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Water Trading with Blockchain, Sydney

Becoming water wise through blockchain technology

Water flows unevenly across Australia. While rain falls in Victoria, the state of New South Wales (NSW) is entering its harshest drought in decades. Water trading is a process devised by federal and state government to administer potentially unequal and unreliable access to water, but the system is imperfect. Not everyone agrees with how water rights are managed, and the sheer complexity of the marketplace makes it difficult to regulate.

Through funding from our research programme, Arup is exploring how blockchain technology can improve our water trading system, so it is fairer, as well as more reliable, transparent and efficient to manage. We are working with the NSW Government to build a proof of concept. 

How water trading works

At its simplest, water trading involves the voluntary exchange of water access rights between a buyer and a seller. One entity holds the license to collect a certain amount of water from a river, groundwater lake or reservoir. That entity can also sell some of its quota at a market-defined price. In practice however, the processes to operate such a market begin to introduce complexities. Transactions can be slow and hard to track, and within this complexity, opportunism and even corruption can slip in.

What is blockchain technology?

A blockchain is essentially a growing chain of digital records. Each record – or block – contains transaction data, a timestamp and a cryptographic hash of all the previous records on the chain. These records are delocalised, meaning they are copied and stored in many places at once. This makes the public records easy to look up and difficult to forge. The most obvious benefit that blockchain technology offers is transparency. But the technology can also make record keeping more consistent, streamlined and automated –  freeing up time and resources along the way.

We need to build technology solutions that distribute water equitably and transparently. This is in direct alignment with Sustainable Development Goal 6 which strongly indicates that it is imperative that the world achieves sustainable, equitable access to safe and affordable drinking water for all users. ” Daniel Lambert Daniel Lambert Former Australasia Water Leader

Can blockchain technology really help?

There is no use applying a technology like blockchain to a problem if it is unsuitable, or if a simpler solution would also work. That is why we are first focusing on the intricacies of the current system.

The team is mapping how trades are performed in NSW on a valley-by-valley basis and exploring the intricacies of water trading policy, inter-valley trade and interstate trade. They can then determine if blockchain technology can adequately address all the shortcomings while still ensuring the necessary policy pieces are fulfilled.

Over the past three years, Arup has run research projects to help utilities explore how technology can be used to build a better water sector. These projects have varied in approach – from surveying to storyboarding, such as The Future of Urban Water and Digital Tide.

I think this technology will move very rapidly once some prototypes are out there. We need to be driven by minimum-viable-product-type solutions. This is uncommon in the water sector. Usually we aim for over-perfection before we roll anything out. ” Daniel Lambert Daniel Lambert Former Australasia Water Leader

Wider impact

The data recorded from such a system would be invaluable for people who design water infrastructure, or whose livelihoods depend on predicting future flows. The system could bring the added benefit of improving general understanding of how and where the water flows.

With the effects of climate change on our ecosystems, our water cycle is becoming increasingly unpredictable. We need to work together to build resilience in the face of these challenges, but to do so we need a system we can trust.