Bringing Transparency to a Precious Natural Resource – Water

Oh welcome to gossip about gossip. Powered by Hedera Hashgraph. And each episode will cut through the hype of blockchain promises and explore real world examples of organizations creating the next generation of decentralized applications, which will bring trust back to the internet for us all. Hello community and welcome to the latest episode of gossip about gossip. My name is Zenobia Gods chalk, and I am the SVP of communications here at swirl labs. I am joined by Katrina Donaghey, who is the CEO and co-founder of civic ledger. Hi, Katrina, how are you? Good morning. Good morning. Very well. Thank you. Good we really appreciate you joining us. So early in the morning from Brisbane. How are things over there? And tell us a little bit about civic ledger and what you all do. OK so now everything is fine here in Australia. It's yes, it is early at 6:30 in the morning here in Brisbane, but that's the case of being so far in the future. But no good. We've, we've, we've got a busy year ahead and I think a lot of the building that we've been doing for the last few years and I think is now hitting mainstream. So we're very excited about what happens the next 12 months. And so civic ledger works across a number of blockchain technologies. You develop projects and products for other folks. Tell us a little bit about your journey and how you discovered Hedera. Yeah so we've, we, we got out we founded our company a long time ago back in 2016. And I'm back then. It was very early, very early. We just had we were actually started working with Bitcoin blockchain back in 2016 before we moved over to Ethereum when that came out with smart contracts and things like that. But we started working in the natural capital space very early, so we were looking at publicly shared assets and obviously water was one of those areas that we looked at. But over the years the technology has matured, but it's also had its limitations and also the public are a lot more aware of blockchain technology. So I think there was a combination of externalities and technicalities, and I'd known Rob Allen for some many years because he and I were on the blockchain Australia board together and I was watching what he was doing. And also I'm a good friend of Katrina DAO from mako who I love very much, and I was watching what she was doing as well in terms of the technology because her and I were using the same tech and then I started watching what she was doing. And I reached out to her and I started asking some questions. And then I just reconnected with Rob and then we got to talk about adara from about September last year, and it started to make sense that our customers wanted to ensure that any technology we used was going to ensure that it would not do any, I guess, harm to the environment. And Hedera seemed to be a good fit for us. It does seem like the, the community in Australia is really leading the way in terms of thought leadership here. We, we spoke to Katrina at mako recently and also the folks at time. Liz, what do you think it is about Australia and I know some of the initiatives that both the private and public sectors there are pushing forward that makes you guys so innovative in this space. I'm not too sure if it's something about Australia. I do have to acknowledge that we founded like the community came together way back in 2013, 2014 and started working with the Australian government around taking the double, double GST off the BTC, the Bitcoin. So I shouldn't use acronyms, but so it's always been from the bottom up and a very strong community and we all got together and created meetups. We had the Ethereum meet up, we had the Bitcoin meetup, I did the women in blockchain meetups, but we founded the industry association, the Australian digital commerce association, and from there we've really leaned forward, dragged government with us, particularly around regulation, around cryptocurrency exchanges, having conversations with government. We sort of got an accidental roadmap in Australia for blockchain technology and now I guess coming up to just a month ago with the blockchain Australia week across Australia it's always been community driven and I don't think any of us have waited for permission. And I think that's the difference is that we got shut out of a lot of places, out of a lot of rooms. People just want to talk to us. But I think as a community we could see what each other were doing and we were very openly in sharing that with each other. Yeah, and I think that's an amazing part of this industry. As you've had some of those conversations, was there a tipping point where you decided, hey, we should make that move from Ethereum over to hedera? We learned we hear a lot of people say it's a cost. It's sort of an understanding that predictability and cost, there's certainly the environmental aspects. Was there anything in particular that stood out to you? Look, I think from our eye, we talk a lot as a development in terms of the team, because one of the challenges when you're building with new technology is, is that you need to be able to find documentation, you need to find a community. You need to be able to find people who are talking about the technology. So when you have a problem with you can't solve something, you're able to go to the community and say, hey, we've got this problem and the community will come back and say, we have solved it this way or point you in the right direction. So we've always had that problem because we were very early. So then obviously Ethereum got a lot better in terms of documentation, but we have we're always where technology agnostic, it's really about what was the problem we were solving. But obviously as we started to see the fees and prices go up, it became a problem for us and we had to start looking around. We use for smart contracts for our water markets. And for us to deploy one of our smart contracts. I think the. Last time we looked was going to cost about 2 and 1/2 1,000 Australian dollars just to deploy a contract. And I remember the early days. Yeah, I remember the early days. We could actually pass through 30,000 transactions. What did we do? We transferred about 50,000 transactions through Ethereum in less than 40 minutes for about $50,000 equivalent in bitcoins. And so there was just this various other things. And obviously also, yes, the transaction cost, when you're dealing with government or industry or your customers, you can't say to them, we don't know how much it's going to cost you. Right I've never met a client or a customer who's willing to just go with super flexible pricing where they have super flexible depending on what's going on with the gas transactions. So it's and then you've got a sort of like you do your whole economics and your Treasury and sort of say, well, OK, if we're going to say to Ethereum into the wallet so they can do their transactions, how much do we need to hold to do that? So it becomes a larger conversation and it's a commercial conversation. And also, as we're saying, to see the media getting more involved or asking more questions about, well, you know, you're burning the planet and this is not really good and your customers would hold that into their minds. So you've got to allay their fears by showing them that you're being responsive and responsible. And the team we did a lot of research, a lot of research looking really deeply into hedera, looking at all the pros and cons and all that sort of stuff. And because we don't take these decisions lightly, and then we sat down and we went, OK, let's, let's give it a go. And we have been working with a terrace with for six months now. Wonderful Yeah. When you're building something that's so foundational to your business, I would assume you have to do that research and look at it from all angles because to change. That is a big, big lift. Yeah, it is. And we as I said, we are technologies, so we still keep libraries and things like that. And explore. But we're quite happy with the tokenization service and we've got to go into a whole lot of tokenization now with redevelopment of water ledger, the consensus service. So and nodularis I'm getting used to nodularis now. So we're using that at the moment to. And so you mentioned water ledger. Tell tell us tell the audience a little bit about what you are doing there and what your aims are for that project. OK so water water is very complicated. Complex it's very complex regardless of where we go in the world. Water will instill a reaction, an emotional reaction, a political reaction. Water is very, very complex, but it doesn't need to be complicated. So in Australia, we are one of the most mature countries in the world. Well, one of the countries in the world that has the most mature water markets and we use water markets. So we can actually share water across multiple, multiple areas and agree on a price. So when you look at water, we will use water for agriculture, we use it for utilities, we use it for mining, we use it for industry, we use it for the environment. But in Australia, 70% of our water is used for agriculture. So we look at market places so we can better understand how much water we have and how much. What are we using, how much water we're sharing. But over time, this marketplace has not been efficient, has not been effective, and a lot of information is left out of the market, such as last traded price. So it's very difficult for farmers to know exactly how much to put their water in the market for and how much they should be buying their water for. So we have brokers, we have intermediaries, price. Yes so. So when you. Yeah it's like going to a crypto exchange. And when you go to a crypto exchange, you want to see the last. You want to see the exact value of Bitcoin or Ethereum or however you want to know. That's the right price. And you can see it on the same exchanges, all the same exchanges. The exchanges have got the same price. We can all agree not on water. Water is run by proprietary companies in terms of exchanges, and those exchanges are not required to provide data in real time. So the market gets very opaque and we get information asymmetry and we get big actors and little actors and all that sort of stuff. So it gets very complicated all over a megalitre of water. But water is really, really important because it underpins every economy on the planet. Every vertical on the planet has a water dependency. But the challenge is because we can't be clear on how much water we sent, we tend to exceed that sustainable yield. We extract more than that than we can, than we can. So our solution, water ledger, is a peer to peer marketplace for the trading of water rights or water allocations, and it actually puts the farmer at the center. So we built from the bottom up, not from the bottom down, from the bottom up, not from the bottom down, but we actually make the market compliant. So using things like the guardian or consensus and tokenization, we're able to tokenize water resource systems, we're able to create digital wallets and allocate water into those digital wallets. And when the water has actually been extracted, we're able to burn those tokens. So we're able to understand at any point in time how much water is in the system, how much water has been used and how much has been shared. So the five pieces of information that we're able to provide through the work we do is authority. So can we prove that the person has the authority to be in the market ownership of the underlying asset, which is very, very important? So do you have the right to that asset? And does everyone agree that you do because you can't trade water that you don't have? Right last traded price market liquidity. So the depth of the market, but also history and we actually bring all of that information into a platform. It's not sitting in different systems. We actually bring it together and that's very, very different. On how water is. Soda traded in Australia right now? Yeah, I mean I think for the average consumer they probably see there's one provider, they share their water bill with you and there's no visibility into the back end. But that's just for your very small personal consumption, I would imagine, how frustrating that is, if that is sort of the literally the lifeblood of your business and you're trying to, again, manage those costs and figure out what that is going to cost you and what you can afford and how much where it's coming from and have more control over that. Well, I guess the whole idea, too, is that water is very heavy, so it has to move. So there's a lot of energy involved with water. There is a water nexus, carbon economy. There's so many intersections with the concepts of nature. And so we're working with the nature, the nature markets. So the nature markets are now looking at how do we actually design some governance globally. So we can all agree on how market nature markets are to emerge. And we're working with our foundation on that. So it's all of a sudden because we started looking at water back in 20 2017 and I came from governments and there was a lot of stuff I did with water back in my old days. But it was fascinating because nobody wanted to talk about what we were doing was really quite strange because everyone was doing payments. Everyone wanted to be payments, payments, payments, payments when it came to blockchain technology. And then obviously supply chains became quite important. But when we started looking at water, people thought we were very strange. They didn't understand what we were doing, why we were looking at these things, but we had to sort of say, well, you know how a carbon market works. And everyone seems to understand that because there's always a pushback. They think that water shouldn't be a commodity and therefore it shouldn't be traded because water is a human right. And we agree that water is a human right. We need to protect it as a public good, but we also need to ensure it has an economic value, because we use water every day for economic good. But we need to ensure that we can account for it and we don't take more than we can or extract more than we can before it starts to harm the environment. Right so it can be a sustainable resource, right. One that we have. It has to be. Yeah, it has to be because we have to be able to give water back to the environment. The water the environment actually is an has an authority. It needs to be given water to sustain itself and also first nation people. So our first nation people here in Australia, our Aboriginal and Torres Strait Islander people need to have cultural connection to water. It is essential to their country, to their culture, to their being, to their identity. But they only have very because we separate land and water in Australia. So in the murray-darling basin they have less than 0.02% of water and that's not fair. That's not right. So we've got to make sure that our governance, how we design our marketplaces, can ensure that first nation right to cultural water is actually a right as well as economic water as well. So there are a lot a lot of different people, individuals, parties, I'm sure government organizations that are impacted by what you are doing. What has the feedback been from the various different participants in the water ecosystem? It's fascinating because water is so conservative. If you want to look at any industry across the planet, water is the worst. Which is strange because it is such an important part of our lives. But it is very analog. It is very data siloed. It is extremely conservative, very slow to move, not wanting to change, like doing things from an engineering perspective. And that's challenging when you're going up and going, hey, here we go. There's here's a new way of solving a problem. But what this is why blockchain technology is so, so important globally is that it enables us to look at socioeconomics or governance through a different lens where it's distributed, it's decentralized, it's from the bottom up, and it's peer to peer, and it's the only technology as we know. But what it does is it actually allows us to bring a second layer of governance into the solution where we actually put the person who has the pain points in the middle and we build from their perspective. So everything that we do is a first layer of government, which is all the institutional, institutional instruments that local legislation or those sort of things can be codified. But we bring a second layer of governance in. So everything is compliant by design. But it is interesting because in. Yeah you get a lot of no's, you get a lot of we don't like blockchain. It consumes so much energy. It's that crypto thing. But you go to the person that has the problem. And when you work with them and you talk not from a technical perspective but from a problem led perspective, get to understand and get to learn. Then you start to have a different conversation. You start to get traction, but you can't go to government and go, here's a blockchain, let's start working together. No, no, no, no. Because this stuff is very, very complicated, very complex. Yeah it sounds like you have to build some support and consensus among all of the different parties. It is because when you are very early, a lot of it was education. So we had to sit down and say, well, what is blockchain? What isn't it? And when do you use it and when do you don't? And why is it different to crypto? Why do we need still crypto in it? So we're aware the applications where the business cases where the different use cases but that was a very long time ago. Now we're in 2022 and we're just finishing the critical minerals project with ledger, which is the biggest blockchain pilot in this country. Last year the Australian government funded the $3 million project. It's a pilot looking at critical minerals. This is where we're using Hedera. So what we're doing with ledger is looking at the ethical or the sustainability of the extraction of rare Earth materials. So when we think about rare earth, it's there to fuel the fourth economy, which is supposed to be a low carbon, zero carbon economy. So we're talking about cobalt and nickel and all those rare earths that will feed electric vehicle batteries, electric vehicles and all that sort of stuff. So we're looking at how do we get the water accounting piece into the supply chain. So when that rare Earth mineral goes into the marketplace, manufacturers are able to see the provenance of where the rare Earth has come from and the ESG credentialing. And we're actually doing the water accounting piece. So we're looking at how do we account for water at the site, but also associated with the commodity and wrap that up into a digital credential and then it becomes discoverable in a supply chain. And that's really hard work. Really hard work. But we're using the Hedera Dara for that. And it's and it's really groundbreaking because we're working. Ever led to a blockchain company that use Hyperledger Fabric where a blockchain company that's using now Hedera and just using the different mechanisms of sharing data across from one protocol to another is really interesting. Well and it seems like mining is such a big industry in Australia and such a big part of the economy. So getting transparency there. And making sure that ESG goals are visible and accountable in that segment of the economy seems like a massive but certainly very worthwhile undertaking. It is. And it's interesting because you talked about government and the mining industry do want to show that they're being sustainable, that they are taking they are good stewardship of whether it be water or Earth or things like that. But it is challenging because the data is not connected up between government, the regulator, the mining and the manufacturing, all that sort of stuff. So this work that we're doing with our villagers trying to sort of create that joined up economy, data economy and are able to actually bind all of that associated with the assets. So it's really interesting. We're just about to finish that project. It's been. Nine months. I think of hard work. Because what we have to look for is we have to make sure we have to look for data consistency. So we looked at the Global Reporting Initiative to inform the threat, which is a standard in the 303, which is about water. And then we rolled that back into a framework and then we rolled that back into some data, data roles and data fields and things like that. So it's all about how does data move and how do we make meaningfulness of it? Amazing well, it seems like certainly a case of the days are long, but the years are short. Right it feels like you've probably been working on this for forever, but it's nice to hear that it's all coming to fruition. Yeah and we are, we're, we're actually taking more to life this year on Hedera. So we are rolling off critical minerals and rolling back on into water ledger and starting a project with in South East queensland, in South East Queensland. And we will be announcing that very shortly and our work in northern Australia is progressing quite well and we still have a strong interest in the US as well. So hopefully we'll be able to get over to the US very soon, later in the year to start to talk to potential customers as well. Very exciting. Katrina, is there anything else on the roadmap or otherwise that you'd like to share with our audience as we wrap up here? I think it's right now it's we've got a busy dance card. Busy dance card is really just now moving over into the address system, redeveloping water ledger and going live in September. So that's our goal. September is go live. And that's when we start onboarding customers into the platform. We're really looking forward to working closely with the Hydrow team between now and then and over the next 6 to 12 months, because it's even though when we deploy it, there is so much more work to do. And the work that we're doing with the nature markets, with our foundations, with our foundation, offers us an opportunity to really think globally and bring the work we're doing in Australia to a global audience. And it's very, very, it's nice. It's nice to finally be able to have these conversations. Right well, it's taken a long time, but we're finally here. Well, Katrina, I hope you will come back in September or whenever you are ready to talk about how that deployment is going and what your customers are doing. Thank you so much for joining us today. We are excited to follow your progress. This project is inspirational and we love to hear what you are doing. So thank you. Thank you so much.