Technology-enabled financing of sustainable infrastructure: A case for blockchains and decentralized oracle networks

• Published in: Technological forecasting & social change Vol. 187; p. 122258
• Main Authors: Chung, Kenneth Hsien Yung, Li, Dan, Adriaens, Peter
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01-02-2023
• Subjects: Blockchain; Decentralized oracle network; Performance-based finance; Sustainable infrastructure; Performance-based finance; Decentralized oracle network; Sustainable infrastructure; Blockchain
• ISSN: 0040-1625; 1873-5509
• DOI: 10.1016/j.techfore.2022.122258

The capital required to maintain infrastructure in good repair falls short globally. This is commonly referred to as the “infrastructure finance gap”. To address climate change, transitioning from conventional to sustainable infrastructure further imposes financing challenges. This study employs the Model approach to justify and predict how blockchain technologies can leverage infrastructure data to close the finance gap by introducing new financing mechanisms. A semisystematic literature review was carried out for infrastructure finance, sustainable infrastructure and smart cities finance mechanisms, as well as blockchains and oracles. Conventional infrastructure finance via debt and equity lacks benchmarks that reflect the risk-return characteristics of the asset class. Performance-based financing addresses this issue by integrating performance data in valuations. However, a lack of trust in data veracity remains. Blockchains provide trust and transparency in data and transactions. They utilize oracles to access off-chain information for on-chain decision-making. With smart contracts and decentralized oracle networks, a general approach is presented where data from internet-of-things inform on-chain transactions, delivering performance benchmarks that accurately reflect the risk-return characteristics in an infrastructure investment. Capital can then be more readily deployed, thus closing the finance gap. An end-to-end example of financing sustainable stormwater infrastructure, Open Storm, is also presented.
•Capital shortfall in infrastructure investments is observed globally.•Sustainable infrastructure have added technological risks that impose finance challenges.•Justification and prediction of why and how blockchains can use infrastructure data to close the finance gap is presented.•Data flow from IoT to decentralized oracle networks and hybrid smart contracts is laid out.•An end-to-end example of financing sustainable stormwater infrastructure, Open Storm, is proposed.