Blockchain technology experienced an explosive attention rise in 2016 and was placed by IT experts at the top of the trend curve, the so-called peak of inflated expectations. Analysts from Gartner Inc. are confident that the Blockchain technology is not just a hype but promises numerous potential applications for the future. Can this technology meet indeed these high expectations? At the moment, companies from different sectors are wondering whether it is worth to invest in this trend.
How it works
The blockchain technology became known for its application in the cryptocurrency – the bitcoins. In short, the blockchain is a distributed database that makes it possible to store transactions and other data simultaneously and decentral on hundreds or thousands of servers – each network node stores its own copy of the blockchain. New transactions are then added to already accepted transaction, blocks, building eventually a chain of blocks. Since each user of a blockchain can view and proof the transactions, but no one can change them, these transactions are stored transparently and forgery-proof. This could be the answer to the central trust problem in the Internet, enabling the existence of “Internet of value”. Indeed, thanks to the blockchain technology peer-to-peer transactions can be easily handled, creating a trustworthy network, in which each user can send direct transactions with no intermediaries.
But everything comes at its costs. The scalability of the blockchain technology is currently seen as a major problem: the extremely fast increase in the amount of data generated during the operations demands high requirements on data storage and computer power, making the process slow and expensive.
To visual how the blockchain actually works, let’s look at a simple example: If you want to transfer a cash amount abroad, you need a central instance like a bank that registers, proofs, executes, and confirms this transaction. This transaction will take several days and is additionally charged with transaction costs. The Blockchain is used to replace the bank with a distributed payment system. During the transfer a new account balance is updated for all users within a few minutes, and the transaction is now completed. There are no (or very low) additional transaction costs.
The Blockchain allows for fully automatic, fast, cost-effective and manipulation free transactions. These properties also promise great potential for sectors outside the banking sector. Via Blockchains, not only cash flows (Euro), but e.g. also energy flows (kWh / h) can be transferred. Companies are currently identifying new business models in order to take advantage of this revolutionary technology and the wide range of its possible applications. Follow our blog to find out more about possible applications of the blockchain in the energy industry in the next energy blog updates.
If you are interested in blockchain or have questions to the content of this report, please contact our Energy Consulting team.