Can Sustainability Be Tokenized?

By Thomas Wendling, PE

Almost everyone agrees that sustainability has something to do with scarce resources.

Most of our energy, labor and materials go into creating and running things that are collectively called infrastructure – the stuff that lets society thrive. There are big gaps in infrastructure finance, especially for aging infrastructure in power, transportation, water and communications.

Actuaries have invented a game that balances future capital versus operating costs of aging infrastructure. The game uses the law of large numbers (the insurance principle) on ordinary data common to all things. If played right, this game could recover trillions of dollars in resources, such as energy, labor and materials that will otherwise be wasted. You can play this game on a blockchain with a digital token to monetize the value of the game and to incentivize decentralized players (miners).

Once there is confidence in the game (to do what it promises), the token becomes a kind of equity in future energy and resource recoveries. It would have intrinsic worth connected to these future recoveries. There would be forward-looking fundamentals for valuation. Such a token could be a financing mechanism for today’s infrastructure needs that mines a totally untapped resource, and is grounded in little more than mathematical sustainability and game theory.

You might say that sustainability is about saving the planet, not about helping the next Silicon Valley startup strike it rich, and you would be right. But, incentivizing our best minds to apply their entire toolkit to mine future efficiencies (instead of Bitcoin) would be a miraculous step in the right direction, and could take us to a whole new level in the conversation about saving the planet.

Sources:

Integrated Engineering Blockchain Consortium

A Dual Use Case for Blockchain: Infrastructure Delivery Method and Stable Store of Value, CH2M – IEBC Joint Technical Memo, September 20, 2017.

Actuarial Portfolio Management of Infrastructure Service Contracts, Variance 8:2, 2015, pp. 161-180.

Reserving for Infrastructure Service Contracts, Variance, Articles in Press, July 17, 2017.