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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.

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South Africa’s Standard Bank to Launch Permissioned Blockchain for Overseas Exchange Services

Standard Bank will launch its private permissioned blockchain for overseas exchange trades with the participation of its Ugandan partner.

South Africa’s Standard Bank will soon launch its private permissioned blockchain for overseas exchange trades on behalf of corporate clients, fintech news outlet FinExtra reports Thursday, Feb. 28.

The platform, which is set to go live in the second half of 2019, is based on the Hyperledger Fabric — a foundation for developing applications or solutions for enterprise with a modular architecture. The South African bank is also planning to connect its foreign currency trading app, Shyft, to the blockchain platform.

The blockchain-driven system is expected to speed up the processing of international trades, foreign exchange payments and settlement. In addition, Standard Bank hopes to increase the transparency of transactions, as all the documents will be available for all parties in real time.

Richard de Roos, head of foreign exchange for Standard Bank, says that the blockchain solution is likely to reduce the incidence of trade failure, while increasing regulatory transparency and improving the visibility of liquidity.

Initially, the solution will be used by Standard Bank and its partner in Uganda, Stanbic Bank, along with third parties directly involved in trades.

Moreover, as the South African bank also works with the Industrial and Commercial Bank (ICBC) of China, the permissioned blockchain can further be extended to that partnership. De Roos confirmed that the bank and 20 of its franchises are currently negotiating with ICBC to extend the hub into Asia, Finextra reports.

Earlier this year, a working group of South African financial regulatory organizations had released a consultation paper focusing on cryptocurrencies. In the paper, the country’s officials called for public input to develop a cryptocurrency regulation policy for South Africa.

More recently, Intel has launched a commercial blockchain package based on the Hyperledger Fabric and using Intel’s hardware, including Xeon processors and Ethernet Network Adaptors. The new product is designed for businesses that want to launch their own blockchain.

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Hyperledger Onboards 12 New Members Including Alibaba Cloud, Deutsche Telekom and Citi

Open source initiative Hyperledger has announced 12 new members including Alibaba Cloud, Citi and Deutsche Telekom, among others.

Hyperledger has onboarded 12 new members, including such major firms as Alibaba Cloud, Citi, and Deutsche Telekom, according to an announcement published on Dec. 11.

Launched in 2016, Hyperledger is an open source project created by the Linux Foundation and created to support the development of blockchain-based distributed ledgers.

The new members were announced at the Hyperledger Global Forum in Basel, Switzerland. The latest general members that joined the initiative include Alibaba Cloud, a subsidiary of the e-commerce giant; financial services firm Citigroup, Deutsche Telekom, one of the largest telecoms providers in Europe; and European blockchain trading platform we.trade, among others.

Hyperledger executive director Brian Behlendorf said that “the growing Hyperledger community  reflects the increasing importance of open source efforts to build enterprise blockchain technologies across industries and markets.” Beth Devin, Head of Innovation Network and Emerging Technology at Citi Ventures said:

“We believe blockchain has the potential to drive new forms of efficiency and develop new markets, and are pleased to join the Hyperledger project to advance our exploration.”

This month, the Hyperledger Technical Steering Committee approved the Ursa project, a modular cryptography software library. Ursa is meant to avoid wasted work on duplicate projects, enhancing security by simplifying analysis and making it “less likely for less experienced people to create their own less secure implementations.”

In October, the central bank of Germany, Deutsche Bundesbank, and securities marketplace organizer Deutsche Boerse (DB) successfully completed the trial of a blockchain solution in the settlements area. The transaction volume and speed of a production system were tested on the Hyperledger Fabric framework and Digital Asset, a distributed ledger (DLT) solution for the financial sector.

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Hyperledger Announces New ‘Cryptography Library’ for DLT Development

Hyperledger announced Ursa, a modular cryptography software library meant to ease the development and interoperability of blockchains.

The Hyperledger Technical Steering Committee has approved the Ursa project, a modular cryptography software library, according to an official announcement Dec. 4.

According to the statement, as Hyperledger has matured, projects “have started to find a need for sophisticated cryptographic implementations.” The post describes Ursa as a shift from having each project implementing its own protocols to collaborating on a shared library.

Ursa is meant to avoid wasted work on duplicate projects, enhancing security by simplifying analysis and making it “less likely for less experienced people to create their own less secure implementations.”

Furthermore, the project is supposed to grant “the ability to enforce expert review of all cryptographic code” and simplify cross-platform interoperability since multiple projects would use the same libraries.
Hyperledger states that with the new library “blockchain developers can choose and modify their cryptographic schemes with a simple configuration file.” Also, Ursa will purportedly have “implementations of newer, fancier cryptography.”

The library is divided into two, smaller libraries. The first contains simple, standardized, modular cryptographic algorithms and the second one “more exotic cryptography.” Advanced cryptographic algorithms like pairing-based signatures, SNARKs, aggregate signatures, and threshold signatures are cited as examples.

Software will be primarily written in Rust, but will have “interfaces in all of the different languages that are commonly used throughout Hyperledger.”

Hyperledger expects that Ursa will ease development since “it is easier for new projects to get off the ground if they have easy access to well-implemented, modular cryptographic abstractions.”

Hyperledger is increasingly popular for institutional and commercial use. As Cointelegraph previously reported, major Russian bank Sberbank recently concluded an over-the-counter OTC foreign exchange repurchase agreement by employing smart contracts on the Hyperledger Fabric Platform.

In November, French retail giant Carrefour deployed a food tracking platform based on Hyperledger in its Spanish network. The system will be used to track free-range chickens raised without antibiotics.

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Russia: Sberbank and Interros Group Conclude Blockchain-Based Foreign Exchange Repo Deal

Interros Group and Sberbank in partnership have carried out an OTC foreign exchange repo deal on blockchain.

Sberbank and Interros Group have carried out an over-the-counter OTC foreign exchange repurchase agreement (repo) transaction employing smart contracts on a blockchain, Reuters Russia reports Nov. 30.

The Interros Group is a Moscow-based private equity firm founded by Russian oligarch Vladimir Potanin in 1990, with stakes in Norilsk Nickel, pharmaceutical company Petrovax Pharm, and ski resort development firm Rosa Khutor.

Head of global markets department and vice president at Sberbank, Andrei Shemetov, informed Reuters that the transaction is real, legally binding, and has been “concluded in electronic format using a smart contract and digital signatures through the IT platform of Sberbank.”

The aforementioned article also mentions that while Shemetov “did not disclose the scope of the transaction,” he “indicated that the amount corresponded to the average volume of the interdealer repo transaction.”

Shemetov further explained that “the transaction is a currency repo secured by the pledge of Eurobonds of the Russian issuer of the first tier.” He also described how blockchain will improve the services offered by Sberbank:

“In the long term, the conclusion of transactions through the blockchain platform will reduce transaction costs and errors through automation, as well as increase transparency and trust among all participants in the financial market.”

Reuters reports that Shemetov cited “the creation of a software environment with the ability to audit data on a bilateral basis” and “automation of settlement and operational functions” as advantages of blockchain-based repo transactions.

The article further declares that the smart contracts used — which will be part of the “overall decentralized infrastructure of the financial market” — have been written in the Go programming language and have been deployed on the Hyperledger Fabric Platform. The system permits real-time monitoring of “covenants and other market conditions.”

As Cointelegraph recently reported, Sberbank CEO Herman Gref has predicted that blockchain will be used on an industrial scale in one to two years, after having said this October that blockchain technology will be “ready” in three to five years.

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US National Insurance Advisory AAIS Introduces IBM Blockchain-Based Reporting Tool

Privately held insurance advisory American Association of Insurance Services (AAIS) has introduced its blockchain-based insurance database and reporting tool, according to an announcement video posted August 15.

The platform, dubbed Insurance Data Link (openIDL), is based on IBM’s enterprise blockchain solution, using Hyperledger Fabric. The platform intends to reduce “burdensome” statistical reporting processes, as well as cut costs and data processing time for insurance carriers.

According to a report accompanying the announcement, openIDL is operating the “first secure, open blockchain platform that enables the efficient and permissioned-based collection of statistical data on behalf of insurance carriers, regulators and other participating contributors.”

The blockchain-powered insurance solution aims to provide “timely and accurate information,” as well as enable regulators to acquire “holistic and dynamic reporting.”

According to the AAIS’ announcement, the openIDL platform includes an automated data uploading system, smart contracts to enable automatic transactions’ execution, and access to insurance data on “permissioned basis in near-real time” instead of time-consuming data calls.

The openIDL solution is also reportedly targeting carriers and organization of “every size and configuration,” such as blockchain consortia, platforms and applications.

In April 2018, global insurance brokerage and risk management firm Marsh announced the first commercial blockchain solution for proof of insurance to move their system “from complicated and manual to streamlined and transparent.”

In late 2017, Cointelegraph reported that a group of fourteen European insurance providers partnered with Deloitte and other companies to provide a simple system for insurers to comply with the Hamon Law, with requires insurers provide simple transfers for clients who want to change companies during the first year.