MYTH # 1: It consumes a lot of energy.
You have probably heard that Bitcoin mining consumes as much electricity as some countries, so it would not make sense to use such energy-inefficient technology in the Energy Sector. Although Bitcoin mining is electro-intensive, this does not mean that other Blockchain applications share this characteristic. The high-energy consumption stems from the consensus mechanism adopted by the Bitcoin Blockchain, called Proof-of-Work (PoW). During Proof-of-Work, computers need to perform a difficult mathematical calculation that requires high computational power, which one of the consequences is energy consumption. However, Proof-of-Work is not the only consensus mechanism that exists. Among other options adopted in applications for the Energy Sector, one can mention Proof-of-Stake, Proof-of-Authority, and Byzantine Fault Tolerance (PoS, PoA, and BFT, respectively).
MYTH # 2: I need to get involved with cryptocurrencies.
While cryptocurrencies use Blockchain as underlying technology, the reverse is not true: not all Blockchain applications (or DLTs — Distributed Ledger Technologies) use cryptocurrencies. There are platforms and applications without any type of crypto, and others with intrinsic utility tokens only (those not traded in Crypto Exchanges). Hyperledger Fabric, from the Linux Foundation, is an example of a popular platform that does not have cryptocurrency or cryptotoken.
This is a very sensitive and important topic to understand, since more traditional organizations, such as in the Energy Sector, have been concerned with operating cryptocurrencies since the frauds occurred during the 2016–2017 ICO boom.
MYTH # 3: Blockchain = Bitcoin.
Also related to the previous myth, the answer is NO. While Bitcoin was the first case that popularized the use of Blockchain technology, applications in the Energy Sector around the world have little or nothing to do with Bitcoin.
At all the courses that I have taught on the subject so far, I have always had a Bitcoin enthusiast to ask me, “Vanessa, did you see how much Bitcoin went up/down this week?” My answer is always the same: “I do not follow these variations of Bitcoin and during the course I will explain why it matters very little.”
MYTH # 4: It will replace the DSOs, Traders, Retailers, Market Operators, among others.
This myth originates from the disintermediation characteristic of Blockchain technology, which allows for peer-to-peer (P2P) negotiations. Those who are unfamiliar with the Energy Sector may mistakenly assume that figures such as Distributors, Traders, Retailers, and Market Operators, are mere intermediaries that Blockchain technology will annihilated. This superficial point-of-view of the functions and activities such entities perform can harm the discussions around the applications of Blockchain and DLTs in the Energy Sector, as it can alienate the agents who will most likely lead the adoption of the technology to make it a reality, in addition to making it difficult to deepen identification of use cases.
MYTH # 5: Blockchain projects are expensive.
This myth is justified, given that you can find news about millionaire Blockchain projects in the media. My professional experience in past years shows that most of these projects are not completed successfully and end up not delivering the investment value. A more solid strategy is to start with a small internal team dedicated to explore the growth of Blockchain technology organically, through sequential POC’s (Proof-of-Concept) and validation with existing technologies.
Another factor that contributes to myth #5 is the high affiliation fee for some international consortiums, especially truth for those in developing countries with an unfavorable dollar or euro exchange rate. In such cases, some companies may end up affiliating without assembling a competent team beforehand, and thus fail to extract value from the affiliation.
The most popular consortium currently is the Energy Web Foundation, with its EW-DOS platform. Among the tool kits offered by the organization are:
- EW Origin, for certification of renewable energy through the acquisition of i-RECs;
- EW Flex, for integration of distributed energy resources with demand flexibility programs.
In order to achieve the full benefits a consortium affiliation can offer it is important to analyze whether the tool kits offered make sense for the strategy of your company or your national energy market. Remember that you will still need a dedicated team to customize the tool-kits, since they are not 100% ready.
Do you know any other myths about the application of Blockchain Technology in the Energy Sector? If yes, please share it with me :)