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Blockchain and Smart Cities

Thursday November 15, 2018, by Bhavya Suri

After a decade in which it was inextricably linked to bitcoin, the immutable distributed ledger technology called blockchain is starting to find substantial use cases in other sectors. Financial services firms are exploring uses for blockchain’s ability to serve as a tamper-proof record of transactions. Blockchain is also being applied in the supply chain/logistics and manufacturing sectors thanks to its ability to establish a rock-solid record of transactions and provenance. And we believe that blockchain can also enable the long-dreamed of vision of truly smart cities, which can make smarter, more efficient use of sustainable energy (typically solar power).

Most towns and cities rely on the traditional, large-scale power grid. But the self-sustaining city is possible thanks to the technology of the smaller, more local “micro-grid,” and blockchain can be an important component of this approach to distributed power generation and consumption. The idea is to create an ecosystem where people will be able to generate energy for themselves and distribute it other user who are in need of it and charge for it easily and automatically. This energy ecosystem is based on revenue-generating, not sharing.

It’s easy to install solar panels on tops of houses and commercial buildings and connect them to a distribution grid. Now it’s getting easier to create much smaller microgrids, and use private blockchains to monitor consumption. (These blockchains are private to make it easier to implement, but they are fully transparent in the sense that all participants can see their own consumption and where their extra energy goes – that’s one of the benefits of blockchain.)

When one member of the microgrid generates excess energy (over and above what that member consumes), that energy is automatically routed to another member of the microgrid who needs energy via a “smart contract” handled by blockchain. Essentially, the terms and parameters of a smart contract are set up (coded) in advance: “Whenever party A needs 10 kilowatts of electric power, party A is willing to pay up to this amount per kilowatt.” If the energy is available, it will be priced according to all the smart contracts on the system, and be consumed. The smart contract eliminates the need for any intermediary, directly matching buyer and seller in real-time. The blockchain network performs a real-time peer-to-peer transaction, debiting the buyer and crediting the seller, and recording the transaction for posterity.

Solar power is renewable, contributing to overall social/environmental welfare, but a blockchain approach could further reduce energy consumption through incentives. You could write smart contracts such that, in a multiunit building, apartment or office, the revenue generated by that building’s solar panels could be remitted in inverse proportion to energy consumed. Those who consume less get more – a great incentive – and the city gets more and more sustainable.

The interconnections between the smart grid can be extended beyond houses or offices to include individual devices on the power network. Sensors could alert the network to malfunctions or the need for service for, say, a furnace, a water heater, and manufacturing machine – then automatically schedule maintenance or repair, extracting payment when the device is operating normally again. No human intervention required (unless a technician must repair it in person).

You can imagine a scenario like a car changing station equipped with a smart contract so that it will only be charged (a) if needed and (b) when the cost to charge is below a threshold level.

These use cases are just the beginning. The possibilities are endless as blockchain systems get more familiar and applications to tap them get easier to use.

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