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Blockchain and water: an added value for a universal right

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  • Blockchain and water: an added value for universal right

About the blog

Fernando Valero Flores
Head of Infraestructures, Construction and Real Estate Consulting.
Schneider Electric
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Themes

What is Blockchain? What can it be used for?

Blockchain is a technology that allows exchanging information and carrying out transactions between two or more participants using a computer code which is, at the same time, secure and irreversible. These exchanges do not require centralised intermediaries to identify and certify the information; instead, it is distributed across multiple independent participants in the blockchain network (nodes) who register and validate it, without them needing to trust one another. Each participant has an exact copy of the information, allowing transactions which are traceable and unforgeable.

The block chains work like accounting ledgers where each record is linked to the previous one. For a record to be registered in our database, a consensus is required among all the nodes. There are different mechanisms of consensus, but, ultimately, it is key to ensure network safety and trust.

Blockchain networks or distributed ledgers allow three key uses:

  • Trace and register: Since it works as a database known by all participants and which cannot be altered (the accounting ledger verified by all that we mentioned), it allows having an unaltered register of all transactions made.
  • Represent assets (economic or other): The information in the database is a representation of value in the blockchain, which can be equal to a certain amount of a specific asset, or it can fluctuate based on free market rules.
  • Execute logic rules: They allow programming smart contracts, which are automated execution systems of (certain) terms of a contract between two or more parties according to some predefined rules. Smart contracts allow automating processes, reducing intermediaries and red tape, and seek to operate according to a principle of neutrality.

Adding value to water services

Since the 19th century, water supply and sanitation systems comprise the most advanced civil infrastructure, adopting new technologies to a great degree.. However, this is just an ideal starting point to include new systems that add a layer of value to the service. Some applications can clearly make use of blockchain technology.

Firstly, the tokenisation of water rights is an application that seems to fit well with the use of block chains. Tokens, which can directly represent m3 of the resource, are negotiated in real time in a neutral context, while at the same time we comply with legal requirements, because the regulator is given a relevant role in determining the rules to execute associated smart contracts. In other words: blockchain allows a virtual representation of the right and its negotiation, fully according to the rules that administer that right, in a manner that is faster, transparent and efficient.

If we go one step ahead, there is direct payment for the use of the resource. Tokenisation not only of the used resource, but of the means of payment, allows collecting payments in real time for the exact use of the resource, more swiftly and efficiently. Existing monitoring systems, and even those that — following IoT trends — can gradually be included, facilitate this application.

Ultimately, the traceability of the resource and its uses is, as we know, a key element of water resource planning. With Blockchain we can certify transparently and safely the source of the water and the suitability of the use, whether it is valid according to planning specifications and, if applicable, its legitimacy in terms of authorised volume.

Hence, we see how Blockchain offers a broad range of possibilities to ensure the safety, transparency, efficiency and neutrality of water services, increasing the perceived value of the service.

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