Dan Nossa recently attended a conference at Rice University focused on blockchain technology. It was a first of its kind for the city and one of the things the attorney at Steptoe & Johnson PLLC’s Houston office noted was the significant turnout from energy companies.
“It was full of very senior folks from the biggest energy companies in Houston and the biggest tech firms in the world,” he told executives gathered for a recent Houston Business Journal forum. “You’d see the technology guys kind of cornering the energy executives trying to educate them, but I think also the energy executives have seen what's been going on on Wall Street and they want to, at least, experiment, see what they can do with it. But it has tremendous potential.”
Nossa has studied blockchain technology — the technology that undergirds bitcoin cryptocurrency — for the past two years and says he has become convinced that it has the potential to play a big role in the energy industry and beyond. And he says Houston could be a key place in that development.
Blockchain technology provides for a cryptographically secure, shared record of transactions, updated by a network of computers instead of a central authority. Every transaction within the system is secure, timestamped and linked with previous and subsequent transactions that can be seen by anyone with access to a given blockchain. The technology has the potential both to automate contracts and payments, but to more efficiently track the flow of commodities such as oil and natural gas.
Those factors make it, at the least, a technology energy executives need to watch. They also make the technology as it could be applied to the energy industry fertile ground for startup entrepreneurs to innovate.
“I think that it's an extremely powerful technology … and blockchain has come to Houston because at least half of the people who were at this conference (at Rice University) were from Houston, including startups that are looking to team up with energy companies to help them find blockchain solutions for the energy space,” Nossa says.
Financial institutions are wading into the world of blockchain technology. Such institutions have invested hundreds of millions of dollars over the past two years on proof-of-concept experiments in the space.
In one example this year, Nasdaq rolled out blockchain technology to trade guaranteed advertising contracts. Publishers, advertisers and media buyers will be able to buy and sell future advertising inventory on the exchange. And that wasn’t the first exchange for which Nasdaq is using blockchain technology; it uses the technology to power sales of shares in private companies as well.
Finance firms are also pouring money into tech startups focused on aspects of blockchain, according to a report from CB Insights, which tracks startup investment. Among the companies investing in blockchain startups: Wells Fargo, Goldman Sachs, American Express and JP Morgan.
Nossa says the finance world is about two years ahead of the energy sector when it comes to blockchain experimentation and adoption. That, he adds, isn’t a bad thing. “Let the Wall Street banks use all of their R&D money to test out the technology and if they’re happy with it, then all right. Now energy can maybe start looking at it,” he said at the Houston Business Journal gathering.
To learn more about blockchain technology’s impact on the energy sector, contact Daniel Nossa.
Steptoe & Johnson PLLC is a U.S. law firm with core strengths in energy, labor and employment, litigation and transactional law, serving clients from its 13 strategic locations across the nation. In 2013, Steptoe & Johnson celebrated 100 years of helping clients reach their goals.
Kent Bernhard is a free-lance writer for The Business Journals.