Could blockchain facilitate peer-to-peer water trading?

What’s happening? The US state of Colorado has turned to blockchain to help it manage its depleted water supplies. Recently passed legislation tasks the Colorado Water Institute, the University of Colorado and Colorado State University with finding ways to use blockchain and other technologies – such as remote sensors, satellite systems and forecasting – to improve monitoring, management and conservation of surface water and groundwater. Other goals include improving efficiency in recycling wastewater and improving the quality of data in water rights transactions. (Ledger Insights)

Why blockchain? Blockchain’s underlying cryptography and decentralisation offers a platform where water-related data can be uploaded for households, industry consumers, water managers and policymakers to view information equally on a secure network.

This equal access to information, as the World Economic Forum has pointed out, means greater clarity is offered about water quality and quantity, meaning better decisions can be made about managing it as a resource. The implementation of the technology is, in part, a response to water corruption which continues to persist with over $75bn worth of investments lost to it every year.

How could it work? Smart contracts provide the technological foundation to facilitate automated peer-to-peer trading. They represent digital contracts in which the terms of an agreement are written as computer code – enabling a transaction between two parties to be executed only when all programmed terms are fulfilled.

This approach is already being used in the energy sector. A rise in renewable energy assets has led to the adoption of tokenised energy in which residents can buy or sell excess energy on blockchain-powered platforms. Trading water, however, is surely a harder task?

Select companies have already built platforms aimed at peer-to-peer water trading. Civic Ledger has designed Water Ledger, offering a water market that provides a register of all trades. It’s not fully clear how water would be physically transported between households, however, suggesting a water intermediary would still be required to facilitate this.

Environmental standards – The application of smart contracts goes beyond trading by enforcing environmental or safety regulations. Deloitte and IBM have tapped blockchain for wastewater management to improve tracking of wastewater records and discharging pollutants. IoT sensors installed at the businesses in question check levels of pollutants including asbestos, mercury, lead and petrochemicals. This information is then sent to the blockchain platform for validation against the network’s requirements. If levels are approved in line with environmental standards, the IoT platform signals for the wastewater to be discharged.

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