I am currently exploring the technological eligibility of Blockchain for implementing an asset recycling strategy in an urban / cities development and planning environment.
Introduction
Today, cities occupy 2.6% of the earth's surface, but are home to more than 50% of the world's population, generate more than 80% of the world's GDP and use 75% of the world's natural resources (according to WEF sources). The UN estimates that our global population will rise to 9.6 bn by 2050. The majority of this growth will occur in cities, with an estimated 66% of the global population living in urban areas by 2050. Hence, cities are evolving fast and are competing to be attractive for trade, industries and of course the population. If managed well, cities will be at the center for unprecedented economic growth and well being for all, but if managed in an uncoordinated manner, urban growth may drive social, economic and environmental decline.
The challenge
The changed demographic and engagement patterns are reshuffling important criteria for livable cities:
- Efficient transportation of people, goods and waste
- Reliable energy supply as important enable for digital businesses and eco systems
- High speed connectivity for instantaneous information provision and real / near time processing
- Efficient storage and affordable housing
- Efficient and seamless governance
- Confidence in (individual) data / information processing
A changed expectation of citizens regarding the provision of urban and infrastructure services requires thoughtful investment decisions into the respective assets - specially when high debt levels are limiting the spending options. It's increasingly important to understand how the asset utilization can be increased and the asset lifecycle can be optimized.
The idea
To combine the need for capital efficient investments into infrastructure services with an efficient asset utilization, an appropriate asset recycling strategy may set the frame to attract the private sector for valuable assets and pursue upcoming renewal measures. Adopting new business models and technology will allow a continuous improvement. Use blockchain technology to collect all relevant and evidencing asset information regarding
- Asset conditions (management)
- Operations / maintenance
- Utilization
- (...),
create a ledger of facts allowing the optimal point in time to act according to a determined asset recycling strategy - as conceptually proposed by the WEF report (2017) "Recycling our infrastructure for future generations".
Asset recycling strategy and mechanism (source: WEF)
Definition (of an asset recycling strategy): divesting existing assets to a private consortium and investing in a new infrastructure asset.
Aim (of an asset recycling strategy):
- Trust in communities along whole budget process (planning and execution)
- Increase capital efficiency (i.e. unlock "idle" capital) by
- Divesting government / public assets attractive to private investors - promotion as tradable asset for institutional sources
- Building new infrastructure without increasing debt levels / tax or reallocating funds from other much needed public services
- Efficiency gains (expressed as monetized financial benefits, i.e. attacking the bottom line) in existing infrastructure
- Create a long term view and strategic assessment of
- Capital value tied up in existing infrastructure on the public balance sheet
- Potential benefits to be obtained by monetizing these assets and directly reinvesting the capital proceeds to create additional or improve existing infrastructure
The suggested asset recycling mechanism holds an important number of elements eligible for an implementation on blockchain technology. Based on an appropriate IoT platform connecting all relevant infrastructure assets and collecting significant data an infrastructure blockchain may facilitate the underlying principles of this asset recycling mechanism (WEF report (2017) "Recycling our infrastructure for future generations" p.28 f.):
- Assessing and answering the needs for new infrastructure:
- Adopting a system-wide perspective on infrastructure planning and delivery
- Directing capital towards prioritized infrastructure
Examples for using blockchain
- Auditable and highly secure data framework (example: repux.io) to collect all relevant usage and user data of infrastructure assets to
- derive future needs depending on population and economic growth
- Improve reliability, resilience and quality of urban and infrastructure services
- ...
- Inclusion of population when prioritizing upcoming infrastructure investments by setting up voting via decentral organizations, specially when social value of an infrastructure asset needs to be evidenced over the economic value (example: ethereum)
- Use smart contracts to facilitate an enforcing service level set by public authorities, specially when private asset operations may have conflicting economic interests (example: ethereum)
- Attracting private investors with a crypto currency validation of assets targeting at social value to the society
- Make use of ICOs for the funding of innovative digital city services, e.g. based on sharing economy - better due diligence expected due to real infrastructure assets as underlying for the digital business
Conclusion
Cities need to come up with a solid masterplan to remain attractive in the competition for trade and economic hubs in their regions. Digitization is forcing even more urban developers to design city services to meet demanding citizens expectations. High public debt levels on the other side require innovative financial solutions to make infrastructure assets and urban services affordable for the society and meet environmental targets alike. An optimized asset management and recycling strategy as suggested by WEF implemented on blockchain technology might be a way forward worthwhile to be further analyzed that the feedback in this community is highly appreciated.