How Blockchain Smart Contracts Benefits Energy Industry
In the last few years, the energy sector has been key to the development of various economies. In fact, the global energy industry is estimated to be worth billions of dollars. Due to the large scope of this sector, several forms of technology like energy blockchain have been applied to ensure a seamless transaction.
One of such technology that is currently disrupting the energy sector is Energy Blockchain. Blockchain technology is a form of technology that is particularly adapted towards the decentralized sharing of data over the Internet. With blockchain technology, a group of computers can communicate over a somewhat public network while maintaining the privacy of activities. Blockchain technology thus provides a means of sharing data over the Internet without any form of interception.
When applied to the energy sector, Blockchain ensures trust, efficiency, transparency, and control by verifying transactions in a digital public ledger, and preventing fraud. In addition, one of the revolutionary technologies in blockchain is smart contracts which are self-executing rules and regulations in a contract.
Blockchain smart contracts can benefit the energy sector in the following ways:
- Trading and quality management: Each day, various types of transactions are carried out in the oil and gas industry; crude oil, natural gas, and petroleum products are traded across entities involving multiple parties. The blockchain smart contract helps to bring transparency into the trading process using a distributed ledger where data and transaction details can be stored for verification by all entities.
- Managing exchange agreements: Oil and gas firms buy products from each other and carry out reconciliation based on the exchange contracts. Most times the process of tracking the volume of products bought are done manually and not centrally within one company. However, energy blockchain smart contract can help track custody transfer and bring transparency into the reconciliation and settlements process because participants can simultaneously view and share data on the location and know the status of their transactions.
- Joint venture accounting and management: Energy Blockchain smart contract creates a distributed ledger to digitize joint venture bill generation, distribution, and acceptance with electronic authorization for expenditure (AFE) consent tracking across operators and non-operators. It also allows transparency of the distributed billing ledger and ensures fewer errors associated with disputes between operators and non-operators.
- Get rid of third-party intermediaries: Furthermore, Blockchain based energy processes would no longer require third-party intermediaries like banks and energy companies because it offers a decentralized system which empowers customers to manage their own electricity supply contracts. With blockchain smart contracts, consumers can be directly linked with producers, thereby getting rid of today’s multi-tiered system which includes distribution system operators, power producers, suppliers and transmission system operators.
Finally, although energy blockchain technology is still at its infant stage, it offers so many benefits to the energy sector. If the experience gained from blockchain in the financial sector can be safely deployed to the energy sector in conjunction with the use of smart contract which creates a decentralized system that eradicates the multi-tiered system and reduces fraud and corruption, the energy sector will be a transparent and efficient that is devoid of corruption in few years to come.