The promise of the blockchain technology

Published onSeptember 5, 2018

WEPOWER IS a Lithuanian startup that aims to change the way renewable-electricity projects are paid for. The government-guaranteed prices that have propelled growth in wind and solar energy around the world are being cut back, says Nick Martyniuk, WePower’s founder. So his firm wants to help developers of renewables raise money by selling the rights to the electricity their plants will produce once built. Customers will buy a smart contract now, running on Ethereum’s blockchain, that will provide them with power later. Using a blockchain offers several advantages, says Mr Martyniuk, who used to work as an energy trader. Big energy users such as foundries and aluminium smelters already negotiate such contracts with power stations, but they are often complex and time-consuming. Contracts on a blockchain could be offered off the shelf, allowing smaller companies—and perhaps, one day, individuals—to use them too. Such contracts would be as easily tradable as any other crypto-asset, creating a secondary market in power agreements…

…for all the technology’s potential, though, most attempts to use it remain tentative. Honduras’s property blockchain, originally announced in 2015, was eventually abandoned in the face of official indifference. And some supposed successes turn out to be wildly exaggerated. A rash of reports earlier this year that Sierra Leone had run the world’s first blockchain-powered election, using software from a Swiss startup called Agora, had to be corrected on Twitter by the country’s National Electoral Commission…the advantages of blockchains are often oversold. Because of the overheads involved in shuffling data between all participants, blockchains are less efficient than centralised databases, a problem that gets worse as the number of users rises…

…enthusiasts are also beginning to realise that even when a blockchain might be a suitable tool for the job at hand, they will still need to resolve the same sorts of problems as for any other big IT project. Proposing a new standard is the easy part. The point is to get everyone, including competitors with little love for each other, to agree on important details such as who will be in charge, how the system will be built, how data formats will work and what happens if someone wants to leave. As David Gerard, a blockchain sceptic, puts it: “Blockchains don’t solve the underlying problem of agreeing on what you want to do and how.” Applying blockchains to highly regulated industries such as finance, says Mr Brown at r3, means reassuring regulators that the systems can operate as planned, and that systemic risks can be minimised.

Source: https://www.economist.com/technology-quarterly/2018/09/01/the-promise-of-the-blockchain-technology