How blockchain seeks to change energy and commodity markets

Nathan Thompson is the lead tech writer for major crypto exchange Bybit. This article is part of Crypto Insights, a column that dives into the latest and most pertinent issues in the crypto space.

Commodities and energy are being brought onto the blockchain to power financial innovation and to build a more sustainable low-carbon economy. Let’s take a look at three protocols that are pushing things forward and aiming to introduce changes in the commodity and energy sectors.

LandX

LandX is a new project that is creating on-chain perpetual crop futures backed by farmland. Simply put, it gives farmland owners an upfront payment in exchange for a percentage of their crop yield in perpetuity. It uses lien agreements as collateral, which is a legal structure that guarantees the right to be paid following a default.

Image credit: LandX

The project tokenizes the crop yield and represents it on-chain using a crypto asset that can be traded via automated market makers (AMMs) such as Uniswap, or 1inch. The tokens act like a perpetual commodity bond, and the yield is paid by real-world farmers.

LandX uses validators to sign up farmers and ensure that everything is legal. Farmers have to pay the first 12 months of yield upfront, and this allows the protocol to pay investors right away, using the collateralized stablecoin USDC.

Naturally, crop yields can be risky – everything from pests to wildfires can be a threat. But since LandX can sign up farmers all over the world, its yield flow has a certain robustness in the face of these dangers.

Energy Web Chain

Energy Web Token (EWT), the native currency of Energy Web Chain (EWC), had a nice little rally recently after getting a shout-out from US-based investment firm BlackRock in its statement about adding Bitcoin to its Aladdin portfolio management system.

BlackRock said it was “encouraged that organizations such as RMI and Energy Web are developing programs to bring greater transparency to sustainable energy usage in bitcoin mining, and will follow progress around those initiatives.”

Energy Web Foundation team / Photo credit: Energy Web

EWC is an open-source platform that connects energy grid operators with consumers and producers to promote a decarbonized and democratic energy supply. The top layer of the technology is permissionless, but EWC uses proof of authority (PoA) on a validator node level to achieve consensus on its blockchain.

In a PoA model, validators must meet specific criteria such as getting legally registered and being an official Energy Web member. This allows EWC to avoid using significant amounts of energy and provides a certain level of security for the large energy companies that the platform works with.

EWC already has a number of applications. For example, Project EDGE allows grid operators in Australia to request and buy excess solar electricity directly from households. Another project tokenizes renewable energy certificates to create a more transparent procurement process.

Klima DAO