Blockchain in the oil industry: Applications, challenges, & Trends
It’s been more than a decade since blockchain technology was first introduced as a bitcoin cryptocurrency. Since then, it has taken over many markets due to unique features. Blockchain technology is a very secure system of recording information which uses a decentralized ledger to record all data. This data is free from any central authority, and no third party can interrupt. All these features have made blockchain a revolution in the technology world. But still, there are few markets this technology yet has to cover one such example is the oil industry. The oil industry is one of the world’s largest industries in which transactions over hundreds of billions are carried out. To cope with this industry’s rapid growth, many companies are gradually shifting toward digitization and intelligent work methods, and blockchain technology has been in the eyes of many big firms. It is because this technology has the potential to significantly improve the data security and management level of this industry. Let us understand in detail- If you are interested in Oil trading, you may consider knowing about the Beginner’s Guide To Oil Trading.
Uses of BlockChain in the Oil Industry
Transactions: The oil industry contributes most to the counties export and import. The transactions are done in hundreds of billions, primarily international, which is a very cumbersome task as it is subjected to human errors, heavy paperwork, and currency fluctuations; moreover, these transactions are constantly exposed to fraud. Blockchain technology can help overcome this problem by making transactions more transparent. Its system allows both sides to view all transactional records, which helps them evaluate much more quickly. Moreover, through blockchain making international payments is much more accessible than other methods as it is cost-effective and time-saving. It allows sellers to reduce the time and cost incurred in cross-border payments.
Data Storage: Data management in the oil industry is very daunting because of its complex nature and massive transactions. Companies cannot easily record and coordinate data among every stakeholder. Blockchain technology can make it less complicated by providing all information that stakeholders can manage. In addition, it helps to store data in a systematic manner eliminating manual reorganization.
Trading commodity: Crude oil is one of the most globally traded commodities in the world. This trading is tricky, and companies must use many systems to track records and store data. These are difficult to maintain and are exposed to data hacking or manipulation. Blockchain technology is one way to make this system more accessible and reliable. As blockchain uses a decentralized ledger to record transactions, these transactions are then directly available to all parties. Moreover, data stored in the blockchain ledger is safe and can’t be hacked.
Blockchain technology has provided various opportunities and has been a revolution for the industries, but still, there are some factors this technology has to cover. One such challenge is a risk. The current blockchain system is not perfect and exposed to various cyber, operational, and legal risks.
Cyber Risks: It refers to the risks exposed because of fraud due to lack of security. Blockchain technology is way more secure than other systems but is still not 100% secure. Therefore, there can always be a risk of system hacking.
Operational Risks: These refer to the risks raised by industry, technological or social problems. There can be data loss, technical errors, or poor management.
Legal Risks: Because of its anonymity, blockchain technology is often used in illegal transactions like drug use or tax evasion.
There is no doubt that blockchain technology has enormous potential and is good enough to bring a revolution to the oil and gas industry. Users can solve many problems by using this system. Even oil firms like BP and Shell have already started to deploy blockchain for some of their work. However, this technology is regularly improving and striving to find much better applications. There are some critical areas this system yet has to capture, but overall, the world has seen the excellent potential of this technology. The use of blockchain in the oil industry is still in the experimental stage, but it is safe to say this usage will surge in the future.