Introduction

In the beginning there was paper. As a means of storing information and recording financial transactions, it was simple, but effective.

But as the world progressed and became more complex, new ways of storing information developed and in today’s 24/7 existence, we now employ a large number of banks, brokers and regulators to verify and establish trust over a wide range of processes for exchanging value in myriad forms.

Having third parties verify trust in transactions is obviously a good idea, but in today’s world of on-demand services and rising expectations for instant gratification, the work this entails can often feel unnecessarily lengthy and cumbersome.

And so, in recent years more and more people have started exploring the potential of new technologies to eliminate our reliance on a complex network of third party verification regimes. The most prominent of these is currently blockchain.

Blockchain, which is often linked with the volatile cryptocurrency Bitcoin, is a distributed digital database or ledger that enables multiple parties to write time-stamped blocks of data, using electronic signatures and without the involvement of a third-party intermediary.

Blockchain’s roots in the world of cryptocurrencies is still evident through the number of trading platforms that have been and are currently being developed with their own currency tokens, which can be used in lieu of money on the secure networks. Instead of buying or selling electricity for regular pounds and pence, blockchain users can use their own currencies within this world.

One of the benefits of blockchain is that all entries to the distributed ledger are permanently recorded and are impossible for a single user on the chain to alter.

According to Shell’s blockchain lead Arno Leaven, these characteristics make blockchain the ideal successor reliance of third-party verification systems for all kinds of transactions. He says the technology will return power to individuals to verify for themselves whether or not there is authentic value in a transaction.

Taking the example of exchanges of cash money, Leaven explains that, before digital banking, individuals could meet and complete transactions without any need to know or trust one another personally.

“Instead, we could trust that the paper notes which change hands reflect a universally accepted value. And if you didn’t trust that, you held it up to the light and verify whether it’s real.”

In a digital world, this kind of verification became a challenge. “Because how can we guarantee the authenticity of a digital asset?” asks Leaven.

To overcome the challenge, trusted third parties were employed to outsource the risk involved in verifying authentic transactions based on digital assets.

But now, “Blockchain has found a way to no longer use these trusted third parties, and just as with cash money, to verify for ourselves whether a digital asset is real,” says Leaven.

The change may seem mundane to some, but the blockchain enthusiast insists: “It has huge consequences if you think about where we use trusted third parties in our processes across all industries, and definitely in the energy sector.”

So just how might blockchain transfigure today’s energy system and its established methods for transferring value between stakeholders? And what issues might cause the technology to fall short of such high expectations?

The following Foresight report from Utility Week leverages insights from technology experts and leaders of prominent blockchain pilot schemes to offer some answers to these questions.