SMART WATER WATCH

Hashing out the future of blockchain for the water industry

Bitcoin’s underlying technology, blockchain, is lining up for its first use cases in the water industry. Is this the beginning of a chain reaction or a wave of investor folly?

With Bitcoin’s share price fluctuating, the underlying technology, blockchain, is traversing uncharted territory in the water sector. Exploring applications in water rights trading, water treatment contracts and data sharing to name a few, blockchain-based solution providers are branching out from cryptocurrencies and finding footholds in non-financial spaces.

Riggs Eckelberry, chief executive officer of OriginClear, explained how water utilities and industrial users are looking to digital technologies. “Blockchain doesn’t require a central party to own or control data,” he continued. “Once information is written in the database, there’s no way to delete it or change it.”

SHARING THE BURDEN

While cloud-based protocols rely on a central server to store data, blockchain relies on a distributed system of nodes. Network decentralization and distribution enhance cybersecurity as multiple copies of data exist across different servers; however, high energy requirements and system complexity create new challenges.

Centralised Decentralised Distributed

Centralised server

Server connected to central server

Individual Node

Source: GWI

50 / GWI SOURCE: Global Water Intelligence FEBRUARY 2018

CHIEF TECHNOLOGY OFFICER

Eckelberry indicated that with fiat currency, there is often a lengthy verification process. “Blockchain creates a zone where coins can move more rapidly, in much fewer steps. If we overlay smart currency, you can plug in smart contracts without any currency barriers.”

Blockchain use cases in the water industry remain sparse, with only a couple of technology companies making it off the starting blocks thus far. In Western Australia, after receiving an A$80,000 (US$60,400) federal government grant, Australian blockchain company Civic Ledger developed ‘Water Ledger’, a blockchain-enabled peer-to-peer trading platform that leverages smart contracts and a token management system to monitor water trading.

Katrina Donaghy, co-founder of Civic Ledger, explained that Australia’s water market is mature but “complicated and opaque,” creating the need for intermediaries, resulting in time delays and costly fees. The integration of blockchain with water trading cuts out middlemen to “streamline business processes, save money and reduce the potential for fraud”.

A guide to blockchain

  • Bitcoin: a type of cryptocurrency.
  • Block: a record of some or all of the most recent transactions that have not been previously recorded in prior blocks. New blocks are added to the end of the blockchain.
  • Cryptocurrency: a digital currency in which cryptography is used to regulate and verify the transfer of funds.
  • Fiat Currency: a currency which the government has declared to be legal tender but is not backed by a physical commodity.
  • Token: the digital identity of something which can be owned.

The project aims to develop a blockchain platform that will integrate distributed energy and water systems to create efficiencies in Fremantle, Western Australia. In the US, water rights traders face similar challenges to those experienced in Australia, but attention is shifting towards exploring blockchain’s integration. Christopher Peacock, chief executive officer and founder of AQUAOSO, noted challenges in water trading practices while leveraging blockchain to track water rights ownership.

Peacock highlighted potential blockchain implementations, stating, "I think that there is an appetite amongst multiple water utilities to share data and leverage the smart contract for that."

As applications explore humanitarian aspects, South African blockchain solutions provider Bankymoon launched a platform allowing donors to top-up selected African schools’ water meters. This opens the door for incorporating blockchain into smart meters.

The regulation landscape surrounding blockchain varies by country, affecting investor sentiment and confidence in frameworks. OriginClear plans to initiate an ICO for its WaterChain platform later this year, striving to operate under compliant regulatory structures.

While blockchain applications in the water sector are growing, significant questions remain regarding the security and economy of their deployment. With high energy demand and the potential for cyber attacks, water utilities must secure their systems against emerging threats.