Blockchain and Renewable Energy

Blockchain and Renewable Energy

Introduction

It was in the Cypherpunk Manifesto of 1993 where Eric Hughes claimed that people could not depend on governments and other large organizations to grant them privacy. As a result, David Chaum, a mathematician, came with a digital payment system in the same year that was known as eCash that enabled safe transactions over the internet (Tapscott, 2016). The system was so good that Microsoft wanted to include eCash in their software as a feature. The problem was that online shoppers did not mind about online security and privacy; hence David Chaum’s company was declared bankrupt in 1998. It was at this time when Nick Szabo, who was one of Chaum’s partner wrote a paper “The God Protocol” where he mentioned about the development of technology protocol that was supposed to be the ‘God’ of all transactions. Szabo’s main point was that transacting over the internet was risky since most infrastructure lacked the much-needed security to prevent data from being manipulated.

The global financial industry crushed later in 2008, and Satoshi Nakamoto created a new protocol and electronic cash system known as bitcoin (Tapscott, 2016). These protocols came with a set of rules that ensured the integrity of data exchanged without going through third parties. Satoshi was able to leverage clever cryptography to come up with a consensus mechanism, which could solve the double-spending problem better than trusted third parties could. The network time on the bitcoin blockchain could stamp the first transaction after the owner spends some amount and decline subsequent spending hence doing away with double-spending. Don Tapscott, the author of Blockchain Revolution and legendary business strategist, claimed that blockchain represented the second era of the internet where anything of value such as money and music could be stored, transacted, and moved across in a private and secure way. Moreover, where trust cannot be attained through an intermediary, it may be achieved through collaborative cryptography by means of the trust protocol.

Blockchain has encouraged cross-border payments by reducing the number of intermediaries and delays that existed on a transaction. Blockchain then solves these challenges by simplifying the process and storing each transaction in a safely distributed ledger, and as soon as the transaction is recorded down, the payment can be accessed by the receiving party without going through delays, intermediaries and unnecessary commissions. Theoretically, blockchain technology has been anticipated to break the normal banking system as it is meant to do away with middlemen or intermediaries such as banks by developing a secure and permanent transaction record.

Centralized and decentralized network bitcoins

The term “centralized” states how bitcoin networks are structured. Therefore, in a centralized network, a middleman such as a bank needs to be present to facilitate all the operations, information, and transactions (Asia Blockchain Review, 2019). This means that all the middleman holds all the data, and hence trust is paramount. The main advantages of this bitcoin are consistency and efficiency and that it needs less infrastructure support hence an affordable network. However, it is the limitations of the centralized bitcoin networks that have made it less favorable, and the main disadvantage is that the user has to give up on the control of his data. The centralized network also possesses a single failure node that, when compromised, can affect the entire network. On the other hand, the decentralized bitcoin network that does not depend on trust or any points of failure in its structure. The network is highly secure and ensures privacy and anonymity but still has its limitation, which is the high infrastructure costs as it requires more machines to support the network system.

Public vs. Private Ledger

The public blockchain, as the name indicates, is a public ledger, which is completely decentralized and that anyone can join the network (“Public vs. Private Ledger – MME – Blockchain”, 2020). These networks may have developed incentive mechanisms to encourage contribution in the network whereby each contributor may contribute to verifying the entries in the blockchain. Making decisions and validations are carried out through different consensus- mechanisms like the proof of stake and proof of work. The main advantage of the public ledger is that intermediaries are not needed to execute any transaction since transactions only require the sender and the recipient. A disadvantage experienced in the public ledger is that the proof of work validation form may need excess computing power. Examples of public blockchains are Ethereum and Bitcoin

The private ledger is managed by an administrator and is available to a particular group of allowed participants. Therefore, the network administrator has a critical function as he accepts or denies access on the network since the information on any transaction is not available to the public but only to the involved participants in the transactions. The participants in the public ledger cannot edit or modify any transaction without permission from the network administrator. The advantage of private ledgers is the fast processing in transactions since a few numbers of participants are only required to validate them. Examples of private ledgers or blockchains are Ripple and Hyperledger.

Understanding solar renewable energy credits (SRECs)

Solar Renewable Energy Certificates (SRECs) are solar incentives that enable homeowners to sell any energy certificates to their utility. As a result, the homeowner will get one SREC per thousand-kilowatt hours produced by the solar panel system. SRECs are a part of the renewable portfolio standards, state legislations that need utilities to give out a particular percentage on their electricity. To meet the renewable portfolio standards(RPS), electricity providers are required to get renewable energy certificates that serve as proof of producing renewable electricity.

Blockchain technology has the capabilities of transforming the energy sector, which has been catalyzed by a number of innovations, including electric vehicles, smart metering, and solar paneling. Power Ledger is a company in Australia that is involved in the application of blockchain technology in some energy systems (Ledger, 2017). One of the most known application is residential P2P, which is an electricity trading market place between local consumers and prosumers. The company carried out a trial demonstrating the significant energy saving bills and additional revenues for the PV producers. For instance, PV prosumers paid 7c/kWh when they needed to export excess power to the main grid as consumers were charged 25c/kWh. Power ledger is also taking part in the wholesale electric e-mobility, electricity trading, green certificates, and grid management. Power Ledger is trying to analyze blockchain feasibility for trading with excess energy.

How blockchain could protect intellectual property rights

Blockchain technology has expanded, and it is now used in contracts, commerce, and music. Blockchain has also been identified to be used to create patents, and two major advantages have been identified: proof of existence and hashing. Hashing is the process whereby a document is changed into a fixed code. Proof of existence is the hashes’ recordings in the blockchain. These two procedures are used on all transactions done on the blockchain and could be implemented in patents, authorship, and trademarks. Through the hash, a creator can prove his work by creating proof of existence since blockchain technology provides proof of record, which can be used to secure ownership and original work. However, the creator will be required to comply with all regulations of the authority to hold his or her rights despite the registration in the blockchain. Blockchain technology can also be utilized by third parties to complete specific ownership of any work through licenses and assignments. Because of all these patents and copyrights, blockchain will make corruption difficult since the technology can certify transactions and records in a process that cannot be tampered with.

Hash SHA-256 Cryptographic Algorithm

A cryptographic hash is a type of signature used in a data file or text. SHA-256 creates a unique 256 bits signature used in a text and is one of the secure hash functions available. A hash is not encryption; hence cannot be decrypted back to its original text since it is a one-time cryptographic function. This makes it appropriate when comparing hashed versions of various texts, unlike decrypting texts, to get their original versions. Encryption ensures that no information can land on the wrong hands, but the CIA managed to fool the world by buying a Swiss company (Crypto AG) that helped various nations to encrypt their codes (Simpson, 2020). For about 50 years, the CIA and their counterparts from the German intelligence helped rigging devices sold to a number of countries so that they could steal their secrets and take most of their money. The CIA controlled the hiring decisions in the company and helped to create the technology to their preferences and manipulated the algorithms so that they could wreck the channels their customers believed that they were kept under wraps.

Privacy in Blockchain

Technology has affected privacy protections as most organizations and individuals are in a public domain. Blockchain has the capability of limiting the effect of erosion in privacy while still allowing information to be released when it is necessary. For instance, a user may store his or her personal information in the blockchain and allow only specific parts of the information to be released. Therefore, blockchain-enabled systems may help users to be in charge of their personal information and data.

Cryptocurrency and Initial coin Offerings (ICO)

An initial coin offering (ICO) is a method that startups companies may use to raise funds (Frankenfield, 2019). When a cryptocurrency wants to get some money through the ICO, it creates a whitepaper where it outlines the objective of a project and the capital needed to start it. Interested investors are then able to cash in the offer and receive a token from the startup company. If the money needed is not enough to meet the minimum funds required, the ICO will be deemed as unsuccessful.

Smart contract

A smart contract is a type of contract between a seller and a buyer whereby its terms of an agreement are written directly into the line of code. The agreement and the code exist in a decentralized blockchain environment whereby the code controls executions, and the transactions can be tracked but irreversible. The smart contract enables trusted agreements and transactions to take place between anonymous parties without a need for any central authority. Smart contracts allow the creation of open networked organizations under various business models with a blockchain twist (Tapscott, 2016).

Conclusion

Blockchain technology is more of a decentralized ledger, and when adopted in the energy sector, chances are it will allow people to trade energy between themselves. The use of renewable energy sources is now able to connect grids hence helping to convert the consumers of energy into producers who are able to sell extra power to the grid. Moreover, the idea of having smart contracts in the blockchain technology will do away with third parties as smart contracts can automatically find and close deals in a supply chain without intermediaries. The success of blockchain technology can be seen in Singapore at the Blockchain Licensing Marketplace, a company working to do away with obstacles and build trust in the problems surrounding the transactions in supply chain management.