Can blockchain help us to solve climate change?

We humans are a swarm. The increasing harmonization of our habits and behaviours has an enormous impact on the environment. How we shop, work, eat and sleep affects the kind of infrastructure we need in homes, cities and countries. Seemingly irrelevant personal habits, when multiplied thousands of times over, create significant and potent changes on our environment. As an infrastructure investor, to ignore the behaviour of the human swarm would be to the detriment of fund performance.

Swarm behaviour determines how one designs, creates, invests in and optimizes infrastructure to cater to the swarm. Emerging advanced technologies, such as blockchain, mean that swarm theory can now allow us to improve efficiency and ultimately the intelligence and responsiveness of the infrastructure itself.

Its application to reduce negative human impact on our planet is already an exciting and productive area of development. But it is the combined impact of swarm theory and emerging advanced technologies in infrastructure which could have staggering implications for our ability to mitigate the most critical risks facing our generation, risks such as resource scarcity, commodity volatility and climate change.

How do the simple actions of individuals add up to the complicated impact of a group? And what does this mean for infrastructure design and investment?

Consider the humble choice of whether to scrunch or fold. Yes, this is indeed an allusion to one’s private bathroom habits. A study by Kleenex discovered that Americans mostly “scrunch” and have significantly more cosseted behinds (think quilted, four-ply, scented paper). The British swarm (who mostly “fold” and tend to use the more austere two-ply paper) therefore use far less toilet paper by volume than their prolific American cousins. More toilet paper is flushed down per volume of human biological waste in the USA than in the UK.

This diverging set of bathroom quirks has implications when investing in water treatment infrastructure – namely in Anaerobic Digestion (AD) plants. AD plants use bacteria to digest effluent and sewage to produce methane that can be burned for electricity or injected into the grid. American toilet habits result in less efficient sewage AD plants as the composition of the material that the plants are processing (with higher toilet paper waste) is more difficult to break down. Therefore, similar capacity plants with similar capital outlay would result in dramatically different methane yields in the USA than those in the UK. Swarm behaviour, in this instance, influences investment and design decisions in sewage AD.

Nudging human behaviour can improve hive efficiency. Using the example above, it is possible to see that a public campaign on the benefits of the humble “fold” versus “scrunch” could improve hive efficiency, leading to increased productivity of the US water treatment sector. Technology can do the same and, in fact, is already in process for this example. The toilet paper dispenser company, Kimberly Clark, moved from standard, low-tech roll dispensers to less generous dispensers that do not freely roll. There are models that “catch” thereby creating a tear in the run length of the paper or “single serve” dispensers, both of which prevent you from taking the vast amounts of loo paper required to “scrunch”. In attempting to make the operation of public toilets more cost-effective, Kimberly Clark has unwittingly nudged the swarm to be more efficient and environmentally friendly.

But evolving swarm demand patterns, although arguably still predictable, are somewhat less controllable. Changing behavioural patterns of the human swarm are having unforeseen effects on hive efficiency.

Fifteen years ago, an episode of EastEnders, the hugely popular UK soap opera watched by around 7 million people, would prompt an increase in electricity use of about 660MW as people across the country turned on their kettles to make a cup of tea after the programme. Today, that figure is much lower at around 200MW. The key driver for this is the way British people are now watching television and consuming media. In 2015, time-shifted viewing (the recording of a show to watch later) accounted for 13% of the way British people watched television, up from about 6% in 2010.

The British swarm is no longer watching TV in sync and, increasingly, consumes media on portable devices, many of which charge through the night when electricity demand is lower. This decreasing synchronization of media is creating fewer and smaller electricity demand spikes. The electricity capacity required is not determined by the base load demand, but by these spikes. The current situation implies that we are collectively more efficient when we are simply not watching TV at the same time or using Netflix on our previously charged iPad.

If hives can be nudged into efficiency by external stimuli, how does harnessing the individual intelligence of each unit of the swarm affect what happens next? Biologists have shown that a single bee may be a little smart, but the hive possesses sublime intelligence. What if the human swarm could communicate – and nudge each other through information exchange and peer-to-peer contracts - to behave more efficiently and make infrastructure itself more intelligent and responsive?

Research into self-organizing systems has produced software that can manage complex operational problems in energy infrastructure. Air Liquide, for example, has a unique system in its US operations that improves its gas transportation efficiency. It uses a software system that is based on the foraging behaviour of Argentine ants, which use pheromones to communicate which foraging routes are the strongest.

Air Liquide produces industrial and medical gases, like nitrogen and hydrogen, at dozens of locations in the United States and delivers them to more than 6,000 sites, using pipelines, railcars and around 400 trucks. Working with an Artificial Intelligence firm, NuTech Solutions, Air Liquide created a programme that uses a similar “foraging” methodology to consider every permutation of truck routes, plant operations and weather patterns. This produces a report every morning that tells the truck drivers and plant operators the most profitable and efficient way to manage their day: millions of possible decisions and outcomes a day that takes their mighty computers more than four hours to run.

The system is counterintuitive – individuals feed the hive information, yet it produces “pheromone routes” that are more efficient than any single individual would choose for itself. Truck drivers who are used to individually maximizing and selecting the shortest physical route are instead directed to pick up shipments from the most profitable route instead, sometimes hundreds of miles away, ensuring that Air Liquide’s profit is significantly higher than it was before.

Such self-organizing systems have already had strong results, but it is with the emergence of blockchain that the potential of self-organizing systems moves to a whole new level.

Blockchain uses decentralized data storage to record digital peer-to-peer transactions. Rather than having a central administrator, like a traditional database (banks, governments, accountants), a blockchain has a network of replicated databases, synchronized via the internet and visible to anyone in the network.

In the energy sector, this could mean the diminished importance of third-party intermediaries. In April 2016, a trial run of a blockchain technology application for electricity in New York meant that electricity was being sold from one neighbour to another via a blockchain system for the first time. In theory, this makes each household an Independent Power Producer (IPP) – your solar panels could be making you money while you are on holiday. Smaller IPPs could, in theory, begin to bypass the large clearing utilities.

In the UK, the regulator (OFGEM) and the clearing system (Elexon) are holding back the potential swarm intelligence and efficiency, artificially imposing rules that give the big energy producers immense power over small IPPs. Deregulation, better organization and an improvement in physical infrastructure is required, but the potential of the swarm to revolutionize the grid is immense.

Empowered with blockchain technology, the swarm now has the potential to be so much more than the sum of its parts. The results for some of the most intractable problems of our generation can be truly transformational. For problems, like climate change, that know no national or human boundaries, the power of a swarm could finally be the key to drive collaboration and progress. Where politicians, regulators and capital have failed to deliver infrastructure solutions that are resource efficient, low cost or not beholden to vested interests, the swarm could deliver increased competition, decentralization of provision and mutualization of infrastructure ownership.

We are only just starting to imagine the immense benefits that the new power of the swarm can bring to businesses, economies, governments and individuals. Thanks to the power of the swarm and blockchain working together, we may now succeed in limiting the negative anthropogenic impact on the world’s environment. Change is finally coming quickly where years of negotiations behind closed doors have proved so slow.