Energy Decentralization: How blockchain and crypto will help to reshape the energy industry

in LeoFinance2 years ago

Centralized Energy: a doomed model

The energy industry as we know it nowadays is very much a centralized one. There are a few exceptions that we will address later but, as a general rule, we usually rely on a few large and remote power stations to supply energy to our homes.

That kind of arrangement has a lot of problems. I won't address each and every one of them here but, just to give a couple of examples, one of the issues of having a huge, centralized power grid is that the transmission is very inefficient. You see, there is this little thing called the "Joule effect" that causes part of the electric current circulating on the power grid to be "lost" in the form of heat while it's being transported from the power stations to our homes and the longer the distance the bigger the loss.


Another issue is stability and disaster mitigation. Let's take an extreme example and imagine that a country relies on a single power station to supply around 90% of all the electricity that it demands (this is not an exaggeration, by the way, that's what happens in Paraguay). Now, imagine that due to an unprecedented natural disaster, this station is temporarily unavailable. It's not likely that this country will have an easy way to quickly replace 90% of its energy production capacity. Even though this is an extreme and unlikely example, we see things like that happen on a smaller scale from time to time. It happened not long ago in Texas.

There are other issues too but I think the ones I described are enough to paint the picture.

A new model: decentralized energy

As it happens with several other things, the answer to most, if not all, of the problems that are created by a centralized arrangement is decentralization.

Decentralized energy is not exactly new and it's already happening although still on a very small scale.

The idea is that instead of a few large and remote power stations we start having more smaller stations distributed throughout the grid. If you expand this idea enough, every household can eventually become one of those stations.


A distributed system is much more efficient in dealing with the distribution and stability issues described above, but it also brings other advantages.

Consumers and Prosumers

On a centralized model, most of us are merely consumers of energy, meaning we only consume electricity that is supplied by the grid. However, as we move towards decentralization, the concept of "prosumer" tends to be more common. A prosumer, in this context, is someone who both consumes and produces electricity, potentially driving local economic development and helping preserve the natural environment.


Today, that's accomplished mainly by the use of solar panels and, on a smaller scale, wind turbines but there is a lot of research going on in this field looking to make other technologies such as hydrogen a reality.

Blockchain and cryptocurrency

How blockchain technology can help this model become a reality?

Blockchains promise transparent, tamper-proof and secure systems that can enable novel business solutions, especially when combined with smart contracts and therefore it can address many challenges of the industry such as data management and peer-to-peer trading.


Another common use case for blockchain within the energy industry is the development of cryptocurrencies for monetary payments as is the case of Marubeni Corporation, which's accepting cryptocurrency payments in some regions of Japan.

In the future, it's possible that a decentralized and tokenized energy grid will allow us to easily buy and sell energy directly to and from the grid, without the need of a retailer, which could really help to bring the price of energy down, as consumers won't be limited to the fees defined by regulatory agencies.

Final thoughts

Energy is vital to modern society and the current centralized model has issues that can potentially threaten its long-term sustainability so there is a real need for a new, better system.

Energy decentralization, with the aid of blockchain technology and cryptocurrency, can really change the way we interact with energy and provide a better system with less waste, more stability, lower costs, and fewer emissions.

The technologies we have available today are still more or less limited and the initial investment is quite high but, with time, different options will become available in the market and that should lower the costs, creating the possibility for more and more people to join this movement.

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I think decentralized energy will probably take a lot of effort to setup. Mainly because the power lines are are mostly owned by centralized entities. It also crosses into private property so it isn't easy to get everything working so new comers will have a tough time getting into the network.

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Yes, that is going to be a challenge. Right now it's not very easy or cheap to make that move so it's a bit of a factor. Some people are moving in that direction and as technology evolves, prices should drop so in the future I expect it to be cheaper.

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Great article. A question: does geothermal enter into your schemata anywhere? Let's face it, it is everywhere so it's readily available - any barring factors for it's use for cheap energy?

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Thanks man!
I'm not as knowledgeable with geothermal as I'm with solar or nuclear so I maybe I'm not up to date on the more recent advances on that front but, from my point of view, I believe there is room for geothermal, yes, but I think on a smaller scale since it's not as easy to set up as solar or wind, for example.

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