Web3 is the much-vaunted next iteration of the internet that promises a people-empowering, decentralized data approach spanning data exchange, data execution and data ownership. It’s brilliantly transformative on paper, but what might Web3 implementation actually look like in real life? A multidisciplinary team here at CC has answered that question by creating a concept platform technology that reveals how a digital service can be implemented successfully on Web3.
This significant technology investment by CC addresses not just the digital footprints of individuals – the indelible tracks formed by digital lifestyles – but also their carbon footprints. These days everyone wants to make informed decisions about how their energy, increasingly electric, is generated. So, we chose the management of green energy as our example digital service for the concept platform. It allows us to amply demonstrate how key strands of Web3 – namely tokenization, decentralisation and compute-to-data (exchanging data while maintaining privacy) – will be applied across every conceivable sector of commerce.
If you’re not yet up to speed and still asking ‘what is Web3?’ I’d recommend that you dip into two previous CC insight articles – one explaining why you should care, and the second exploring the benefits for the C-suite. Assuming you are au fait with the key components, let me walk you through our demonstration. Its aim is not just to showcase the various mechanisms of Web3 within a viable platform, but to inspire innovative approaches in the green energy sector.
Web3 explained: the concept platform
The concept platform is a stage for several key players, starting with the consumer. They possess various energy consuming devices, ranging from electric vehicles (EVs) to washing machines and entertainment devices. As these devices become increasingly connected, they provide a way of accessing and understanding energy consumption patterns. While enhancing consumer convenience, these additional digital trails could inadvertently expose private, valuable information, such as EV use or laundry habits. More on this key theme in a moment, when we discuss the compute-to-data property.
The consumer has a home automation system that collates household energy usage data and has a digital control panel that allows them to express their consumption preferences and enforce their data sovereignty. The second player is our energy producer, let’s call it Z-Power, capable of generating ‘black’ energy from CO2-emitting sources like gas or coal-fired power stations – but also sustainable ‘green’ energy from solar, wind and so on.
Finally, there’s our energy retailer, ‘Volt’, which provides energy matching and balancing services. Volt operates as a marketplace, similar to organisations managing smart meter access and energy retailers. We realise that the thinking we are about to share is quite progressive, and current regulatory frameworks and energy operations may not currently be flexible enough to accommodate it. But as we said, this initiative is about inspiring ambition and propelling change.
The power of Web3 tokenisation
Web3 tokenization is a powerful concept that can be employed in numerous ways to represent physical assets digitally, such as home ownership or tracking the origin of consumable materials. In our case, labelling of energy allows consumers to express a preference for the type of energy they want to use and gain trust that they are being supplied with the desired black or green energy variant.
Z-Power is responsible for creating an ERC-1155 token (associated with the Ethereum blockchain) for each individual watt-hour of energy produced. The token is minted on the blockchain, creating an immutable record of that unit of energy, which can be tracked from production to consumption.
An additional benefit is that when the energy token is consumed, or ‘burned’ in Web3 terms and removed from the blockchain, a carbon credit can be created and exchanged to support a carbon offsetting market. Utilising Web3 for this type of application carries significant advantages, as it prevents double accounting issues when tracking CO2 emissions.
Consumer control in a Web3 world
Users enforce their data rights with a digital wallet. It stores their private keys, granting access to digital assets and allowing interaction with decentralised apps (dApps). This a key component of Web3, and while it introduces another piece of technology that consumers need to get to grips with, it offers greater control and reduces the friction caused by having to remember user IDs and passwords.
By using the digital wallet to access their home automation systems, consumers can express their energy preferences. In a world undergoing an energy transition, it is accepted that we will need to use both non-sustainable and sustainable green energy sources. Consumers can dynamically set preferences, such as choosing to charge their EV with green energy. They can then observe how well Volt performs in matching their preference requests with the energy availability at that time.
Ideally, preferences are met. But during the transition period, green energy requests may occasionally be fulfilled with non-sustainable energy. This mechanism of understanding preferences versus the ability to supply helps us make informed decisions about moderating our energy demands, feeding into a progressive energy pricing approach to achieve sustainability goals.
In our concept platform, the transactions of energy consumption, energy matching and other aspects of the solution are implemented as smart contracts. These are code that executes on the blockchain, where the code itself is public and immutable. This ensures a transparent and secure transaction system. But it also means it’s really important to verify the accuracy of the code before submission, by a formal audit procedure, as it cannot be altered once deployed.
Compute-to-data on Web3 platforms
How does Volt know the consumer energy preferences, given that this is private data? The answer lies in an important and transformational property of Web3 called compute-to-data. Instead of consumers handing over data to the provider, Web3 mechanisms allow the algorithm to be sent to the data, executed, and only the result returned. In the services world, it is the outcome that is important, not the data itself.
We employed Ocean Protocol to implement the compute-to-data mechanism. But on its own, this was not sufficient, as most compute-to-data applications don’t involve privately held data. Our innovative solution entails the home automation system encrypting the data when it is created, storing it in the distributed storage solution of IPFS (InterPlanetary File System) and keeping the key to the encrypted data in the wallet. This approach offers the benefits of cloud data management without a single organisation controlling it.
Once the data is stored in IPFS, the original local version is destroyed. When a compute-to-data request is received, the data is retrieved from IPFS, decrypted, and the algorithm applied.
Some vulnerabilities in the overall system's trust still exist. While the data recorded in decentralised distributed ledgers is secure, actions at the edge – in our case within the home automation systems and Z-Power – could allow nefarious actors to interfere. Once a transaction or value is in the blockchain, it's recorded – but was the value or transaction correct? Despite this weakness, the overall improvement in trust remains valid.
Combining Web3 with green energy
The team at CC is rightly proud of the progress that the platform initiative represents. We’ve demonstrated how combining Web3 technology with green energy management can help balance energy consumption and CO2 emissions, while protecting individual data privacy in the energy market. Showing how compute-to-data can keep end user data private while preserving an immutable record is an important milestone.
It's important to highlight of course that our green energy platform is just an example – Web3 technology can be applied to a whole host of industries to provide tailored services and greater data privacy, leading to a world with lighter footprints in both data and CO2.
And before we close, a word on the sustainability of Web3 technology. The benefits of trust, immutability and tokenisation come with compute-intensive services, which in turn generate CO2 emissions. A parallel workstream at CC has been examining the overall carbon footprint of the Web3 system, and we will report our findings in a separate insights article. Midway through implementing the project, the highly ambitious Ethereum Merge project completed, shifting its consensus mechanism to Proof of Stake—reducing CO2 emissions by over 99%.
If you're interested in understanding how Web3 technology could be applied to your digital service plans or exploring new ways to track energy consumption, please feel free to contact us: Martin Cookson, Mark Hanlon and Toby Simpson.