The renewable energy sector around the world is in pains from dwindling margins. In many nations, governments are scaling back guaranteed prices which initially propelled the growth of the sector. Significant investments have been made by different businesses and if these businesses cannot sell the power they produce at sustainable prices, the equation for renewable energy is bound to change drastically in the coming days. Renewable energy calls for significant amount of initial investments and the pay back periods are often derived from the guaranteed pricing offered by governments.
It is in this context that WePower, a Lithuanian start up is aiming to change the manner in which the renewable energy projects get paid. The effort aims at helping renewable energy producers raise money through sale of rights to the electricity produced by them once their plants start producing power. A smart contract running on Ethereum blockchain will be offered to customers who in turn will get power at a later date.
Blockchain brings multiple advantages to the energy sector. Big users of energy like aluminium smelters and foundries are already negotiating contracts with energy producers though they are often times time consuming and complex. But, blockchain based contracts can be offered at will allowing smaller enterprises and even individuals use such contracts even for a day. Such contracts can also be easily traded similar to other crypto assets thereby paving way to a secondary market for power purchase agreements.
Time stamping and the genesis of blockchain technology
While blockchain is gaining popularity as a means of securing data and recasting stale business processes, in real terms, blockchain is the foundation on which we can build truly disruptive innovations.
Blockchain solution to time stamping issues
Let us say that you are an inventor or researcher developing a new and innovative idea. You are hoping to patent the idea some day, but you should prove that the idea originated from you in order to establish the precedence. For long, researchers have grappled with the problem in multiple ways including maintain a time stamped and notarized ledger or mailing the document through a certified mail and leaving such mail unopened. While these methods do work, they are not only time sensitive, but also susceptible to tampering or alteration and need a trusted second party who will vouch the claims.
In the context of the digital media, the problem gets even harder since tampering digital data is a trivial exercise for sophisticated users. This class of sophisticated users can tamper time stamp on file systems or rigorous audit trails with relative ease and invisibility without leaving any kind of forensic trail. In 1991, W.S. Stornetta and S.Haber found that two properties were important for time stamping digital documents. The first such property was a method for time stamping the data without relying on the characteristics of any medium which carries the data so that no part of the data can be changed without the change being apparent. The next property was making it impossible to stamp any document with data and time distinct from the actual data. In course of time, this theoretical approach to issues related to time stamping became the foundation for what is today known as blockchain. The core of blockchain is nothing more than a securely time stamped ledger.
As we now know, entries in the distributed ledger or the Blockchain ledger are represented as blocks in a sequential chain which grows longer with time. Every new block also carries a fingerprint (a hash value secured through cryptography) of itself covering both new data entered in the block as well as the fingerprint of the preceding block. Because of the chaining of fingerprints, altering single record in any block (even a small bit of it) changes the fingerprint of the entire block and all subsequent fingerprints are invalidated. This presents a high degree of accuracy and trust in the ledger.
It was in 2008 that cryptography researchers got interested in the distributed blockchain. This solution also meant that the whole ledger be present on several individual servers, with each of them competing to add new blocks in the form of digitally signed transactions. The Bitcoin network implemented this for the first time in 2009. The decentralized nature of the ledger meant that any failure was not attributable to a single point and each node also had a copy of the whole ledger. The massive amount of built-in replication also contributes to a high degree of trust and quality. When new blocks are added, each node validates the transaction which also provides a redundant guarantee of funds not having been spent previously and then fingerprinting the new block to prevent potential tampering. When further blocks are added to the chain, they also validate the prior blocks making the task of altering or falsifying earlier transactions increasingly difficult.
An important feature of the blockchain generally is that any data can be added to the blockchain without any restrictions. However, when it comes to specific implementation can have certain limits or costs. Embedding data into the ledger need special skills since the files will need to be encoded as .text and broken into 32 character chunks that become fake recipients of the transactions. Another limitation is that each block can have only a maximum of 1 MB of data (yes you read it right, only 1 MB and not GB). What this means is that when you have voluminous data that needs to be put into a block, you should split the data into multiple parts and create independent block for each part.