Blockchain: A More Secure Platform for Multiparty Transactions
Blockcoins, bitchains, and the possibility for general confusion
A few weeks ago, my colleague, Ryley Kornelsen, and I released a set of documents on Digital Oil and Gas. Included in that set was a document devoted to Blockchain in oil and gas. You can download those documents here, for free.
There’s no doubt that blockchain has become one of the most talked about technologies in the 2010s. In general, it’s associated with the financial services industry, and typically with virtual currencies. However, as a technology, it offers all industry with a platform that allows simplified and more secured multiparty transactions.
Blockchain is a technology concept that describes an immutable, distributed, database structure. A blockchain implementation provides a platform for multiple parties to transact with one another, without the need for third party validation, creating a ledger of record that is, by design, more secure than other approaches. This security is driven by its structure: a peer-to-peer, distributed, timestamped network of records, each containing a sequential hash, which cannot be changed, without modifying the entire chain of hashtags (see the picture below).
By distributing the ledger, no single party has the entire transaction record, and there exists a platform that every party can connect to, and in which the security enables the trust required for all parties to retain confidence in the transactions and data found there. It also shifts the balance of power from third party, centralized entities, and distributes it to the parties involved in the transactions2.
Blockchain is enabled by the proliferation of next generation of networks, being driven by extensive advancements in computing power required to process validation of the chain.
Great, but what about my hydrocarbons?
Since the oil and gas industry has many complex multiparty relationships, it stands to reason that this technology offers potential support to those complex situations, especially as incumbents pursue cost reduction and overall efficiency improvements. There are clear scenarios involving activities such as joint venture accounting, capital project handover, enterprise trading, and land / title registries where this sort of structure would improve transparency and offer opportunity for increased automation.
Like any technology, blockchain isn’t without it’s complexities. It requires a large computing requirement, which then drives extensive power consumption. It can also lead to highly complex computations which can drive longer validation times.
For more reading on the topic, please download our papers here, or check out some of the writing from one of my mentors, Geoffrey Cann, who’s been exploring blockchain in oil and gas as well on his blog. You can also reach out to one of your partners (like us!) to explore the topic further.