Herstatt risk or settlement risk is the risk that a foreign exchange rate will change after a contract is locked in at a specified amount of a specified currency. Obviously this is a two-way risk, as if the exchange rate goes up, the buyer will pay more; and if the exchange rate goes down, the seller will receive less. The more volatile the currency and the longer the time until settlement, the greater the risk.
WePower is building a blockchain platform to allow renewable projects to get funding.
A smart contract that involves contracting a payment for services to be rendered or a product to be delivered involves three separate accounts: a purchaser, a seller, and an escrow account. Escrow is a means of creating trust in a contract where there is none. In an escrow situation, a third party holds something of value from the purchaser until a certain condition is met by the seller, at which time they deliver the thing of value to the purchaser.
A smart contract is a computer program that runs on blockchain. That means it runs on the distributed computers which choose to support blockchains. Smart contracts are arguably a subset of the more generalized term distributed applications, or dapps.
The entire blockchain concept is a solution to a computer science problem from the 1970s that was formalized in 1982 as the Byzantine Generals’ Problem. At heart, it’s a question of how a bunch of systems can collaborate with trust when malicious actors are trying to disrupt the system. Proof-of-work and proof-of-stake are different solutions on top of blockchain to that problem.
Blockchain is just an accounting system at heart. It keeps track of transactions, just like a list of purchases in a spreadsheet. And it makes those transactions available over the internet. It actually doesn’t add much in the way of new functionality. Pretty much anything you can do with blockchain you can do with a database and basic web technology. Non-functional features are where blockchain starts getting interesting.
Blockchain is probably most widely known to the public as “having something to do with cryptocurrency and Bitcoin, right?,” which is partially correct, but the technology itself has a wide range of applications, some of which will be crucial in the fields of distributed renewable energy, grid management and energy storage, and smart contracts, among others.
Although contributions to digitalization debates often address imminent risks, I would actually like to focus on the opportunities. It is notably the renewable energies which stand to profit from these opportunities — which I refer to as financial real asset investments. Just like the “Internet of Things,” the “Internet of Assets” combines the virtual and real worlds. It is the FinTechs (financial technologies) which are seizing upon the opportunity to disrupt the structures of the financial industry — which have been the status quo since the last industrial revolution of the 19th Century.
Network operators should get involved soon in blockchain technology. If they miss the digital revolution, it will threaten their business model in the longer term and they could end up becoming pure network asset owners without operational responsibilities, writes Marius Buchmann of Jacobs University.
Electrify is a Singapore-based energy retail marketplace co-founded by Julius Tan, who is also the blockchain startup’s CEO. Electrify will soon be making it possible for excess solar power to be traded using its peer-to-peer energy trading platform in the Kyushu region of Japan. Mr. Tan answered some questions about the startup’s work for CleanTechnica.
