The latest hearing of the U.S. Senate: Mining affects public electricity consumption, can blockchain solve the problem of power grid security?

Bianews reported that the U.S. Senate Energy and New Energy Committee held a hearing on August 21 local time on the energy efficiency of blockchain and similar technologies, as well as the cybersecurity possibilities of such technologies in the energy industry.

Robert Kahn, President of the National Research and Innovation Federation of the United States, Paul Skare, Chief Cybersecurity and Technology Group Leader of the Energy and Environment Directorate of the Pacific Northwest National Laboratory, Thomas Golden, Technology Innovation Project Manager of the Electric Power Research Institute, Claire Henly, Managing Director of the American Energy Web Foundation, and Arvind Narayanan, Associate Professor of Computer Science at Princeton University, attended the meeting and expressed their views.

The hearing heard and discussed the application of blockchain and related technologies, as well as the cybersecurity possibilities of using these technologies in the energy industry. It explored whether blockchain and related technologies would have a significant impact on energy infrastructure, and the cybersecurity advantages they could provide in ensuring the security of energy infrastructure.

The blockchain energy efficiency issue

At the hearing, senators proposed that new crypto mining pools would increase demand for local energy, put pressure on utility providers, and even damage the power grid. In addition, this could also lead to increased costs for suppliers' customers.

The panelists said that power utilities should discuss with the community at the beginning about providing electricity to these companies as a start to solving infrastructure problems. However, energy issues are still an important issue affecting the scale of blockchain applications such as Bitcoin.

Another lawmaker said that finding alternatives to PoW could be a way to solve the problem, noting that while they both require a lot of power, utilizing proof-of-work and proof-of-authority algorithms are more energy-efficient and could serve as viable alternatives for scaling blockchains without requiring large amounts of electricity.

However, some guests also said that the impact of mining on energy is mostly seen in media reports, and there are few quantitative studies on the impact of cryptocurrency mining. He believes that in order to understand the potential long-term impact of the cryptocurrency industry on the US power grid, it is necessary to understand the elasticity of demand for cryptocurrency.

Can blockchain solve power grid security issues?

As a key issue discussed at the hearing, blockchain security was a topic of discussion. Some guests at the hearing said that blockchain has the potential to address cybersecurity risks in energy systems and can be considered as one of the technical tools to address energy network security.

However, some guests also expressed the view that blockchain itself does not guarantee the security of any system, but is intended to provide a credible record of events recorded in digital form. Whether to gain user trust is not a technical issue, but a question of user's subjective choice and belief.

He said people should also seriously consider all other protective, secure means, but he noted that wherever people gain trust in digital objects, it will be based on the application of strong encryption, whether for authentication or hiding content.

The following is a transcript of the hearing highlights summarized by Bianews:

The mining industry’s demand for electricity puts severe pressure on local utilities

Lisa Murkowski

Senator, Chairman of the Senate Energy and Natural Resources Committee

The mining industry requires a lot of electricity, and miners flock to where electricity prices are the lowest. The demand for more electricity overnight can put a serious strain on local utilities and affect the power grid. How long will this new area need electricity to support? This may also lead to increased costs for suppliers' customers.

The high cost of cryptocurrency energy may lead ordinary people to question energy costs, such as: My family and I may not be the ones who benefit from blockchain and Bitcoin, but I wonder, will my interest rate pay for this infrastructure? The solution is to find alternatives to PoW. Now, some regions are beginning to respond. New York State recently authorized its municipal utility to charge cryptocurrency miners higher hydropower rates than other consumers. Quebec requires cryptocurrency miners to bid for electricity and quantify their community impact in the form of employment and investment.

Meanwhile, power companies see blockchain as a way to increase consumer engagement and grid efficiency through a secure energy trading platform. Puerto Rico is studying the concept, focusing on microgrids to rebuild in a more resilient way and using blockchain technology to trade electricity between companies operating microgrids.

The share of mining electricity is increasing

Blockchain shows great potential in the clean energy economy

Maria Cantwell

Democratic Senator, Ranking Member of the Senate Energy and Natural Resources Committee

Bitcoin is an important application of blockchain, and Bitcoin mining is an important issue for relevant government regulatory departments.

In the energy sector, blockchain enables peer-to-peer transactions, where electricity consumers can purchase energy directly from specific energy suppliers through blockchain applications.

But blockchain also brings other challenges to government energy agencies. Bitcoin mining is a popular phenomenon recently, and the proportion of electricity used for mining is increasing. The electricity consumption of a bitcoin exchange is equivalent to that of a Dutch household in a month. This is also a major issue facing government public utilities.

But blockchain also has other excellent applications. It can ensure the network security of existing energy and power systems and promote the development of clean energy companies. More and more clean energy companies are using blockchain applications.

Blockchain has shown great potential in the clean energy economy. The most basic function of blockchain is that every independent computer participates in the classified record management of digital transactions, solving the problem of power centralization and reducing the risk of data leakage.

Understanding the impact of the crypto industry on the electric grid requires understanding the demand elasticity of cryptocurrencies

Blockchain is one of the tools that must be developed to ensure the security of energy systems

Paul Skare

Lead Cybersecurity and Technology Team Leader, Energy and Environment Directorate, Pacific Northwest National Laboratory

While there has been extensive media coverage of the size of the growing cryptocurrency mining community and its impact on the U.S. electric grid, there has been little quantitative research on the impact of cryptocurrency mining.

All that’s known from news reports and anecdotal reports is that some utility companies came to investigate unexpected loads and found rows of computer racks mining cryptocurrency in residential and commercial spaces.

Understanding the elasticity of demand for cryptocurrencies is essential to understanding the potential long-term impact of the cryptocurrency industry on the U.S. electric grid.

The U.S. electric grid is rapidly transforming from large generating stations and passive energy loads to a more dynamic grid with increasing distributed energy generation resources and more active "smart" loads. As renewable energy increases on the grid and some older large generators retire, generator inertia—critical to the reliable operation of the AC power system—becomes strained.

Blockchain technology shows potential in protecting energy delivery systems (EDS) with transactional attributes. Improving the ability to identify, control and secure grid devices through blockchain technology can improve the security and reliability of real-time energy operations without increasing costs, delays, interoperability or scale issues.

Blockchain is well suited to facilitating more efficient and decentralized energy trading, but these characteristics also bring some potential challenges: For example, Bitcoin's failures are concentrated at the application layer, and when users lose the private keys required to sign transactions or data content, Bitcoin can be stolen or lost.

Another example is that if unnecessary data is stored in the blockchain, it is difficult to change. To change it, another method may be required - controlling or compromising 51% of the nodes to reach a consensus.

The challenge with big data management blockchain is that at some point, the blockchain may be overwhelmed by the amount of data stored. Therefore, it is important to ensure that the data is stored in an efficient format to minimize the overall amount of data stored in the blockchain.

There’s also endpoint security. No matter how secure the blockchain aspect of a solution is, the endpoints (the parts of the solution at either end of the blockchain technology) are just as susceptible to vulnerabilities as any other software.

Integrating blockchain technology into digital services, in parallel with “better securing” the grid, requires leveraging these fundamental science and technology tools of high performance computing, analytics, deep learning, and control theory to develop more resilient system designs for network, data, and grid control systems. These will enable systems to better defend against inevitable attacks and ultimately recover quickly.

DOE’s investments in basic science, applied technology, and public-private partnerships in grid cybersecurity are critical components of an effective, comprehensive National Cyber ​​Preparedness Strategy for the U.S. electric system and its related infrastructure.

Securing the electric grid is a long-term effort that requires a range of strategies and new technologies, and blockchain is just one of the tools that must be developed in the effort to achieve the goal of securing the energy system.

Power companies and communities should consider encrypting the supply of electricity to enterprises at the beginning

Bitcoin Energy Usage Will Prevent Bitcoin from Scaling

Thomas Golden

Technology Innovation Project Manager, Electric Power Research Institute

Energy interaction is defined as a technique for managing the generation, consumption, or flow of electricity within an electric power system using economic or market-based structures while taking into account a value to make grid reliability decisions. These decisions may resemble or be literally economic transactions.

Blockchain is seen as an enabler of energy transactions. While innovations in the blockchain space are rapidly expanding blockchain’s capabilities, issues remain regarding standards, scalability, energy usage, and potential return on investment associated with deploying blockchain-enabled technologies into distribution and transmission networks.

The challenge with any energy interaction system is that it must operate across different devices and through many levels of the grid: consumers, microgrids, feeders, distribution system operators, and transmission system operators to enable transactions.

These transactions will take place between customers and utilities, as well as any willing buyers and sellers (prosumers). Blockchain can potentially solve this challenge and provide a platform to handle what is described above.

Regardless of the type of device, if the market structure is standardized, the device only needs to be able to exchange price/energy data with the market using blockchain. In the energy sector, almost all attention has been focused on the ability of blockchain to support cross-mobility or mobility (for example, payment platforms for electric vehicle payments).

However, there are currently regulatory barriers that limit transactions to customers and their local utility companies, as well as issues with utilizing infrastructure regarding costs, return on investment and the capabilities of the equipment required.

As with traditional smart metering, differences in geography and topology will impact the design of the required communications network. This interactive metering approach may be feasible in central New York City, where broadband connectivity is ubiquitous, but may not be feasible in rural areas, which are often limited to power line carrier (PLC) or intermittent communications.

Electric utilities should discuss providing power to these companies with communities at the outset as a start to addressing infrastructure issues. But even strengthening the grid in some places won’t be enough. There is a concern that Bitcoin’s energy usage will prevent it from scaling.

PoS and PoA algorithms replace PoW and are more energy-efficient

Claire Henly

Executive Director of Energy Web Foundation

Blockchain has the potential to make energy markets more efficient and open. But there are still obstacles to overcome, and the United States needs to meet the challenges and establish the value of blockchain in the energy sector.

Early blockchains such as Bitcoin and Ethereum were energy intensive, but later in development there are much less energy intensive alternatives. It has become clear to the industry that energy consumption of Bitcoin and similar networks is a critical issue that needs to be addressed, which could prevent Bitcoin and others from scaling.

As Bitcoin becomes more popular, its energy use is also increasing. It is estimated that Bitcoin's global electricity consumption is growing by between 1 TWh and 32 TWh per year, with 1 TWh being the annual electricity consumption of about 90,000 American households and 32 TWh being the annual electricity consumption of Denmark. One Bitcoin transaction consumes as much electricity as the average American household consumes in a week.

And that’s just Bitcoin, there are hundreds of blockchain applications. Bitcoin’s changes may take longer, but the industry’s overall energy usage will drop as existing networks no longer support authentication, and new networks begin to use PoS and PoA. While PoS and PoA also require a lot of power, the algorithms are more energy-efficient in comparison and can serve as a viable alternative for scaling blockchains.

The Energy Web Foundation is running a certified test network for a blockchain that will go live in 2019. Europe is far ahead of the U.S. in terms of blockchain demonstrations and expertise. Without further R&D funding, the U.S. could fall behind as this technology rapidly develops.

Blockchain is one of the technologies to solve energy network security

Arvind Narayanan

Associate Professor of Computer Science, Princeton University

Cryptocurrency mining is a zero-sum game: the total revenue you can earn per unit of time mining a particular cryptocurrency is fixed. In the case of Bitcoin, it is approximately 12.5 Bitcoins every 10 minutes.

If market participants are reluctant about a platform being controlled by one company, blockchain-based marketplaces may be more attractive than centralized exchanges.

Blockchain enables consumers to trade electricity directly with each other in a “peer-to-peer” manner, for example, by buying and selling excess rooftop solar power. However, peer-to-peer trading still requires the cooperation of utility companies, who ultimately control the actual flow of electricity.

Smart contracts that control energy consumption and generation can be largely independent of blockchain technology. In addition, it is possible to combine energy trading with automated control of energy consumption.

But in practice, blockchain applications often fall short of their claimed benefits. It is difficult to develop new blockchains without some degree of centralized regulation, and technology developers inevitably have a significant ability to control the resulting platforms.

Blockchain has the potential to underpin all types of existing and new energy markets. Currently, many of these applications are speculative, and blockchain technology is just one way to enable them, with both potential benefits and drawbacks.

As for cybersecurity, blockchain has the potential to address cybersecurity risks in energy systems, and policymakers should consider it as one of several possible technological tools to address energy cybersecurity.

Blockchain is just a special way to implement digital objects

Not necessary to build trust

Robert Kahn

Former US Presidential Science and Technology Advisor, "Father of the Internet", Chairman of the National Research and Innovation Association of the United States

Cryptocurrency is the area where the concept of blockchain is most popular today. Blockchain itself does not guarantee the security of any system, but is intended to provide a trusted record of events recorded in digital form.

Ultimately in the digital world, the strongest protection is the cryptography used within it. As computers become more powerful, we may need to re-encrypt data that was once considered cryptographically strong enough.

Blockchain technology provides trust not because it uses strong cryptography, but because blockchain involves multiple distributed systems and different organizations, changes to any block or subset of blocks can be easily determined. This approach requires many systems, large amounts of data storage, and the ability to maintain those records for a reasonably long period of time.

This construction method of blockchain is not necessary to establish trust. Are there other equally effective ways to establish trust? This is not a technical question at all, or even a factual question, but a question of subjective belief.

Blockchain technology is just one particular way to implement digital objects, but people should also seriously consider all other protective and secure ways to trust that the energy system is safe and cannot be disrupted.

Regardless of how people gain trust in digital objects, it will be based on the application of strong encryption, whether for authentication or hiding content. It is not possible to apply a one-size-fits-all approach to all applications in the short term, and the decision focus should also be on the overall efficiency of the chosen approach.

Bianews Summary

The hearing held by the Senate Energy and Natural Resources Committee did not reach a definite conclusion, but basically affirmed the application potential of blockchain encryption technology in the field of energy network security, while pointing out the energy efficiency issues that cannot be ignored and need to be resolved.

Finally, Committee Chairman Murkowski noted that the hearing was educational for committee members and may also provide valuable reference for more people in need.