Introducing: The Economic Policy Engines

Economic policies are designed and implemented through institutional frameworks and public policy decisions. Despite an interest in public participation being responsive and data informed, most economic policies today are made top-down based on lagging historical information and applied bluntly to timeframes years in advance. These rigid and siloed approaches lead to inefficient policy outcomes and drown momentum when it's needed most. The urgent challenges of the 21st century such as climate change, urban redevelopment, economic inequality, and democratization of technology require that every mobilized resource be used wisely and governed by communities supported through their use.

To illustrate the inefficiencies of economic policies, let’s take one of the most developed countries in the world; 

As with many northern developed nations, homes and buildings account for nearly 1/5th of Canada’s carbon footprint. While Canada has a goal to reach Net Zero by 2050, current retrofit rates suggest it would take 71 years to get there for commercial buildings, and 142 years for residential buildings. Despite significant funding and incentives, structural coordination challenges constrain their effectiveness to the extent that Canada’s Net Zero goals may not be achievable without resolution of those challenges. 

Windfall Ecology Centre, with the support of Natural Resources Canada, embarked on a project with BlockScience to understand the nature of the challenges and the role that distributed ledger technologies could fill in solving them (see Windfall Protocol Report).  Among the key challenges identified were: 

• Siloed data that prevents effective targeting of financing, incentives and evaluation of outcomes
• Mismatches between when investments are made and benefits realized and by whom
• Stifling coordination costs for implementing incentives and retrofits

And the solution to address these challenges led to the design of the first Economic Policy Engine. 

The First Economic Policy Engine: Windfall 

The Economic Policy Engine (EPE) is a participatory digital infrastructure for implementing economic policies. The engine automates economic policies using blockchain to dynamically issue incentives and distribute resources in real-time based on transparent, verifiable data. At the same time, policies within this framework are governed from the most direct information sources: bottom-up and grassroots.

Together with Windfall, Inverter is piloting the first Economic Policy Engine that will accelerate retrofits for over 200,000 homes in Durham Region, Ontario. 

In practice, Windfall will accelerate energy efficiency solutions through a dynamic, action and performance-based rewards system that leverages smart, targeted incentives. It operates as follows:

1. Aggregates resources
   Windfall sources incentives and service commitments from various entities (government subsidies, utility company rebates, private sector contributions from government agencies and enterprises) into a Commitment Pool.
2. Tokenizes them into Incentive credits
   The total value of these commitments are represented in a common unit of account on blockchain as the “Energy Credit" tokens. These tokens are issued and distributed by smart contracts that execute specific policy logics based on real-time data inputs.
3. Implements an incentive system for audits and retrofits
   Windfall sets bounties for specific energy-saving actions. Homeowners can view available bounties and receive initial Energy Credits for sharing energy data and completing audits according to their home’s energy scoring. 
4. Dynamically issues rewards based on actual energy savings
   The Economic Policy Engine automatically issues additional Energy Credits to homeowners based on actual energy savings post-retrofit, as verified by utility data. 
5. Creates a "digital twin" of the housing units
   Data feeds accrued via Policy Logics turn housing units into digital wallets for autonomous energy financing and coordination between stakeholders for plugging in their own incentives and services (landlords, renters, government bodies, and other enterprises)
6. Allocates resources
   Once distributed to recipients, these tokens can be spent, sold, or redeemed to claim real-world rewards and services, such as direct cash deposits, discounts, or other designated incentives- all sourced from the Commitment Pool.

Over time, Windfall can adjust reward rates for each policy logic based on retrofit types, set energy reduction thresholds, or other KPIs; modify its policy logics and introduce new ones as the system’s needs evolve. 

All actions—from initial data sharing to retrofit completions and Windfall Credit redemptions— are transparently recorded on the blockchain, ensuring accountability while creating and enriching a living digital representation for each housing unit as a “digital twin”. (1)  These digital twins set a new standard for data-driven urban planning and incentive management, enhancing:

• Predictive modeling for policy impact simulations
• Highly targeted and optimized resource allocation
• Cross-sector policy coordination (energy, grid management, urban planning)

The open and interoperable nature of this digital twin allows additional stakeholders to integrate their own EPEs and green financing mechanisms to achieve collectively desired outcomes:

• Local utilities can deploy dynamic demand response systems, offering real-time incentives for energy reduction during peak hours based on each home's digital twin data.
• Municipal governments can introduce targeted solar panel installation incentives, using the digital twin to identify homes with optimal roof conditions and energy usage patterns.
• The digital twin can enable innovative community co-investment models, where local residents, businesses, or impact investors could purchase fractional ownership in home retrofit projects. Energy incentive rewards could be automatically distributed to co-investors, while any increase in property value due to retrofits could be factored into agreements for future sales or refinancing events. (2)

Windfall’s EPE not only democratizes green investments but also unlocks new capital sources for accelerating retrofit adoption. Any additional EPEs integrated into Windfall’s ecosystem both benefit from and contribute to the digital twin, creating a network effect that adds value to the entire ecosystem and incentivizes further innovation and participation. The end-game for Windfall’s new, powerful EPE is a replicable, flexible, and adaptive system framework that can meet the complex challenges of urban decarbonization while continuously unlocking new possibilities in cross-sector collaboration and policy experimentation.

Economic Policies Onchain

EPEs alternate the pattern of how economic policies are designed and executed simply by carrying out policy operation and execution onto the blockchain: 

Transparency and Access: Every policy action is immutably recorded, allowing anyone to verify exactly how policies are being executed, nurturing trust between institutions and the broader public.

Adaptive Automation: Smart contracts automatically facilitate transactions and adjust policies in real-time based on data inflows without requiring a third party, providing effectiveness and agility in managing policy with minimal manual intervention. As EPEs continuously record and update data, they gradually build a shared database, acting like a "digital twin" for other policy engines to utilize. This allows additional stakeholders to plug in their own incentives or service offerings to achieve collectively desired outcomes.  

Interoperability and Composability: Blockchains dramatically reduce the running costs of maintaining a database while providing security, full data availability, and trustless verification for operating policy systems on shared digital infrastructure. 

Borderless Markets: Blockchain's borderless nature enables seamless policy coordination and capital flows across cities, countries, or even multiple countries, tapping into global liquidity and financial services.

Grassroots Participation: The open-source nature of blockchain enables more direct citizen involvement in policy development, implementation, and improvement, creating a more inclusive and participatory ecosystem for multi-stakeholder coordination.  

Inverter the Infrastructure

At the core of the EPE is Inverter, a modular technology suite designed to transform abstract policy ideas into functional, blockchain-based systems. Inverter empowers policymakers to design, launch, monitor, and adjust sophisticated policy logics on blockchain without needing technical expertise: 

Design and Deploy: Assemble and iterate sophisticated policy logics from a library of smart contracts as economic building blocks and financial primitives.

Monitor and Adjust: Track the issuance and redemption of credit tokens upon verified collection of incentives and fine-tune the policy logic parameters in real-time.

Integrate: Embed policy engines into custom platforms and provide the desired user interface for engaging the target stakeholders.

With its technology suite, Inverter is pioneering the integration of blockchain technology with real-world, complex challenges. It empowers stakeholders to create adaptive, transparent, scalable, and participatory systems that drive impact. For each EPE, policymakers can fine-tune economic parameters in real-time, observe systemic effects, and optimize outcomes. Meanwhile, citizens are incentivized to participate in and benefit from these policies, contributing directly to collective progress. 

The Road Ahead

The Windfall - Inverter collaboration is a glimpse into a potential future that demonstrates how  EPEs offer alternative policy frameworks that can be leveraged for the common good. The true potential of EPEs lies in opening up a new design space for how societies can organize and respond to challenges. Amidst the growing need to mobilize for mass-scale transformation in a complex world, EPEs offer a powerful tool to enhance local institutional capacity and enable new ways to tap into our collective intelligence. 

We are eager to collaborate with policymakers and builders who are pushing the boundaries of what is possible in policy design and implementation to create more effective systems that address the world’s most pressing challenges. Join us!

(1) We use the term “Digital Twin” as introduced by Blockscience

(2) The system specifications of the Digital Twin for the housing units are outlined in detail in the study published by Windfall and Blockscience