2018 Winner: Outstanding Achievement in Information and Communications Technology sponsored by TELUS
Blockchain technology removes contract disputes
GuildOne’s distributed ledger innovation Royalty Ledger helps oil and gas companies and landowners encode their negotiated smart contract into one system, carrying out all subsequent digital transactions based on the agreed-upon terms. Through the system, each royalty transaction becomes a record in a permanent ledger, making the metadata traceable, indisputable and tamperproof. This blockchain solution has no built-in cryptocurrency and does not require crowd-sourced third-party approval.
What problem or opportunity did you see a need to solve and how did you solve this real-world problem?
James Graham, President and CEO of GuildOne Inc.: Different interpretations of contracts lead to different implementations of contracts, which lead to dispute. The way that you address that is to make all the counterparties to a contract share an interpretation of the contract, share the ingest of the data, and share the calculation as if we shared the same spreadsheet across the contract divide, and behind our firewalls. Blockchain and distributed ledger technology (DLT) allows us to address the problem that we can’t transact until we agree.
Currently in the market we will take payment from you and then we’ll come back later and dispute what you paid us. We all know that the contracts are challenged, whereas in the new model with blockchain and DLT, we can’t transact until we agree on all those inputs, the calculations and the outputs.
What has been the impact?
The biggest draw down is in general and administrative costs and rework. When companies get into disputes, they get fired up to negotiate. Then the other side fires up and some of those even go through to lawyers, so we have additional costs of legal dispute. Nobody’s really winning in that we’re all spending resources chasing this elusive truth. Modeling from our first transactions say that 60 to 80 percent of the key resources on the royalty process were drawn down.
Has being in Alberta helped you find success?
There’s a reason why Alberta regulations are the cream-of-the-crop and it’s that regulatory environment that gives us enough information or knowledge about these assets to support the current state, but the new state is what we see from the regulators wanting to work with industry in lockstep. Blockchain is a very interesting technology when you consider that when an operator reports a volume to a royalty holder, they can be reporting that same volume to the crown.
There are also massive things in the history of computing that have occurred here in Alberta, like the Java programming language invented by a Calgarian. We work with machine learning and data extract from contracts at the University of Alberta and the Alberta Machine Intelligence Institute. These individuals are not only some of the best in the world, but have created some of those technology vectors.
There is an innovative spirit here. The thing that goes along with that spirit and supports both of those poles is that we are very let’s–get–it–done type people out here on the prairies, and that’s been shaped by growing and pioneering here. The other thing that comes from those two poles is the sense of egalitarianism; the sense of fairness inherent in the Canadian spirit. Blockchain is a really interesting way to vector that because in a fully transparent environment, you can drive a higher level of trust and eliminate disputes for any stakeholders.
Who have been your major supporters?
This technology is coming along in a time where the oil patch is looking for answers; the patch is looking for some disruption because status quo is a challenge state. I really must thank the progressive companies, PrairieSky and Freehold Royalties Ltd., for even embracing this concept. It made sense from the royalty aggregate perspective to go at this, but we now have a list of operators approaching us and saying they like this new model. I also really have to thank the companies, the crown regulators and the agencies for using this technology to benefit the little guys.
We’re already working on a pilot project in Saskatchewan that includes 1800 farmers, farmer freeholders and the Indigenous who have never had access to the types of tools that blockchain and DLT provides. What we found is not only are the government people that we’re interfacing with very interested in how we can solve those problems and create a fair and equitable trading platform, but also the companies are very interested in getting this right because the cycle of dispute has cost everybody. Now, we’re looking at scenarios under which we can we can create fair and equitable trade.
What are the plans for the future?
The demand on our current solution is driving a lot of activity. You can think about this as sort of data clean up in multiple places at the same time. Everybody’s always worried about data integrity, but if you do it in a silo, you still have potential friction with the other silo or your counterparty. This is metadata clean up that applies in multiple business scenarios.
How does it feel to be an ASTech Finalist?
It’s really interesting and exciting. There definitely seems to be a bigger desire to celebrate innovation and ASTech represents that in some of its purest forms, which is how do we actually nominate, elevate and ultimately celebrate these companies and that’s very exciting from an ecosystem perspective.
As an individual, it’s been a bit humbling in the sense that being blockchain pioneers and doing some world-first-work has really elevated our status. It’s created a new role for me in that I’m now more of an evangelist than I’ve ever been.