Posted on

Thirsty California May Be Wary of Blockchain Water Rights

Blockchain water rights may upset California’s status quo.

Last week, Colorado lawmakers filed a bill exploring how blockchain technology could be applied to water rights management.

Now, California is also studying blockchain for use in water rights management, as reported by Cointelegraph. But coming off a severe drought, which saw water restrictions throughout the state, they are facing a far different set of circumstances than Colorado, as water rights in California have always been a highly political issue.

The film “Water & Power: A California Heist” examined how a handful of corporate landowners took advantage of a state-engineered system and gained control of its water, leaving local homeowners with dry wells. Hollywood also has examined the issue with a bit more drama in “Chinatown,” where the California’s water wars and dirty dealing was dealt with by Jack Nicholson and Faye Dunaway.

In a state where agricultural and corporate interests consume much of the available water while restaurants won’t serve a glass for free and residents’ lawns turn brown, blockchain adoption may be looked at warily by special interests and government, all with a vested interest in maintaining a veil over water usage while blaming the little guys for waste.  

Here’s a closer look at how the blockchain might be implemented in California to manage water.

IBM, The Freshwater Trust and SweetSense

In California, researcher the Pacific Institute has a nonprofit called The Freshwater Trust. It has already spearheaded a collaboration on water management with IBM and SweetSense. The project amounts to a blockchain-based system that implements Internet of Things (IoT) sensors across water pumps in a major river.

The state has been plagued by severe water shortages since 2006, and suffered drought in nine of these past thirteen years. That’s actually keeping within historical norms, as in the 20th century, the state had five periods of drought, with one lasting nine years and another eight years.

California receives most of its water from systems called atmospheric rivers. These storms drop most of the water the region receives on a yearly basis. On average, between 30 and 50 percent of annual precipitation in West Coast states happens in about three atmospheric rivers.

When too few happen, California is in a drought.

Scientists and engineers will use blockchain and IoT sensors to track groundwater usage in real-time across the Sacramento San Joaquin River Delta. Their aim is to manage the water supply and ease pressures on the water table.

Covering 1,100 square miles, the northern California delta is one of the largest aquifers considered by many to be at a high risk for ecological destruction. It sources water for the southern and coastal areas of the state and supports dozens of endangered species, including around 75 percent of all salmon found in California. Three quarters of the delta is further used for agriculture, and this is responsible for much of the high water demand.

“California is huge for American agriculture, but it’s heavily groundwater dependent,” said Alex Johnson, fund director for The Freshwater Trust, while speaking to Digital Trends. “There are some basins in the central valley that have been so depleted over the last couple decades that they are 20 feet lower in elevation.”

Aquifers in California have suffered from intensive farming and business use. The water table is not just being lowered, making water more scarce, but rain has not replenished the aquifers fast enough. One, or even two, rainy years are not enough; the ground is already sinking in a phenomenon called subsidence, the sudden sinking or gradual downward settling of the ground’s surface with little or no horizontal motion.

A market for water

IoT sensors track levels of groundwater pulled up from individual pumps before uploading data via satellite to IBM’s blockchain — with no need for internet connectivity — and then water credits can be granted according to usage. A credit grants its owner the right to extract a set amount of groundwater, but if their need is less, they can sell it as a digital asset.

Conversely, those in need of additional water credits are able to buy from others. This is great if, for example, a farmer chooses to rest their land for a season at the same time a winery realizes it needs extra groundwater during a particularly dry spell. A blockchain system coupled with AI could theoretically recognize opportunities for businesses to trade credits for water and notify administrators and businesses. There is no direct negative effect on the aquifer, if the additional water shares can be bought from the farmer.

Such an open market gives an incentive for businesses and farmers to manage their water use due to the fact that using less means they can sell their credits for a profit. Managing the water supply in this way could prove efficient in a region where already too much groundwater has been drawn.

Using blockchain brings transparency to the system because all records and subsequent amendments can be seen by anyone. Being able to observe the amount of groundwater used by various entities is vital: There is no incentive for an individual to regulate water usage if competitors pay no heed to regulations. If the pilot project is successful, blockchain will be set to play an instrumental role in helping prevent a state-wide ecological disaster looming large for California.

So, how can blockchain help more efficiently manage these artificial rivers and the water they bring?  

Beyond water rights database management, water markets and general administration, a blockchain system could make the management of water more efficient while interfacing with automation and AI. For instance, after numerous recent artificial rivers, less than 1 percent of the state is still considered in drought (one year ago, the United States Drought Monitor classified 48 percent of California as being in a drought). Surprisingly, this region is on the Oregon border.

Using trustworthy oracles, an AI-blockchain could theoretically identify changes in conditions ahead of time, suggest contingency plans, and find buyers (in the drought-stricken region) and sellers (in the regions with ample rainfall) for water before the atmospheric storms even arrive. A blockchain logistics system could be implemented as part of a blockchain-based water management system.

The Hyperledger blockchain

IBM, SweetSense and The Freshwater Trust will likely use the Hyperledger blockchain — which is hosted by the Linux Foundation, Ripple, Stellar and Ethereum — for any experiments pertaining to water management. Local and city governments could also partner with R3 on such a critical part of the infrastructure.

There are several reasons why state officials prefer to partner with a blockchain organization focused on enterprise. For instance, Hyperledger, R3 and Ripple have received money from investors and clients, and can afford research and discovery.

Blockchain water banks

Colorado’s Bill 184 says the Pacific Institute should look into water rights database management, the establishment of water “banks” or markets, and general administration with blockchain once it acquires funds.

The experiment is underway in California. And there, the improved management of approximately three to four atmospheric rivers per year is critical — from collection all the way to allocation.

“We will never capture it all, but we need to do a better job of capturing what we can,” Peter Gleick of the Pacific Institute told Fox News.  

“The challenge is: How do we capture more of that water to use it so we can use it during dry parts of the year? And cities in California have not historically done a good job of capturing what we call stormwater,” Mr Gleick added.

Posted on

California State Legislature Passes Bill to Establish Blockchain Working Group

California’s AB 2658, a bill that calls for the establishment of a working group on blockchain technology, has passed both houses of the state legislature and will now head to the governor for approval, according to public documents.

The bill would would define blockchain as “a mathematically secured, chronological, and decentralized ledger or database,” and requires the Secretary of the Government Operations Agency to form a blockchain working group on or before July 1, 2019.

Per the bill, the group should consist of participants from both technology and non-technology industries, as well as appointees with a background in law, and representatives of privacy and consumer organizations.

The group should also include the State Chief Information Officer, the Director of Finance, or their designees, one member of the Senate, and one member of the Assembly.

By no later than July 1, 2020, the group must submit their study to the Legislature “on the potential uses, risks, and benefits of the use of blockchain technology by state government and California-based businesses.”

The report should include recommendations for modifications to the definition of blockchain and for amendments to other code sections that may be impacted by the deployment of blockchain technology, in particular:

“(1) The uses of blockchain in state government and California-based businesses; (2) The risks, including privacy risks, associated with the use of blockchain by state government and California-based businesses; (3) The benefits associated with the use of blockchain by state government and California-based businesses; (4) The legal implications associated with the use of blockchain by state government and California-based businesses […]”

Some other states have already signed bills into law that form blockchain working groups. In June, Connecticut governor Dannel Malloy signed SB 443 into law, which establishes a blockchain working group to study the technology and is also tasked with shaping a plan to “[foster] the expansion of the blockchain industry in the state.”

In May, the New York state legislature progressed a similar bill to create a blockchain task force. If created, the New York task force would prepare a report for the governor, the temporary president of the state senate, and the speaker of the assembly by December 2019.

Posted on

California Legislature Finalizes Blockchain Working Group Bill

California may soon be forming a working group to examine the potential benefits of blockchain to the state – and how best to update laws to make use of the technology.

California bill 2658, first introduced in February 2018, originally recognized “a record that is secured through blockchain technology is an electronic record,” as previously reported. However, the final version as of Monday now directs the Secretary of the Government Operations Agency to create a blockchain working group to study the technology instead.

It also adds that “for the purpose of this chapter, ‘blockchain’ means a mathematically secured, chronological, and decentralized ledger or database,” though this definition is temporary and will expire by January 2022.

The working group, whose chairperson will be designated no later than July 1, 2019, will include members from within the technology industry, as well as representatives from related fields. Stakeholders will be able to provide input to the group, which will then be responsible for recommending changes for the state legislature.

According to the bill, the group will specifically examine how blockchain can be used by the government and local businesses, what risks might come from using blockchain, how blockchain can benefit businesses and the government, how blockchain use can fit into California law and “the best practices for enabling blockchain technology to benefit the State of California, California-based businesses and California residents.”

The group has until July 1, 2020 to draft its report, which “shall include recommendations for modifications to the definition of blockchain … and recommendations for amendments to other code sections that may be impacted by the deployment of blockchain.”

Public records show that both the state Senate and the General Assembly have passed the bill after third readings as of Monday, meaning it should now go to Governor Jerry Brown, who has 30 days to allow the bill to become law or veto it.

Public records show that both the state senate and general assembly passed the bill with an overwhelming majority, likely protecting it against any potential veto.

California flag image via Jeffrey M. Frank / Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

California Police Arrest Teenage ‘SIM Swapper’ Who Allegedly Stole Crypto From Cell Phones

Police in California have arrested an alleged hacker who stole Bitcoin (BTC) totalling more than $1 million by hijacking cellphones, investigative cybercrime blog Krebs on Security reported Wednesday, August 22.

Citing a police report, the publication reveals Xzavyer Narvaez, 19, used “SIM swapping,” a technique also known as a “port out scam,” to reportedly steal cryptocurrency from victims’ devices. Over a period of several years, Narvaez and another suspect already under arrest used the funds to buy items such as luxury sports cars.

From March to June 2018 alone, Narvaez’s account on cryptocurrency exchange Bittrex processed 157 BTC (around $1,009,000). The police report also confirms that crypto payment processor BitPay was used in Narvaez’s purchase of a 2018 McLaren from a car dealership in Southern California.

According to the report reproduced by Krebs On Security, Narvaez had used the same device to commit the crimes multiple times, which the publication summarizes “ultimately gave him away,” as “approximately 28 SIM swaps were conducted using the same employee ID number over an approximately two-week time period in November 2017.”

Further investigations by Vice revealed that the SIM swapping underworld regarded the 19-year-old as “one of the best SIM swappers out there.”

Nonetheless, Narvaez was unsubtle about his reportedly illegitimate cryptocurrency gains, posting photographs of cars he purchased on Instagram, Vice reports.

Earlier in August, a U.S. investor filed a $224 million lawsuit against telecoms giant AT&T over alleged negligence, claiming that $24 million in cryptocurrency was stolen via a “digital identity theft” of his cell phone account.

The episodes come as attitudes among U.S. law enforcement have become more nuanced regarding the use of cryptocurrency by malicious parties.

In an interview with Bloomberg earlier this month, Lilia Infante, an agent working on the Cyber Investigative Task Force at the U.S. Drug Enforcement Administration (DEA), said she hoped cryptocurrencies remained in favor in criminal circles, noting:

“The blockchain actually gives us a lot of tools to be able to identify people. I actually want them to keep using [cryptocurrencies].’’

The police report notes that the investigators had used the Bitcoin blockchain in order to “trace the flow of the bitcoins used to purchase the McLaren back to an address attributed to the cryptocurrency exchanger Bittrex,” also noting that “BitPay provided records that identified the Bitcoin transactions in which the vehicles were purchased.”

At the same time, the DEA reported the percentage of crimes involving Bitcoin had dropped dramatically since 2013.

Posted on

California Is Open to Allowing Crypto Political Donations

Candidates for public office in California may soon be able to accept cryptocurrencies as donations.

The California Fair Political Practices Commission met on Thursday to discuss a number of election issues facing the Golden State, including whether candidates for public office can accept cryptocurrencies as part of campaign donations.

Ultimately, the commissioners didn’t make a decision to adopt any of the proposed amendments during the hearing, acknowledging that they don’t understand the issue fully. Back in 2014, the Federal Election Commission ruled that federal election law allows for candidates to accept cryptocurrencies like bitcoin as an in-kind donation.

During the hearing on Thursday, chairwoman Alice Germond indicated that a set definition for a “cryptocurrency” is needed, remarking:

“I would be inclined to think that bitcoin is a thing that is not U.S. money but is more like a currency, like the euro. But I would like to hear more to develop my thinking on this.”

More time to study

A public comment from Nicolas Heidorn – policy and legal director of the nonpartisan political advocacy organization California Common Cause – suggested allowing cryptocurrency donations until the commission has further studied the matter. In the end, the commissioners disagreed with the idea.

Commissioner Allison Hayward, in particular, pushed back against the idea of banning cryptocurrencies as donations outright, saying that she would like to gather more information before making a decision.

“I think cryptocurrencies are obviously new and designed to be confidential but the blockchain technology I think might ultimately be a very robust tool in tracing activity,” Hayward said, adding:

“I don’t think we’re there yet, but I would hate for something we do to forestall that later on. I don’t know what that would be but … blockchain might be a very useful tool for us and I’d hate to prevent that.”

Commissioners Brian Hatch and Frank Cardenas both said they disagreed with the concept of an outright ban, but in the case of Hatch, the issue of fraud remains a paramount one. He raised the prospect of a candidate claiming a crypto-donation that came from within the state, when, in reality, it actually had a different point of origin.

The commissioners came to a brief agreement that a cap of roughly $100 per donation may be appropriate for this year’s midterm elections. The commission would then be able to continue studying the matter in 2019, when there wouldn’t be an immediate election to consider.

However, this suggestion was not formally adopted during Thursday’s meeting. The commission will meet again next month to discuss the issue.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Reality Shares Will Join Increasingly Crowded Bitcoin Hedge Fund Arena, Says Source

California-based asset manager Reality Shares has become the latest competitor in the Bitcoin hedge fund space, an anonymous source told Business Insider August 15.

Reality Shares, which became known in the cryptocurrency space this year after launching the first Chinese blockchain ETF in June, has reportedly already attracted $25 million for the fund.

Capped at $100 million, the multi-strategy fund would “be a mix of arbitrage, venture, and directional strategies,” the unnamed person “familiar with the firm’s plan” told the publication.

The 2018 bear market in cryptocurrencies has made life difficult for hedge fund operators, which number over 360 as of August.

As Cointelegraph reported previously, industry commentators have raised concerns that continued market suppression would lead to the closure of over 10 percent of said hedge funds by next year.

“People are able to leverage good returns last year to try to raise money this year, but this year is going to be different,” fund investor Rick Marini told Bloomberg about the downturn in April.

Venture capitalist Spencer Bogart meanwhile told CNBC in late June that hedge fund activity could in fact “artificially” lower Bitcoin prices.

Should Reality Shares raise the full $100 million amount, its fund would rival the only 28 that have passed the figure.

Posted on

China's Crypto Millionaires Are Using Bitcoin to Buy Real Estate Abroad

The chives growing in one crypto tycoon’s California mansion carry a hidden message.

Guo Hongcai, a beef salesman turned early bitcoin adopter from China’s Shanxi province, is one of many freshly minted millionaires funneling parts of their wealth out of the country by purchasing real estate abroad.

In April, Hongcai sold 500 bitcoin in the U.S. then used that money to buy a 100,000-square-foot mansion in Los Gatos, a 90-minute drive from San Francisco, California. His Rolls-Royce, also purchased with the fruits of bitcoin arbitrage, sits in the driveway close to a small chives garden.

“It’s very normal to sell bitcoin in the U.S. After selling bitcoin, you can just buy anything you want,” he told CoinDesk.

Guo calls this secondary residence his “Mansion of Chives,” because the vegetable is also Chinese slang for crypto investors who prove vulnerable to big sell-offs.

As Chinese regulators clamp down on industry business on the mainland, crypto millionaires are turning to foreign real estate markets to diversify their holdings. Some purchase property directly with crypto, others like Hongcai use bitcoin to gain foreign currencies without going through a bank.

The founders of one U.S. crypto real estate startup, who spoke on condition of anonymity, told CoinDesk roughly one-third of their prospective users hail from Asia, figures which include Chinese investors seeking tokenized property rights through Hong Kong securities brokers.

According to the South China Morning Post, real estate purchased in Hong Kong doesn’t require the same taxes and documentation as other financial assets held abroad. Chinese investment in foreign real estate, often through Hong Kong brokers, has been rising for years. Now early bitcoin adopters are utilizing new wealth for familiar patterns.

“The requests we have from them start at $50,000 or $100,000 up to, the latest one was $3 to $4 million for Silicon Valley,” Natalia Karayaneva, CEO of Propy, another crypto-powered real estate marketplace, told CoinDesk.

She added:

“We’re seeing that more and more people are willing to buy properties with cryptocurrencies because it’s getting easier to get their money out of the country using bitcoin, rather than establishing a bank account based in Hong Kong and getting their money out of the country using business channels.”

Crypto hubs

According to Karayaneva, the U.S. and the U.K. are the most sought-after locations for real estate, especially fintech hubs like London or California’s Bay Area.

“They were mostly interested in residential properties next to good education, like Stanford,” she said. “Also, they want to diversify. They want to have parts of their assets abroad in more stable countries.”

So far, around half of the traffic to Propy’s website comes from China, out of 50,000 monthly views.

It’s a trend that has implications far beyond China, though, especially in California, where, according to statistics gathered over a decade by ATTOM Data Solutions, nearly a quarter of all single-family homes are now purchased in all-cash transactions without a mortgage.

According to CEO Roy Dekel at SetSchedule, a California-based startup helping licensed real estate agents connect with buyers and homeowners, it’s more common for Chinese bitcoin veterans to convert cryptocurrency into cash than to buy property directly with it.

“We have noticed a drop in Chinese interest, but certain cities like Los Angeles, San Francisco, and New York remain strong,” he told CoinDesk. “The ultra-wealthy Chinese have used this source as a diversification of investment.”

High rollers

On the other hand, Dekel also noticed “many blockchain enthusiasts” are buying second homes or investment properties, leading to an uptick in sellers interested in accepting cryptocurrencies directly from international buyers.

Since platforms like Propy are compliant across jurisdictions, the reason behind this trend may go beyond tax evasion, speaking to real pain points in legitimate markets.

In January, The New York Times asserted that China’s exorbitant housing market is “like a casino.” Further, Reuters reported property development restrictions continue to tighten, such as reduced subsidies for housing developers.

“In Beijing, only last year they saw a 40 percent rise in price,” Karayaneva said. “Historically, real estate investors from China are very active abroad because their own property market is going crazy.”

All things considered, Chinese buyers are hardly the only ones purchasing property with cryptocurrency. In 2017, Europeans used bitcoin to buy luxury apartments in Dubai’s Aston Crypto Plaza, a project spearheaded by British Baroness Michelle Mone.

Wherever it’s taking place, though, it has become increasingly clear that crypto wealth could have a real impact on global real estate patterns.

Door image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

LocalBitcoins Trader 'Bitcoin Maven' Sentenced to Year in Prison

A Los Angeles bitcoin trader was sentenced Monday to one year in federal prison after she admitted to operating an unlawful money transmission business.

Theresa Tetley, a former stockbroker and real estate investor based in California, was also fined $20,000 and will give up 40 bitcoins (an amount worth roughly $254,000), nearly $300,000 in cash and 25 assorted gold bars, according to a notice from the U.S. Department of Justice.

As CoinDesk previously reported, Tetley worked as a trader on the LocalBitcoins exchange platform under the name “Bitcoin Maven” between 2014 and 2017 and reportedly exchanged millions of dollars worth of crypto during that period.

The year-long sentence – plus one day – is less than the 30 months Tetley potentially faced as the sentencing process moved forward. It represents a win for Tetley, whose lawyers sought a one-year prison term.

Brian Klein, one of Tetley’s attorneys, called the result “a victory,” according to LA Times, as it is much shorter than the previous 30-month jail time.

“We are pleased the judge made such a dramatic departure,” Klein told the publication.

Tetley’s case is considered to be the first of its kind within California’s Central District, but other lawsuits in the past couple of years have taken aim at U.S.-based traders who used the LocalBitcoins platform.

In one case from 2017, a bitcoin trader and his father were charged with running an unlawful money services business, resulting in a nine-year sentence for Michael Lord.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Platform for Enterprise Blockchain Adoption Nets $45 Mln From A16ZCrypto, Binance

Blockchain cloud computing platform Oasis Labs announced July 9 that it has raised $45 mln from major investors as part of its plan to help companies adopt blockchain.

In a press release, Oasis, which has University of California professor Dawn Song as its CEO and co-founder, described its plans to build a “decentralized internet” by resolving businesses’ “concerns” about implementing the technology.

“Blockchains are poised to revolutionize much of the way we live, but many developers and organizations have understandable concerns about performance and privacy limitations that are currently hindering their ability to embrace the technology,” Song said.

Oasis’ investors, which include Andreessen Horowitz’s crypto venture fund a16zCrypto, cryptocurrency exchange Binance, Pantera Capital and Accel, nonetheless consider the status quo may not last as long as is feared.

“Today’s internet is experiencing significant growing pains when it comes to providing effective security and privacy protections, which is only compounded by the rise of data-intensive services like AI,” Accel partner Jake Flomenberg stated, adding:

“At the same time, however, the opportunity has never been greater to responsibly leverage data in the web’s next phase of products and innovation.”

Monday saw applications for Oasis’ private testnet go live, in a bid to deliver a production version with the input of developers.

Blockchain adoption has faced new criticism in recent months, specifically in the banking sector, with various sources skeptical as to whether its benefits are truly compatible.

Ripple, the company behind a multibillion-dollar blockchain platform focused on cross-border payments, admitted last month banks are “unlikely” to adopt the technology due to privacy and other concerns.