This is the final piece in a five-part series on the business impact of blockchain technology.
To wrap up blockchain week, BRINK had a conversation with Joanna Hubbard, CEO of Electron, a London-based blockchain startup, about the role of government in blockchain, the opportunities it presents for new business models to flourish, and the risks associated with the technology. This Q&A has been edited for length and clarity.
BRINK: How has blockchain continued the trend toward decentralized power sources, which was already underway even before blockchain appeared on the scene?
Joanna Hubbard: I don’t think blockchain is changing decentralization—the cat was out of the bag already. I think what it’s doing, or what it’s capable of doing, is creating a new coordinating architecture that allows you to actually engage really small assets as a kind of safe central course. You can essentially coordinate all of your trading interests on the platform so that everyone trusts that they’re going to get from the market what they want from the market. I think what blockchain will enable us to develop is that kind of market trustee. You bring enough equality and different types of assets and products into a market, and you essentially trust the really diverse set of assets and the set of requirements designed to help balance the kind of increasingly intermittent overall system.
BRINK: What’s the role of government in the energy sector as it relates to blockchain?
Hubbard: I’m going to be really unpopular in saying this, but I think blockchain is a fantastic source of governance. I think that government will be involved in setting the essential basic rules and parameters of the systems and evolving those rules. A lot of the rules are going to be around data validity: what kind of license do you need to be paid at, what data sets can you see, how much of a system can you interact with? I think governments are going to be key in answering those questions.
Because energy is a local market product, different governments and different regions are going to have different rules. These different programs on the system create a kind of transparency of who’s going to be expected to trade and on what basis—and that gives rise to a business world with a much more efficient market structure.
You can mitigate a lot of the classic risks around hacking through running a consortium blockchain with visibility, transparency and data.
BRINK: But doesn’t blockchain bypass the role of government, as it were? Does government still need to play a role in this?
Hubbard: Absolutely, in the end it does. If we’re talking about consortium blockchains, that means that you have to be commissioned to participate, and even then you have to be commissioned under full sanctions. So governments are creating rules around, for example, how much price risk the customer can be exposed to. So if someone wants to change their trade, they might not want to turn their electric power off and find that they got charged 1,000 pounds for half an hour of electricity. They need protection, and that will be a role specific to government and built in to the trading consortium blockchain.
BRINK: Right. But wouldn’t they need to be in the business of owning energy sources?
Hubbard: No. And I really think they shouldn’t be in the business of owning energy sources. I don’t think that’s how you get an efficient market outcome.
BRINK: What sorts of new businesses do you think will emerge in the next five to 10 years as a result of blockchain?
Hubbard: Partly data-driven businesses, partly distributed energy resources (DER) aggregation businesses and also shift energy businesses. For example, a company is already looking at providing batteries for electric vehicles based on the fact that they can then trade those batteries within the vehicle, which takes away the worry of vehicle owners that the battery will be degraded too fast. It also enables someone to essentially aggregate massive amounts of flexible kinds of distributor loads. I also think the aggregator model has been really under-scaled recently. Who will provide people with services that manage all their utilities, trade those utilities for them and guarantee the price for them? Basically we should expect to see business models that require much more granular information and more open market access that we don’t have today.
BRINK: You’ve clearly gone into this business because you see this as a huge opportunity. But what are the kind of risks involved in shifting to a blockchain-oriented economy?
Hubbard: I think you can mitigate a lot of the classic risks around hacking through running a consortium blockchain with visibility, transparency and data. A consortium blockchain is less likely to be hacked than a public blockchain because you have to have permission to engage on that blockchain. And even if that node was taken over, the other nodes would be able to identify that the node was hacked into and cut it off the system. And you would be able to reverse that stream before it was hacked into. So that would reduce some of those risks that are most common.