Scientists have observed that the electricity sector contributes to 35 percent of the carbon emissions in the U.S. every year. And as climate news piles up, there is a growing movement among ordinary people to do something.

But historically, we’ve had a pretty one-sided relationship with energy. Our homes use energy from the grid, we pay our bill, and the cycle continues. Today, those who have rooftop solar have a slightly more reciprocal energy relationship. Excess energy produced by solar panels is sold back to the utility. Yet even this two-sided relationship is pretty dated and inefficient.

Enter: blockchain. With the application of blockchain, the energy our homes use may soon be much cleaner. And, we may soon have more control over how our homes consume energy to begin with.

Blockchain is a decentralized ledger technology. When applied to the energy sector, it will enable people to trade energy among themselves. Just as Venmo allows the exchange of money with its peer to peer platform, blockchain will enable a fundamental shift in the distribution of energy.

Here’s why this is big; this shift will stimulate more renewable energy projects as a whole, ultimately forwarding our transition from carbon-emitting electricity generation. Tokenizing renewable energy allows wind, solar and hydro producers to seamlessly connect with investors, who are willing to pay upfront for the right to consume renewable energy. As a distributed system, the middleman is removed.

One demonstration of what this distributed system might look like within a local community is the Brooklyn Microgrid Project. In this project, solar panels are installed on five buildings. All unused energy is sold to neighboring buildings. While all the buildings are still connected to the grid, transactions are managed and stored on a blockchain. Through smart meter technology and blockchain software, transactions are easily made from neighbor to neighbor. This project is proving out the concept that blockchain can create a local community market for renewable energy.

Blockchain also allows producers to raise capital by issuing their own energy tokens. Investors can either consume this energy, or resell it when it is closer to being produced. The end result is a multidimensional platform that has the potential to create a smarter, cleaner grid.

Inside our homes, the application of blockchain will accelerate the Internet of Things (IoT). Interconnectivity has been a roadblock in the smart technology category for a decade, and blockchain could be the key. By creating a more inclusive ecosystem of data, it’s possible for more high-quality data to be exchanged freely between devices.

This is a major step in moving from individual smart devices to fully connected, intelligent homes. Finally, we’re seeing the walls that inhibit access to useful data being shattered. The decentralization of data means better working, smarter homes that are more secure. It’s an important catalyst that will accelerate the adoption of smart devices—and ultimately help our homes become smarter and perhaps most importantly, more efficient.

Once fully connected homes are more pervasive, blockchain will play a role in helping people manage their energy smarter. We can’t force people to care about every kWh. But many people will opt-in for demand response, when incentives are aligned. Because of this, we’ll soon see more energy companies explore modern demand response options. Blockchain will help energy management to be routinely delivered as a service to customers, on an automated basis.

Whether it’s changing a thermostat set point or dimming lights, energy companies will be able to optimize for the needs of the grid through the smart technology in people’s homes. Because this will require a massive amount of small changes on a real-time basis — changes that have financial consequence for several parties — Blockchain will make the previously impossible, possible.

By providing these management and optimization services across tens of thousands of homes, energy companies will capture value from grid operators (who were previously using inefficient means of managing load, like spinning up a peaker plant), and pass that value on to energy users, without the customer having to lift a finger.

Blockchain makes a new energy sharing economy possible, one that facilitates an open exchange of power between homes, with all transactions recorded through a decentralized ledger. This will represent a fundamental change in the way we generate, use and distribute energy for the better. Its promise will empower all of us to determine the impact our homes have on our climate.

Lead image of networks. Credit: Pixabay.