Off the Chain Blockchain Use Cases for your City Block?
A look into the potential utility of blockchain technology for Smart Cities
Please excuse the poor wordplay in the title of this article, but I couldn’t resist and dumb humour is strangely fitting for a discussion of a technology space so dominated by, well, dumb humour. After all, blockchain is the technology that enabled a digital coin created as a joke that pays homage to a Shiba Inu meme to skyrocket 14,000% from the beginning of 2021, peaking during a sketch comedy show’s episode featuring its most famous proponent. What some call magic internet money, cryptocurrencies and other blockchain uses such as Nonfungible Tokens (NFTs) have nevertheless dominated the news in recent months. Uses for blockchain range from fascinating to absurd, but under-discussed in the uproar are the rational and promising use cases for smart cities that can make urban life greener and more liveable.
What is blockchain?
A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. That way, an intermediary party such as a bank or utility is no longer necessary to provide trust and legitimacy for the transactions.
How can it be sustainable? Doesn’t bitcoin use more energy than Argentina? I won’t get into the energy usage of bitcoin and whether or not it is a socially productive use of energy here. That has been discussed enough elsewhere and as far as I can tell, has no easy answer. But forget bitcoin, we will now discuss how blockchain can reward the uptake of renewable energy in local communities.
One way blockchain is being used is to help the urban energy transition is by facilitating the trading of renewable energy. Prosumers can sell their excess energy directly to their peers, at a better price than utility tariffs would give. This decentralised payment model also saves both the buyer and seller transaction fees and lowers transmission costs as the energy stays close to where it was produced.
Short description of what P2P energy trading is from the BABLE’s Smart City Solutions database:
The goal of peer-to-peer (P2P) energy trading is to make renewable energy more accessible, while at the same time empowering consumers to make better use of their energy resources. It works by creating an online marketplace where prosumers who produce their own electricity through distributed energy resources (also called self-consumers) can trade electricity at an agreed-upon price with consumers.
P2P trading helps the grid by lowering reserve requirements, providing ancillary services, and reducing peak demand, while also saving citizens money on their electric bills. Trading power locally eliminates most transmission costs and allows prosumers to sell energy at a greater profit than if it were sold back to the grid, as is currently the standard. By limiting utility involvement in transactions, P2P models enable buyers to save costs and sellers to make a greater profit. They also empower customers to choose where their electricity is sourced from.
What are Smart Contracts?
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.
Renewable energy + blockchain?
Another potential use for blockchain to help renewable energy uptake is being explored by the team behind NRGcoin, a Smart Contract protocol and mechanism to boost the production of green energy. NRGcoins are a reward for distributed generations that are safe from policy changes, such as a decrease in government subsidies.
One NRGcoin is equal to 1kWh of green energy, regardless of the price paid in Euros. Prosumers receive NRGcoins for each kWh they produce and NRGcoin is a protocol and mechanism to boost the production of green energy. Consumers pay their consumption directly to a Smart Contract, not a utility. The Smart Contract then pays the DSO whatever it is owed and mints new NRGcoins, which are rewarded to the prosumer. Prosumers can use those coins to pay for their own energy bills or trade them on a local currency market in exchange for Euro.
NRGcoins are not rewarded for any energy that exceeds local demand, so that energy never needs to be transmitted up the grid. The Use Case and its benefits for governments, utilities and grid operators are outlined in more detail here.
The Case of Heerlens Heitje
A third intriguing use of a local blockchain-based reward to incentivise socially beneficial behaviour is the case of the Heerlens Heitje. The Dutch municipality of Heerlen, a former mining town with a declining population, created a digital currency on blockchain to promote and gamify community service. Users of the corresponding app can earn up to 1500 Heitje, each equivalent to one Euro, for public maintenance tasks such as weeding a public garden or painting a park bench. When the municipality approves the task as complete, the app user earns their reward in the digital coins, which can be spent at local shops and bars.
The encryption ensures the online transactions of the municipal delegated to Heerlen's citizens on the platform. The response has been very positive. The project was kicked-off by merely intrinsically motivated citizens, those who one would encounter doing voluntary work and so on. But after a while we noticed that also low-income households joined in to perform tasks, to earn a little extra.
— Harald Woulters, Digital Transition Expert for the WESH Urban Innovative Actions Programme
The city saves costs on public maintenance and increases citizen engagement, citizens can earn some spending money and participating entrepreneurs can stimulate their businesses. The program also received a tax exemption from the Dutch government, which was instrumental in its success.
What’s next?
Blockchain technology is fairly new, and its use cases for cities are for the most part still experimental. But the potential for decentralised systems that reward sustainable behaviour is huge, and very much still in its nascence as an industry. We have explored here how it can remove barriers to local renewable energy systems and help revive a former coal-mining town in decline.
How could blockchain innovation help your smart city?
