Making the most of Blockchain in space

By Meagan Crawford | Issue #3(21) 2019
ROOM Space Journal

(Credit: Shutterstock)

This article was originally published in ROOM Space Journal, Issue #3(21) 2019.

It seems that every week there is a conference somewhere about solving the world’s problems. And none of them are complete without some avant-garde revolutionary touting the wonders of the ‘blockchain’ as the ultimate solution – from solving world hunger, to eliminating the need for banks, to solving the world’s environmental crisis. And now, we’re hearing about blockchain in space. But is it the ultimate solution? And what is a blockchain anyway?

What do you envision when you read the word ‘blockchain’? A stack of brightly coloured Lego bricks? Young ‘crypto millionaires’ partying on a boat in Miami? Or do you see a genius little piece of computer code (maybe ‘Matrix’-style, green zeros and ones on a computer screen)?

Blockchain’s most famous application is Bitcoin, the crypto currency that has taken the world by storm, creating overnight millionaires, and then un-creating them just as quickly. Other types of crypto currencies have followed, each with a slightly different take on the concept. But while the world has been focused on the volatility and excitement of currencies, the computer code that underlies digital money is being put to use for other purposes.

The fundamental principle that underlies crypto currencies is decentralisation. Currently, our monetary systems are highly centralised. Central banks set policy and interest rates, and print money. For a thousand years, since the early banking of the Knights Templar during the crusades, the secret to successful banking has been centralisation of capital and records within a large, well-organised, and sometimes corrupt, hierarchy. However, the decentralisation of blockchain allows crypto currencies to be managed by their users and there is no centralised point of failure.

Blockchain is just a type of computer code. It can be seen as a new way of interacting between computers. With blockchain code, computers are connected directly together in a truly decentralised web. There is no centralised server, there is no single point of failure. All members of the network support the network, and there is no single party that can control the network. This decentralisation allows for new ways of interacting, creating trust, and reaching consensus among the network.

In its simplest form, you can think of a blockchain as a shared, continually reconciled database. Another way to visualise it would be as a spreadsheet that everyone can see, access, add information to, and interact with. Now imagine that database is distributed on this decentralised, peer-to-peer network, meaning everyone always has a complete copy of the database and complete transparency into its content. Members of the network can add new information but cannot change any existing records.

These records are referred to as ‘blocks’. As new pieces of information, or new blocks, are added to the chain of blocks in the database, each member (or node) of the network receives a copy of that new block and verifies it, creating consensus. Because there are many, many nodes in the network (over 10,000 nodes in the Bitcoin network, for example), it becomes impossible to go back and change any previous blocks without hacking all the nodes in the system. The larger the network becomes, the harder it is to falsify or change the data within the blocks, because you would have to update every node in the system, as well as every block that comes after the one you tampered with.

Digital currencies

The most prolific use of this technology has been the creation of digital currencies, most famously Bitcoin. Because the blockchain provides security and transparency, no third party (such as a bank) is required to mediate financial transactions. Peer-to-peer transactions can happen instantly, online, with complete trust and transparency, and without the need for costly, time-consuming intermediaries. In addition, the blockchain can also be used to provide these same benefits to other types of transactions and dealings as well.

Blockchain technology has enabled a new way of doing business that can greatly reduce the time and costs associated with contracting and transactions. For example, smart contracts are digital agreements that are coded onto the blockchain so that the terms of the contract can be executed instantly and electronically. The code of the smart contract and the particulars of the terms are publicly available, even if the parties’ identities are private. For example, when a specific event occurs, such as a buyer’s confirmation of delivery of an asset, the code of the contract executes, delivering payment to the seller immediately.

This combination of transparency and low cost has the capability to radically transform supply chains in every industry. The world’s largest shipping and logistics companies are already investing in the implementation of this technology, and companies that manage their own high-value or high-throughput supply chains, from Walmart to fine art dealers, are beginning to implement blockchain-based solutions for the electronic tracking and transfer of goods around the world.

Off-world economies

Blockchain can also help revolutionise the off-world economy. The space industry could capture significant value through the use of these supply chain technologies. Recently, NASA released a report about an incidence of fraud in the manufacturing of a small aluminium part that cost US$700 million in lost satellites over two failed launches. It took the agency nearly 10 years to properly diagnose the problem, track its origin and discover the fraud. A blockchain-based supply chain tracking system potentially could have prevented this problem from ever occurring or, at the very least, could have helped the space agency easily track down the problem and the supplier once the first failure occurred.

Both NASA and the European Space Agency (ESA) are studying ways to employ blockchain for their missions, and several traditional space companies, such as Boeing, are instituting blockchain into existing infrastructures and supply chains.

This technology also presents a great opportunity for new businesses to create value. One example of a company using blockchain to benefit the space industry is Colorado-based start-up SpaceBridge Logistics. It is creating a decentralised marketplace for space services such as launch logistics, satellite servicing and on-orbit refuelling. Each satellite, grapple target, upgrade port and refuelling valve in space will be linked with a unique blockchain address and owner, allowing for more accurate and transparent transactions, mediated by extremely low-cost and efficient smart contracts and computer code – not dozens of lawyers, regulators, and banks.

“Tracking space assets on the blockchain will enable us to build an efficient, effective and robust market for in-space services,” said David Forman, co-founder of SpaceBridge Logistics. “Our platform will not only know which assets are where, it will also be able to validate who is authorised to service those assets, when and how that servicing is completed, and then issue payment instantly and transparently for those services. This new approach will save our market participants millions in contracting, legal, banking, and verification processes.”

Another space start-up using blockchain is German-based CloudEO which has created a marketplace for Earth observation data, software, infrastructure and related services. The company provides access to all types of geospatial data and tools from multiple sources as an efficient one-stop shop. It is using a blockchain-based cloud infrastructure, self-executing smart contracts and marketplace-specific cryptocurrency to further automate and simplify access to Earth observation data from around the world.

“Historically, it’s been difficult to access and purchase Earth observation data because of the long and difficult contracting processes, the large number of different data providers, and the lack of an effective marketplace,” said CloudEO founder and CEO Dr Manfred Krischke. “We’ve found that with the combination of our current cloud-based infrastructure and our new blockchain-based backbone for smart contracts, we will be able to provide much greater value. We’re effectively removing the main barriers to purchasing geospatial data using this combination of technology.”

It is likely that in the future, blockchain technology will also be used for governance, voting, intellectual property protection and a host of other applications. But the area where blockchain has the most disruptive potential is financing. And not just with the use of cryptocurrencies such as Bitcoin that reduce transaction costs and time, but through the digitisation of financial assets such as company stock. A recently introduced blockchain technology called ‘security tokens’, will allow the digitisation of ownership. This will facilitate easier transfer and trading of any asset such as collectables, real estate, or stock in a private company.

Essentially, we are taking something that is traditionally done on paper (stock certificate) and putting an ‘electronic wrapper’ around it. A good comparison is the difference between email and ‘snail mail’: you can write a letter, mail it and wait a few days, or you can send an email instantly. The content is identical but the electronic wrapper means that the same information can now be transmitted faster, cheaper and easier. With blockchain-based security tokens, investor agreements and stock certificates now have an electronic wrapper, allowing them to be issued and traded faster, cheaper and easier.

Security token marketplaces

Securities regulations such as accreditation, jurisdiction requirements or transfer restrictions can be included in the coding of the token, ensuring that all future trades are compliant with all the appropriate laws. Companies can then sell their tokens to interested investors, following the same rules and regulations as paper-based share sales.

As the first security token marketplaces come online in the near future, companies will have access to large pools of capital, and will be able to be quickly matched with the investors that qualify for their offering. Additionally, security tokens will allow the development of a large market for secondary trading, as qualified investors will be empowered to complete peer-to-peer trades since there will be no need for lawyers, banks, and other expensive intermediaries. The combination of digitisation and peer-to-peer networks will significantly increase the liquidity of private securities, unlocking tremendous value and providing the start-up community with easy access to much-needed funds.

“Security token technology will be a particularly important development for the space industry specifically as one of the biggest barriers to investment in this industry is the combination of long project timelines and high capital requirements,” said Rick Tumlinson, founding partner of SpaceFund, a venture capital firm focused on investing in frontier-enabling space start-ups.

“Security tokens will be able to decouple project timelines from investor returns by giving investors the ability to sell their tokens on the secondary market at any time during the life of the project. Investors will no longer have to plan their investment horizons around the potential for an acquisition or Initial Public Offering (IPO) in the far future, and instead will be able to realise the gains in the value of their shares at any time during the company’s lifecycle.”

As blockchain technology continues to proliferate into new applications and new industries, it will become ever more present in business transactions, marketplaces and financing. And as the space industry continues to grow both in number of companies and its reach into the solar system, blockchain technologies will provide highly effective and efficient methods of tracking, transacting and interacting. The intersection of these two revolutions, blockchain and commercial space, could provide unlimited opportunity for value creation and industry growth.

As we, as an industry, transition from ‘old space’ to NewSpace, we must look around us and embrace the technology of the future. The small satellite industry has done an amazing job of continually integrating newer, smaller, faster technology – creating a booming new sector with thousands of jobs and billions in market size.

If we want to push further out into space and continue to create new markets and build valuable economies, we must embrace and leverage new technologies from a variety of sectors such as biotech, artificial intelligence (AI) and, yes, finance. When implemented correctly, blockchain can save time, money, hassle and heartache, providing more time, money and inspiration to push the limits of humanity’s presence in space. So, how can blockchain help you?

Reprinted with permission.

Meagan Crawford is Managing Partner of SpaceFund (a venture capital firm investing in space start-ups), a co-founder of NewSpace marketing company Brand Delta-V, and a co-founder of Eden Grow Systems, a farming 2.0 technology company. She began running the NewSpace Business Plan Competition in 2009, a programme focused on educating both entrepreneurs and investors. She is also dedicated to several charity projects that are working to open the frontier. She is a co-founder of the non-profit Center for Space Commerce and Finance and a member of the board of directors of the Space Frontier Foundation, the Earthlight Foundation, and Mars Initiative. She holds an MBA in Finance and Entrepreneurship from Rice University.

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