by the fact that blockchain’s standard security relies on proof-of-work protocols, which require a gradually challenging amount of effort as the value of a blockchain transaction surges. For peer-to-peer trading, blockchains would need to handle transactions of a few kilowatts, spanning time periods of as little as 15 minutes. Such a transaction may be worth just a few cents, said Woodhouse.
For now, blockchain trading remains shockingly expensive. In December, the CoinDesk stated on an instance of a $16 fee being imposed for a $25 bitcoin transaction.
“Despite what you might have heard about the ‘money of the future,’ the fact is bitcoin (and other cryptocurrencies) are both expensive — and experimental — today,” CoinDesk said.
“When I talk to proponents, they say in the long run blockchain might be able to get the cost per transaction down to 1 cent,” Woodhouse said. “But they might not. So, I’m not convinced that peer-to-peer microtrading is really the way to go with the public blockchain.”
Another problem is, blockchain transactions are not complete until a realistic number of blocks in a chain have been updated. With bitcoin, the “realistic number” is six blocks, and the process takes about 10 minutes per-block.
Meaning it could take at least an hour for a 15min energy transaction to be confirmed on the blockchain. But in December, at the level of bitcoin’s status, congestion on the bitcoin network meant delays of up to 16 hours.
And is surprising given that the network’s maximum transaction speed is just about seven transactions per second.
Compared to Visa’s blockchain-free payment, platform is capable of handling up to 24,000 transactions per second and most credit cards charge 2.5 percent or less of the total transaction value.
In short, today’s blockchain technology sounds like the opposite of the kind of cheap, fast and massively scalable system that would be preferably suited to peer-to-peer energy trading. And there are other technologies that could potentially do the job better.
Iota is one of those, a permission-less distributed ledger designed for the internet of things. Instead of a sequential blockchain, Iota relies on a cross-linked mesh of records called a Tangle.
“In order to make a transaction in the Tangle, two previous transactions must be validated, with the reward for doing so being the validation of your own transaction by some subsequent transaction,” says the Iota website.
Woodhouse believes that blockchain isn’t the only option. “There are alternatives to blockchain which may be more scalable for peer-to-peer trading,” he said.
Another is Hashgraph, 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.
Follow us on Telegram.
- American Express Partnership Sets Ripple Into High Priority Chinese Market - Nov 14, 2018
- What To Expect In Ethereum Scalability 2019 And Beyond - Nov 14, 2018
- Ethereum Sees Above Ground 200 Again After JP Morgan Statement - Nov 5, 2018
- Bounty Hunts And “All About Freedom” – October’s IOTA In Retrospect - Oct 29, 2018
- Shenzhen Court Rules For Bitcoin Transactions In China - Oct 26, 2018
Know more than others on any Blockchain Party!
Join more than 5000 others to receive the breaking news and weekly summaries! No ICO spam, we promise.
You have Successfully Subscribed!