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BLOCKCHAIN IN THE SPACE ECONOMY - HOW BLOCKCHAIN COULD HELP THE NEW SPACE RUN?

1. OVERVIEW ON THE SPACE MARKET: ISSUES AND OPPORTUNITIES The space sector has been a steadily growing sector for more than a decade now. After the end of the Cold War and the so-called "first space age," the number of activities dedicated to space was decreasing. In recent years (2008-nowadays), however, the space sector has seen a strong recovery and promises to be one of the most promising and disruptive sectors of the next decades. We have officially entered the "Second Space Age". Nowadays the sector is divided into: - satellite services (Earth Observation, Global Navigation Systems, and Telecommunications satellites); - non-satellite services (space manufacturing, space tourism, space exploration, space mining... etc.) In turn, the sectors, in particular the satellite sector, can be divided into: - upstream segment (services from Earth to Space); - downstream segment (services from Space to Earth).

Figure 1. The new global space market by application, GME forecasts (2020)

The upstream segment includes services like space launches, logistics, satellites and space manufacturing, space tourism, space debris management, and space mining. On the other hand, the downstream segment includes services like Earth Observation (EO) satellites, Global Navigation Satellite Systems (GNSS), Telecommunication Satellites, big data storage, analysis and management, IoT, Smart Cities, E-Health, Transportation and even more. In general, the whole space sector is growing faster with a 10YCAGR of about 10% and an actual net worth estimated at 446.9 billion dollars. Forecasted previsions say that the revenues from the space sector could be rise 1 trillion dollars by 2040.

Figure 2. World space sector growth, Morgan Stanley Research forecasts (2018)

The most important market segments, however, remain satellite services and data management services which weigh almost 75% of the entire space sector. In particular, focusing on commercial satellites, the segment recorded a 5YCAGR of 7%, with an estimated 10YCAGR of 5% up to 2030. The applications of data coming from space are multiple and essential for some services present on earth (such as internet, communication, satellite navigation), for this reason, they are profitable. For example, the estimated CAGR of the revenues generated by Earth Observation Big Data Applications (BDA), according to PwC (Main Trends & Challenges in the Space Sector 2nd Edition, December 2020), will be more than 20% in the next decade.

Figure 3. Satellite segment, upstream and downstream services, forecast by Euroconsult (2019)


2. BLOCKCHAIN AND SPACE SECTOR: OVERVIEW AND APPLICATIONS Blockchain is a very promising technology that has proved itself to be successful in many fields such as currency, process management, supply chain, security, managing complex systems, and others. According to the engineer Michal Zalewski (“How Will Blockchain Impact the Internet of Things?”, 2018), blockchain-based technology would contribute by 3.1 trillion USD to the economy by 2030. Since blockchain is designed as a distributed ledger, it will play a major role in managing and controlling data communications between different devices. It also offers capabilities of managing massive patterns of transactions from device-human, device-device, human-human, or human-device. The basic idea of blockchain is that it is considered a distributed database of transactions with the append-only feature. Given this, blockchain is considered a strict version of distributed ledgers. In blockchain-based systems, trust and administrative responsibility are collective between their operators. Blockchain, unlike traditional database architectures, require its participants to perform consensus operations for information to be added to the chains. Security and trust are achieved through cryptographic operations linking a new block to its preceding blocks. These characteristics make blockchain technology ideal for securing, processing, and managing precious data from space. Furthermore, utilizing blockchain’s main properties could be a new useful way to prevent “cyber and physical attacks” against space resources and assets. Also, blockchain would be used to solve a complex problem in secure communication for existing spacecraft. There are also more applications of blockchain to the space sector, that are exhaustively described in the following paragraph.

Figure 4. Blockchain use cases for Space Industry, PwC Analysis (December 2020)

3. HOW BLOCKCHAIN COULD HELP THE SPACE SECTOR? In the previous paragraph we mentioned some of the possible applications of blockchain technology to the space sector, now let's focus on all the main applications and analyze them in detail:

SPACE FINANCING: encouraging ICOs (initial coin offerings, i.e. issues of utility tokens on primary market) as a means of funding could break barriers of entry in the space industry, which has been known to be capital intensive and highly risky. Traditional crowdfunding mechanisms, which are quite popular in the space industry, act mostly as donations to projects from enthusiasts, while ICOs could serve as an alternative funding mechanism for projects that have a utility for their customers. The “utility tokens” involved might even be part of a smart contract, which means that start-ups are encouraged to achieve their milestones, failing which it could lose their investing entities. National and regional space agencies such as CNES and ESA could serve as a platform to match entities such as those described there are strategic advantages for both the incumbents and the start-up. They could be involved in creating an ICO-based funding ecosystem to enable interested entities to contribute to funding mechanisms for start-ups.

Example of use case (1): a start-up that is involved in manufacturing new propulsion for microsatellites need not have to wait on funding from a venture capitalist. Instead, it can conduct an ICO to provide tokens to its potential customers – for instance, a satellite integrator company – who could be potentially interested in trying out the new technology. This entity might make a strategic decision to invest in the propulsion start-up, which might help reduce its satellite manufacturing costs. Additionally, the investing entity has an opportunity to reap its rewards for backing the start-up from an early stage by enjoying the benefits of token price appreciation. The entity also has the choice to sell its tokens back, if the start-up is not successful in doing what it set out to do, according to the whitepaper.

Example of use case (2): blockchain could be used also to make space exploration more profitable and also more attractive to investors. Monetising Space Exploration missions will be more and more important in the future of space and deep space research and commercial programs. Moving away from the traditional approach to space exploration, in which only the national space agencies planned space missions, in the recent era of “New Space” several private space companies are planning missions to asteroids, the Moon, and Mars. Sparked by the development of companies such as SpaceX and Planetary Resources, and the rise in private investments and space competitions such as XPrize, space exploration is increasingly becoming a competitive affair. Although space exploration is about to become a more competitive affair, there is room for collaboration between the different parties including the space agencies. ICOs provide a way for such collaboration, keeping in mind the competition between the parties. With the sale of “utility tokens” in the ICO, a private company could provide access to valuable data for the interested entities, which also includes national space agencies, who are planning future missions to asteroids, the Moon, and Mars. A lander on the Moon could generate new scientific data, which could then be monetized by using tokens, thanks to blockchain technology. Further, this approach enables a collaborative ecosystem of private companies, while also financially benefitting the parties in the process. A company like SpaceIL will generate useful scientific data that might be useful for other private companies and perhaps even national space agencies for planning future missions. ICOs provide a way for space agencies around the world to invest in private companies for getting exclusive access to data if the mission proves successful. ICOs offer the opportunity for private companies to benefit from their exploration activities: like the first use case, blockchain technology allows for the entire token creation and investing process to be managed autonomously, thanks to smart contracts, which could enable a milestone-based investing approach, just as it is currently being done in various publicly funded commercial demonstration space programs.


SPACE ASSET TOKENIZATION: Through the process of generating security tokens for digital assets, also physical assets could be converted into digital shares of ownership. The most crucial application of asset tokenization is the fact that there are no territorial barriers to investing in assets. Any potentially interested entity from anywhere in the world can invest into an asset without complicated procedures, with high-security models and the speed of transfer offered by the blockchain network, due to the absence of middlemen. any asset can be tokenized into the blockchain network, this opens up a variety of applications for the space industry:

1) tokenizing astronomical assets, which is a fundamental use case for the commercial space resource utilization industry Use cases: potential space resource utilization approaches including asteroid mining and extraction activity on the Moon could be facilitated by the tokenization of assets. Tokenizing space resources has a huge range of applications in the space mining industry since blockchain provides a mechanism to register the physical location of space resources as digital tokens, and track their transactions, thus enabling a transparent identification and management process. ConsenSys, a blockchain firm, recently acquired Planetary Resources, an asteroid mining company, in order potentially to initiate the application of this use case. It is possible that, in a few years, ConsenSys could manage the transactions of Planetary Resources using its Ethereum-based blockchain network, thus enabling a new wave of investment for space resource utilization by an entity, irrespective of its geographical location. The problems associated with this type of application mainly concern compliance and respect for international treaties. The Outer Space Treaty (1957) still in force today prohibits the appropriation by states or individuals of space materials and resources, although it remains ambiguous as to the possible transfer to earth and exploitation of these resources.

2) tokenizing geospatial information and data to store it on the blockchain network. Use cases: geospatial data gathered using satellites could be tokenized into “utility tokens”, thus enabling a digital storage mechanism on the blockchain network. Tokenizing geospatial data might have several far-reaching advantages across industries. Land transactions and land data repositories are two powerful applications of tokenized geospatial data. Blockchain-based land registry systems provide an innovative way to eliminate the bureaucratic paperwork involved in the registration and verification of land transactions, by eliminating the need for an intermediary and reducing transaction-processing time. Countries such as India, the Netherlands, and Sweden are already testing out pilot projects to identify how using tokenized geospatial data would enhance their repository maintenance.


SPACE INDUSTRY PROCUREMENT and SUPPLY CHAIN MANAGEMENT: A DLT (Distributed-Ledger Technology) like Blockchain integrated supply chain network for space systems offers compelling advantages, including a forensic audit trail and a single source of truth. According to George Mason’s Mercatus Center, “Provenance tracking works by using digital tokens issued by blockchain participants to authenticate the movement of the good”. Moreover, the supply chain data is encrypted and sealed, which makes it very difficult to alter. In addition, digital transactions on the blockchain can be easily audited and various risks can be monitored, such as the hazards posed by used or counterfeit parts. Using blockchain to track the origins of raw materials and to follow domestic and international supply chains can meet this increasing demand for information with levels of transparency and accuracy not previously attainable. Tracking the origins of raw materials can also help companies improve their internal processes. As the space industry becomes increasingly global and interconnected, a DLT-enabled digital platform can help to foster collaboration, trust, and cross-organizational automation, stretching beyond one company’s tracking or enterprise system to include all supply chain participants, from cradle to grave, including raw materials, parts, components, and systems. This could happen in particular with the small LEO (Low-Earth-Orbit) satellites (especially CubeSats) industry, which is growing fast in recent years and it’s supposed to grow more in the next decade.

Use cases: Blockchain and space data could help to: o Detection of cyber threats; o Managing accurate inventory levels; o Responding to product recalls promptly; o Detection of parts and components fraud (e.g., counterfeit parts).

a. VeriTX (Toronto, Canada), partnering with Northern Block, a blockchain consulting firm, to develop a DLT platform to manage aerospace parts networks for both commercial and military customers.

b. Parts Pedigree Ltd. (UK), partnering with Pattonair (UK) and parts machining specialist Advanced Manufacturing Ltd. (UK), is working to create a digital cloud-based service using DLT to notarize, track, and view aviation parts and paperwork throughout the supply chain. From a supply chain risk management (SCRM) perspective, the Department of Defense inspector general (DoD-IG) identifies the need to “improve the accuracy of the requests for supplier threat assessments and require the prioritization of the critical components on the requests and the inclusion of all key information needed...to conduct the assessments.”20 Recognizing the DOD posture toward SCRM, a recent Aerospace report noted that blockchain mediation represents a superior technological and process solution toward mitigation and recommends that the Air Force and DoD continue to build expertise in blockchain technology and other SCRM mitigation approaches.21


SECURE SATELLITE COMMUNICATION : Blockchain could be used also to secure satellite communications. The benefits would be the creation of virtual zones of satellites with protection against space attacks from outsider satellites or debris. All requirements and registration rules of adding a new satellite to a specific virtual zone are specified in a blockchain smart contract executed by the zone master, using Multi-Factor Authentication (MFA) technology. So, for example, if a new satellite asks to join a specific virtual zone, its join request must be verified by all satellites in the virtual zone for proofing the validity of this new space communication. The verification algorithm is executed according to the specified join rules defined in the smart contract. If the transaction is valid and the identity of the new satellite is verified, the zone master (the ground station that manages satellites communications) issues a new virtual id to this satellite and adds it to the zone, and registers this new transaction as a new block in the blockchain. Otherwise, the domain master rejects this communication and detects this satellite as an intruder one as depicted.

Figure 6. Creating virtual zones and verifying satellite connections using blockchain (Blockchain in Space Industry -Challenges and Solutions- SRGE Paper, 2018)


SUMMARY: THE FUTURE OF BLOCKCHAIN IN THE SPACE ECONOMY

Figure 7. Blockchain applications in the space sector vs other industries (BLOCKCHAIN IN THE SPACE SECTOR, Karen L. Jones, 2020)

This chart summarizes the various blockchain applications in the space sector and general industry. Non-space blockchain applications are maturing faster than space applications. So, within the space sector, blockchain maturity ranges from the early R&D phase (e.g., supply chain management and Internet protocol [IP] management) to a more mature growth phase such as financing new space ventures. In conclusion, the evolution and adoption of blockchain technology in traditional sectors will contribute to further development and a more widespread application of this disruptive technology also in the space sector, albeit with a slight delay compared to more consolidated sectors (investment services, supply- chain, asset tokenization). The plateau of productivity will be reached by 2050, the year in which the space industry will also have achieved a remarkable level of development.

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