Ecocentricity Blog: A Boy, His Elephant and Blockchain

Every 1L (first year law student, for the uncorrupted of you) takes a Property class. Dem’s da rules. Knowing who in the heck owns a thing is fundamental to our legal system. Judges and juries need to know that before deciding whether a plaintiff or defendant should prevail in most legal disputes.

Ownership is a nuanced and complicated thing. To explain it, most law professors use the “bundle of sticks” analogy. It goes like this….

Consider my son’s stuffed elephant, Eli. J.R. owns Eli, but ownership entails a whole portfolio of legal rights (the bundle of sticks) with respect to the jolly elephant. J.R. can snuggle Eli and he can throw him down the stairs. He can share “Eli kisses” with Chantel and me or he can keep them all to himself. He can lend Eli interest-free to his sister so she can have a tea party with Eli and Raffi the giraffe (her animal of choice). And J.R. can offer Eli for sale on eBay, and I’d bet the “buy it now” price would be $1,000,000 based on how much he loves that elephant.

Every single thing that you can legally do with property is one stick in the bundle. You can give, loan, or sell an individual stick to other people, thereby giving them limited rights to the property. You can also give, loan, or sell the whole bundle of sticks, thereby giving them total ownership. At the root of it all, we need confidence in who actually owns each stick in the bundle in order to freely engage in commercial exchange and resolve any disputes that arise.

Often, that ownership is evidenced by possession. In the case of Eli, you can tell that he belongs to J.R. because my boy rarely puts him down. But how do you provide evidence of ownership for digital property rather than physical property? Well, that’s a bit tricky. For instance, suppose J.R. also had a hefty bitcoin balance to keep Eli company, and he agreed to loan me 1.25 bitcoin so I could short sell it on the market. How do I know that he legally owns the cryptocurrency he transfers to me? And how does he know I legally own the cryptocurrency I eventually transfer back to close the short position?

The answer is blockchain. I’m at risk of going WAY out of my depth here, but I know enough to say that blockchain is a digital technology that provides a record of transactions (i.e. a ledger) that can prove who has current legal title to cryptocurrency. Polite golf clap to the geniuses who developed it.

And a moderately vigorous and enthusiastic clap to the folks at Energy Web Foundation, Grid Singularity, and the Rocky Mountain Institute who are developing blockchain for electricity. Electrons are similar to cryptocurrencies in that people want them and we can’t see them. With blockchain, we can track who put various electrons on the grid, even though the electrons were then used by someone else. Basically, blockchain for electricity would give us the certainty in ownership we need to then have a free market for the exchange of electrons.

What’s the big deal, you ask? This technology could revolutionize how we power our world. Imagine this hypothetical in a world with free markets for grid-based electricity. I’ve got my electric vehicle at work and it has 100 miles of range left. I could comfortably get home with about 25 miles of charge and then plug it in and recharge overnight. I check an app on my smartphone and I see that the price for electricity where I am is surging right now, being bought at $0.20 per kWh. That extra 75 miles of range I don’t need is about 20 kWh of energy, so I plug the car in and sell those electrons to the grid. Someone buys those electrons and uses them, and I pocket $4. Cool, right?

Blockchain could help usher in this era of easy energy exchange, which will move the energy system one step closer to being distributed. The more distributed our energy system, the less reliant we will be on fossil-fuel energy generation. It’s early stages for sure, but I’d love to see all of us be able to buy and sell electrons. They’re a lot more useful than a bundle of sticks, that’s for sure.