Using Blockchain for Local Economies: The Netherlands Case Study

Blockchain can benefit entire communities without compromising anyone’s privacy, as proved in the example of the Netherlands. Namely, the project EnergieKnip led by the BlockchainLab Drenthe reached over 106,000 citizens in the Dutch municipality of Emmen, with around 300,000 euros distributed as token rewards.
Read on to understand how EnergieKnip became the biggest public government blockchain project in the Netherlands.

Reading Time: 4 minutes

blockchain the netherlands

Illustration: Milica Mijajlovic

How did the Dutch use blockchain to reduce energy consumption? 

Whether it’s social awareness for energy sustainability or the need to save a few bucks on your electricity bill, everyone seems to be looking for more efficient ways for their energy usage. But an individual can only do so much; this problem needs to be taken care of at a bigger scale, by local authorities documenting energy consumption data. 

And that’s the exact idea behind the project EnergieKnip, led by BlockchainLab Drenthe. 

image-1

What gets measured, gets managed.

In a nutshell, local authorities incentivized citizens to share their energy consumption data anonymously. Their obligation was to comply with all data processing and security rules to ensure citizens’ privacy. The goal was to collect accurate and comprehensive data on energy consumption so that the authorities could present incentives and solutions for optimizing energy consumption. 

How were locals convinced that blockchain is a good idea?   

EnergieKnip stands for energy wallet, designed for IOTA cryptocurrency and launched by BlockchainLab Drenthe, especially for this occasion. Wallet users would get token rewards for providing data about energy consumption in their homes. 

In an official blog post, project leader and co-founder of BlockchainLab Drenthe, Adri Wischmann, shared their experience with the EnergieKnip project in the Dutch municipality of Emmen. 

So, with a new technology such as blockchain, especially since its closely related to crypto, a huge number of citizens are still skeptical about it. If you add privacy concerns to this skepticism, it’s easy to understand why so many of them would reject taking part in a project like this. 

That’s why, the project team wanted to address these concerns first and thoroughly. Their goal was to assure every single local that their privacy was taken care of, and that this project was for the greater good. 

Even if only some of them refused to join the project, it would be considered a failure since it wouldn’t have provided the whole picture. 

How did they manage to convince them that blockchain is a good idea? 

They defined the following best practices for the EnergieKnip project: 

  • The data collection had to be anonymous: at no point should it be possible for local authorities to attribute the data they obtain to a specific household. 
  • Participants had to understand all steps of the set-up and that no data about their identity would be obtained at any stage of the set-up. For example, the EnergieKnip app never asked for an email address, name, home address, or phone number. 
  • The obtained data had to lead to a direct benefit for energy consumers and the municipality. 
  • Because not everyone is intrinsically motivated to save the planet, there had to be an incentive for consumers to change their behavior, be it a reward system or any other form of incentivization. 
  • Any exchange of data and rewards had to occur via an easy-to-use platform. Energy consumers should not be confronted with obscure technical terms, cumbersome user interfaces, and lengthy text, but rather be told in an easy-to-understand way what the project is about and how they will benefit from it. 

The challenge of finding the right technology   

So, having in mind the aforementioned key points, what was the final solution for the EnergieKnip app? 

Well, the idea behind it was to store data and reward points, with both having value citizens would usually store in their traditional wallets. These reward tokens could be spent at local retailers to acquire new energy-saving devices, like LED lighting, radiator foil, or thermostats. 

In other words, the app was easy to understand and easy to use. 

How did the EnergieKnip app work?
BlockchainLab Drenthe chose the Dutch municipality of Emmen for this project. First they randomly distributed QR codes within Emmen, which made it possible for households to participate but made it impossible for the authorities to identify the individuals behind these households.
Activating the app automatically created a wallet for the reward token, allowing rewards to be transferred from the community's wallet to the homeowner's wallet.
The app users were asked simple questions, such as “Do you have solar panels?”, “Are electronic devices in power-saving mode overnight?”, or “What kind of windows do you have?”
Once a question was answered, households received reward tokens within seconds, all realized by an automatic process on an IOTA node.

From the start, BlockchainLab Drenthe had no doubt that this project would work best with a distributed ledger technology (DLT) network with its own native cryptocurrency. At the same time, as you may know, the energy consumption of most cryptocurrencies is excessive and therefore doesn’t align with the purpose of the project. 

image-1

It would be hypocritical if we tried to improve the energy consumption of private households with an energy-draining DLT such as Bitcoin. Fortunately, we found a more ecological alternative with the IOTA Foundation and its DLT network. It was a perfect fit for our project.

After looking into it, they decided that IOTA was the best option to use because: 

  1. The ability to store the collected data in a decentralized way on the IOTA network, ensuring its security; 
  2. Feeless transfer of our reward token from the municipality to households, making the project economically feasible; 
  3. Instant transactions (under two seconds), meaning no delays in collecting the data and or sharing the rewards; 
  4. Households get their own dedicated wallet for the reward tokens, maintaining privacy while also identifying that the data comes from one household; 
  5. The architecture of IOTA makes fraud impossible, meaning we could trust the accuracy of the energy data. 

And most importantly, IOTA doesn’t require mining which requires computational power and isn’t considered an energy-sustainable consensus mechanism

How successful was the project? 

Now that you’ve hopefully understood the idea behind the project and the infrastructure supporting it, it’s time to share some of the most impressive results. 

The EnergieKnip project resulted in 50,000 created wallets for each household, which is around 106,000 citizens of the Emmen municipality. The total amount of distributed reward tokens was worth approximately 300,000 euros. 

image-1

EnergieKnip currently has around 30,000 active wallets and is the biggest public government blockchain project in the Netherlands.

Additional benefits may be difficult to see at first, but the outcome is much more important than encouraging consumer behavior. 

These were the most valuable outcomes of the project: 

  • Users didn’t only receive awards but were also educated on how to improve their energy consumption (e.g., “closing your curtains will save up to 4% of your annual heating bill”); 
  • The municipality receives data to improve future policies, can improve and plan future campaigns, and learns how to distribute subsidies quickly, efficiently, and at a low cost. 
  • Local retailers benefit from the extra revenue and new customers while ensuring that the rewards are reinjected into the local economy. 
  • The environment benefits from the saved energy, including a reduction in CO2 levels because people spend their rewards locally, limiting transport costs. 
  • The IOTA ecosystem benefits because the technology is battle-tested by thousands of non-crypto users in a state environment. 

At last, it’s good to point out there are a few other ongoing projects by the BlockchainLab Drenthe with a similar purpose of benefiting local economies. 

A journalist by day and a podcaster by night. She's not writing to impress but to be understood.

Subscribe to our newsletter and stay updated !