Almost every person in the United States uses some form of oil or natural gas energy every single day. When consumers go to turn on the lights, it is the job of their local utility to make sure that enough power is there to do so. This energy is largely generated by these fossil fuels. To ensure that everyone is properly billed for the energy that they consume or purchase, energy traders have long been on the front lines of this process. Now, thanks to a new blockchain trading platform, this process is more seamless and safer than ever. So what exactly must you know in order to better understand this new platform?
- What Is Energy Trading?
- What Is The Blockchain?
- How Can These Two Systems Work Together?
What Is Energy Trading?
All across the globe there are millions of gallons of oil and natural gas produced which will end up being consumed by homes, schools, businesses and hospitals alike. Because there are varying amounts of oil and gas available in the market at any given time, professionals, known as energy traders, are in charge of purchasing these commodities and then selling it to the party that is willing to pay the most for it. This process is completed thousands of times per day. This is especially true for customers who are subject to spot prices which can change at a moments notice. This spot price can be affected by world events, legislation, and a variety of other external factors. Usually, oil and natural gas are cheapest in the spring and fall and then more expensive in the summer and winter when demand rises.
What Is The Blockchain?
The blockchain can be thought of as a decentralized ledger that is able to keep track of thousands of transactions per second while remaining secure. It does this by not existing in just one single location. Instead, bits of information about one transaction are stored across many different computers and networks in a “decentralized” fashion. This way, it is much more difficult to find out what one particular party either sold or purchased online. Blockchain technologies are being widely adapted to help with the many security concerns that have arisen in the digital age.
How Can These Two Systems Work Together?
Hundreds of thousands of oil and natural gas contracts are bought and sold every day. This requires a great deal of organization and thousands of physical written contracts. Energy contracts are in and out of the hands of energy traders sometimes in the matter of just a few seconds which means these transactions can take longer than someone actually owns the commodity. The advances in blockchain technology ensure that all of the energy generated is accurately attributed to one particular party. Additionally, blockchain helps maintain secure transactions as well. By using blockchain tracking, it is far less likely that any fraudulent activity will occur. This is extremely valuable technology to the biggest energy traders in the world such as oil and natural gas producers Shell and BP as well as big banks which finance much of this fossil fuel exploration such as JP Morgan and ING. By investing in the adoption of a blockchain platform, their commodities are much more secure, and the process to trade them is greatly streamlines.
Hundreds of industries are investigating ways to better adopt a variety of blockchain technologies to make their businesses run better and to better protect their information. The energy industry is no different. By having large oil and natural gas companies team up with the biggest financial institutions in the world, energy trading will soon look far different than it ever has before.