Solving climate change is the greatest challenge currently facing humanity. And it may also be the greatest financial opportunity of our generation.
I recently came to the conclusion that we can only rise to meet this challenge in time with blockchain. Why?
To begin with, traditional strategies are moving way too slowly and doing way too little. This is despite the focused efforts of every nation on earth (including some U.S. cities and states). Record temperatures and extreme weather continue to increase around the globe.
The commitments of the Paris Climate Accords aim to limit the increase in global temperature to 2 degrees Celsius - but unfortunately, even achieving this target temperature still means massive disruption to existing ecosystems. Climate models predict that many parts of New York City will be under water in 20 years.
So what does blockchain have to do with all this? Moreover, how do I know that I'm not just being seduced by the tantalizing bait of $18,000 Bitcoin as the next wave of super-sexy tech du jour?
As a venture capitalist focused on energy innovation, I have seen thousands of companies who could solve some part of the climate change puzzle. Some had genius, novel technology that promised new ways to generate or store energy. Some claimed that borrowing business models from other industries would all but guarantee success. None offered the paradigm shift embedded in blockchain--that a humble distributed ledger can encode the alignment of everyone who uses it.
The hackneyed aphorism of VC land is that the best startups are the ones able to uncover unresolved pain in the market. Their products are the "pain killer". If you have a solid team, and a large enough total addressable market, these are the companies to fund.
But what about the delivery mechanism? I have witnessed tons of amazing "pain killers" that failed because of challenges getting into the market. Traditional VC and innovation techniques are more difficult in this environment.
Because, for VC investments to be successful they require growth that scales exponentially. When Intermediaries control access to the customer that kind of growth doesn't happen. It's like building a barrier to the network effect--the phenomenon that leads to massive, rapid adoption.
There are massive opportunities though. Like the app store, electric utilities are platforms that can provide access to millions of customers. They are highly-regulated monopolies, so fundamental to the economy that almost everyone is a customer on their platform.
Try to think of any other entity besides government that can claim everyone as a customer. Bet you can't.
Except for a few forward looking utilities like Austin Energy, SMUD, Enel, Innogy and ComEd, "uploading" an app to the the utility app store is almost impossible. This is true even if you know all the right people, and you have a compelling value proposition.
Every type of technology is affected, including "plain-vanilla" solar panels. Electric utilities are gate-keepers to the grid, and to their end customers. They are cautious about new technology because of the potential for risk to the grid (and the business model).
The collective utility mantra - "nothing is as important as keeping the lights on". As a result we enjoy (especially in the developed world) near-perfect reliability. But, the side-effect is that progress towards energy transformation and a zero emission world is only sputtering forward.
In fact, data generated by the entire electricity supply chain remains fragmented. This fragmentation limits trust and understanding between utilities, their vendors and their customers. In economic terms it's an opaque market. In this system, limited performance data means limited competition for the best solutions.
It establishes a more transparent system where companies can prove their value. Blockchain allows both electricity providers and users to cross-correlate massive data streams. Doing so illuminates what "pain-killers" work right now, in real-time. If we have network-validated proof that a new technology works, we can then determine it's economic value to the owner, and to the system.
New solutions are judged, and priced openly, based on their proven performance. Every participant is now an active stakeholder aligned to growing the value of the entire ecosystem.
To build the blockchain protocol for a zero emission world. Our initial focus is to target innovation and performance of commercial real estate. That's because buildings are the source of 33% of global emissions. By linking the operational performance of the building to it's energy expenses, and proving the value in reducing them, we can unlock trillions of dollars globally.