Application of blockchain technology to energy trading #8

Can blockchain drive cost down?

Can blockchain drive cost down of energy trading?

There are many ways to organize characteristics of blockchain technology; “Immutable and tamper-proof by data structure and process,” “Solved double spending that has been a problem of digital currency,” “Realize peer-to-peer trading that does not require central authority,” “zero downtime” etc. (if those are technically correct is not considered here.). Among them, I often see “low transaction cost,” “lost infrastructure cost.”

How blockchain leads to cost reduction

I will list possible basis of the statement that blockchain technology can lead to cost reduction.

  1. Blockchain is a distributed system and has redundancy in itself. This eliminates system architecture with redundancy and data back-up process for conventional centralized system.
  2. Blockchain enables peer-to-peer trading and eliminates third party intermediaries that used to be needed. Operation cost of third parties can be eliminated.
  3. Blockchain enables to share information among different stakeholders when it was difficult to share information. Cost for communication and sharing can be reduced.
  4. By automating execution of contract by smart contract, business cost associated with conventional contract can be reduced.
  5. With blockchain technology, there is no time lag between transaction and settlement. This reduces counterparty risk and associated cost (i.e. account reserve temporarily recorded on balance sheet of a financial institute).

Can energy trading system be build at low cost?

I have seen news articles that bank remittance cost becomes extremely low by blockchain technology. I can understand that investment for the remittance system has been executed because the benefit of the investment surpasses its cost. What about energy trading system? We need to understand difference between energy trading system and currency/financial system. Energy trading system has the following aspects:

Summary

In conclusion, can cost reduction be achieved by using blockchain-based energy trading system? There is no single conclusion as it depends on design and specifications of the system. However, in spite of statements of the above quote, I do not see any reason why blockchain-based energy trading system can be built at low cost unconditionally, considering factors A. to E. above. In particular, cost of a system is unlikely to be low if measurement and communication devices have to be installed for each participant.

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