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UTILITY WEEK | 24TH FEBRUARY - 2ND MARCH 2017 | 21 Operations & Assets cations, secure identity, authentication and algorithmic governance can be run securely without interference and fear of hacking. Utilities are ripe for disruption To imagine the parts of the energy and util- ity business model that will be affected by this technology, simply think of those activi- ties that rely on third parties or processes to verify and validate the truth of a transaction, contract or exchange of value. Four areas are of immediate interest: 1) The energy retail system and peer-to- peer energy trading For both domestic and business custom- ers, the ability for trades to occur directly between consumers and prosumers through smart contracts stored on a distributed ledger/blockchain is already here. LO3 with Consensys – with the backing of the state of New York – have successfully concluded trades between neighbours in Brooklyn using an instance of Ethereum in their Transactive Grid Platform. Electron recently secured £400,000 of seed funding, with the stated (and highly ambitious) aim of rede- fining the structure of energy trading across the UK system covering grid, settlement and switching, among others. This author knows of several proofs of concept in energy compa- nies across Europe and the US that are simu- lating P2P trading with a view to launch. 2) e-mobility The changing economics of battery storage, mobility of assets, and the need for individu- als to charge their cars anywhere is set to accelerate the decentralisation of electric- ity grids. On the back of a successful proof of concept with Slock.it, Innogy has taken a bold step and joined forces with UBS and ZF, the automotive technology company, to provide a blockchain-backed Car eWallet. The application opens up mobile payments for services, but has significant implications for energy retail and the intelligent grid with the ability to charge and discharge assets at multiple points on the grid and secure value direct to the individual. 3) Smart/IoT Currently the connected home is dominated by a small number of ecosystems that are, in reality, isolated: Thread, All seen, Smart- things and Apple Home kit are examples of ecosystems that only work if you are a mem- ber of an alliance using a particular protocol. They are not interoperable and so not truly connected. The three pillars of decentralisa- tion, through true M2M "economically inde- pendent machines" are set to transform this space. Bosch, Cisco and Gemalto at the recent New Horizons (Blockchain IoT Sum- mit) in California announced their intention to collaborate on blockchain and IoT. 4) Asset management There is little public evidence of distributed ledgers being currently applied to asset man- agement within the energy and utility sec- tor. The potential for applications from other sectors, however, is significant. Everledger's platform for tracking diamonds across the globe, Propy dealing with property, Prov- enance through its white paper on supply chain4 – all show how traditional asset man- agement and supply chains in energy and utilities can change radically in the future. With all the opportunities for significant change using this technology, there is a risk that we focus only on disruption. The tech- nology can have profound effects on the economics and user experience within estab- lished companies and sectors. From reducing the risk associated with "know your bank" and "know your customer" to transform- ing the credit risk equation associated with prepayment through secure digital micro- payments on an hourly and daily basis. The area of micro-payments has huge potential to deliver benefits that will grow further with the rollout of smart metering. In conclusion, it is impossible to ignore the transformational potential of the dis- tributed ledger and blockchain. It is here, it is now, it will grow, it can't be blocked. The rate at which it will grow will depend on solving several fundamental issues includ- ing scalability, governance and security. Of these, identity security is perhaps the most fundamental challenge of our global digital age. Identity security will be the source of control and value for the individual; this is true from the global challenge faced by the UN with ID2020 to the development of Self Sovereign Identity at the decentralised level. Who we are and who we trust matters. Neil Pennington, advisory board member, ID2020 ILLUSTRATION OF HOW A SINGLE BLOCK IN THE BLOCKCHAIN IS BUILT AND VALIDATED Source: Goldman Sachs Global Investment Research Block is filled with transaction details (price, date, terms) Party A agrees to transaction and signs Party B agrees to transaction and signs Cryptographic "hash" calculation is performed based on transaction details, signatures of parties A and B, and "hash" of prior transaction Block is added to the chain of transactions if "hash" calculation matches other nodes Transaction #1 Transaction details aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa Transaction #1 Transaction #1 Transaction #1 Signature – party A Signature – party A Signature – party A Signature – party B Signature – party B Transaction details aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa Transaction details aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa Transaction details aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa aa aaaa aaaa aa aaaaa aa aa aaa