Why blockchain enables the Zero Carbon Project and why it will transform business and society

I am often asked why the Zero Carbon Project needs the blockchain and why crypto-currencies are (or maybe were) rapidly trending higher, or ‘going to the moon’. Highly experienced and intelligent business people and investors tend to shake their head and say ‘I just don’t get it’ as they are used to valuing equity based on residual cashflows, risk, along with a premium for control and liquidity.

The essence of why Zero Carbon Project needs the blockchain is to create Energis utility tokens which capture the utility value that consumers can gain from using our zero carbon market, now and in the future. This utility value could include the utility value customers gain from lower energy prices and the utility value gained from contributing to tackling climate change.

In addition these Energis tokens can then be traded in a liquid global secondary market, 24 hours and 7 days a week. This marketplace ensure that any customers receiving higher utility value from the service can purchase tokens from customers receiving less utility value; matching customers from anywhere in the world at any time, at high speed and with very low transaction cost.

Blockchain can be transformative for business and society, not only in this way, but also in many other innovative applications and approaches depending on the token design and token economics.

For the Zero Carbon Project, the key innovation provided by Ethereum blockchain is the smart contract infrastructure required to design new innovative tokens and crypto-currencies. In addition, Ethereum’s underlying ERC-20 standards which underpins the global liquid secondary market infrastructure for the efficient trading of our Energis tokens. Also, the crypto-community are the ultimate early tech-adopters, who value innovative software solutions that can elegantly tackle difficult real-world problems.

Valuing utility tokens

Many utility token structures and economics, like our Energis token, are designed so that the token is required to pay for the service being provided. These utility tokens capture the utility value that a customer receives from service providers in a highly effective manner. So the total supply of tokens effectively holds the rights to the current and future use of a valuable service. Therefore, the total utility value of the service received by all its customers now and in the future is effectively captured in the total market capitalisation value of the tokens. This includes the utility value of the service received by a small current customer base today; in addition to the utility value received by a potentially much larger customer base in the future. This is matched by the revenues received by the service provider in a single year and revenues received during the future life of the service. Complicated demand and supply dynamics including ‘hodling’ makes the tokens difficult to value and their price highly volatile.

Burn or recycle spent tokens?

The second key design element for a utility token is what happens once it has been used by a customer to pay the service fee. Is the token burnt or is it recycled back into the token’s economy?

Burning the token received as fees for the service will reduce supply. This may create supply constraints if the demand grows by building the customer base. As tokens are divisible up to 18 decimal places, they won’t run out, but the price of the token will increase. The price of these tokens will be much more sensitive to demand, compared to if the tokens received by service providers are recycled back into the token economy.

The token can be recycled back into the token economy by the service provider treating them like revenues. Will the service provider accumulate the tokens and effectively restrict the supply to market? Will they be used to pay staff or service providers and how will they use them? Does the company convert them to ether, bitcoin or fiat by selling the tokens back into the community via a crypto-exchange?

Recycling Energis transaction fees to customers as rewards for zero carbon consumption

Zero Carbon Project recycles up to 70% of the Energis transaction fees back to their customer base as a reward for switching to zero carbon energy; and thereby contributing to climate change. Customers will very quickly come to value Energis tokens as they capture the potential future utility value delivered by our zero carbon market. Energy suppliers or customers will need to purchase these Energis tokens from owners, in order to pay our market’s transaction fees.

Separation of service charging from token settlement

Another design issue is how the service fee is calculated, or what currency the fee is referenced against. For example, Zero Carbon Project calculates their transaction fees based on how much zero carbon energy is consumed by the customer. So for example, transaction fees charged to energy suppliers for household consumers are calculated using 1c/kWh; or about $50 for a typically household consuming 5,000kWh/year. The fees are calculated in USD but the electricity supplier must settle the transaction fees using Energis tokens.

This separation of the fee calculation from settling with tokens is critical; so that token owners are unable to gain unfair monopoly control over the token supply, forcing purchasers to pay monopoly rents to use the service. For example, the higher the Energis token price, the less tokens are required to pay for the service charged using USD.

Energis token ownership by the customers for the customers

The Zero Carbon Project aims for a democratic broad distribution of Energis tokens to our customers who consume electricity and want to contribute to climate change. The Project is most likely to succeed in making a serious contribution to tackling climate change if customers can be attracted at scale for mass adoption of zero carbon energy. This is more like to happen if the tokens are owned by a broad distribution of energy consumers who benefit from cheaper energy costs and from the value of Energis tokens.

Conclusions

Customers who receive the highest utility value from our zero carbon market may be willing to pay the most for Energis tokens, which improves economic efficiency. Customers who receive less utility value from our service, or even no utility value, may still want to receive and own the Energis tokens, as they can sell them to customers elsewhere in the world, who pay more because they may receive higher utility value from our zero carbon market.

For us at the Zero Carbon Project, this is the essence of why Ethereum blockchain is transformative for business and society; and can help us tackle climate change.