The definition of infrastructure in the digital age is changing, asset ownership is becoming blurred, and new data-driven operating and financial models are emerging. By intertwining infrastructure into digital assets, informational inefficiencies can be uncovered that change how we design, value, price and invest in infrastructure assets. Tokenization of information from IoT coupled to smart contracts are offering opportunities to improve efficiencies throughout the financing and operation phases. We are working with incubators, public finance managers, investors and public officials to explore blockchain-enabled financing models for transportation, water, energy and real estate infrastructure. The integration of highly variable time series of data impacts valuation and pricing, and lack of standardization challenge emerging applications and scalability at this time.

1. ©UM-Center for Smart Infrastructure Finance – Not for distribution*Royal Academy of Science and the Arts (Belgium)
Peter Adriaens, PhD BCEEM NAE*
Professor of Engineering, Finance and Entrepreneurship
Director, Center for InfraTech Finance
Program Director, MEng Smart Infrastructure Finance
Civil and Environmental Engineering, Ross School of Business
School for Environment & Sustainability,
adriaens@umich.edu; @UM_CSIF
https://sifin.engin.umich.edu/
InfraTech: Blockchain-Based
Financing Solutions for Cyber-
Physical Infrastructure Systems

2. ©UM-Center for Smart Infrastructure Finance
Cross-campus Center to advance new
business and investment models for smart
infrastructure systems (InfraTech).
Research on financial innovation and
advanced analytics for utility, security and
privacy in designs of resilient infrastructure.
Develop standards and benchmarks with
data science paradigms, and financial
innovations for real assets

3. ©UM-Center for Smart Infrastructure Finance
Smart Cities are Cyber-Physical Systems
Enabling Fractionalization and Tokenization of Real Assets

4. ©UM-Center for Smart Infrastructure Finance
Physical:
Infrastructure Systems
Physical:
Buildings
Social:
Discrete Choice, Social
Networks & the Public Realm
Resource Flows:
Mobility, Energy & Finance
Digital:
Data and Information
Source: Sidewalk Labs
Smart Cities are Cyber-Physical Systems
Enabling Fractionalization and Tokenization of Real Assets

5. ©UM-Center for Smart Infrastructure Finance
Physical System
(Infrastructure)
Sensors/
Monitoring Systems
Actuators/
Control Systems
Physical principles define system
dynamics
Monitoring data analysis and
feedback control methods
PDE-based
Moori Tower, Tokyo
(350 Actuators)
Golden Gate Bridge, CA
(100 Sensors)
Distributed Infrastructure Monitoring and Controls
Advancement of Sensing, Actuation, and Local Control
Source: J. Lynch

6. ©UM-Center for Smart Infrastructure Finance
Smart Infrastructure as Cyber-Physical Systems
Confluence of Computing, Communication, Sensing and Internet
Physical System
(Infrastructure)
Computing Systems
(Cyberinfrastructure/Clouds-based Analytics)
Sensors/
Monitoring Systems
Actuators/
Control Systems
Physical principles define system
dynamics
Monitoring data analysis and
feedback control methods
PDE-based
Distributed computing, statistics,
and informatics
Data-driven
S S
SInternet of Things (IoT):
Wireless sensor networks
with computing at the “edge”
+
5G Communications:
Low-latency wireless
communications with edge
computing services
Early Earthquake Warning Systems
(Source: NIPPONIA)
Intelligent Transportation Systems
(Source: USDOT)
Smart Energy Grids
(Source: The Telegraph)
Source: J. Lynch

7. ©UM-Center for Smart Infrastructure Finance
1. Data has to deliver benefits for CAPEX outlay or OPEX requirements
• CAPEX: Design, construction, contract penalty costs, financing and insurance
• OPEX: Capital intervention in asset performance, cost avoidance, funds for future O&M
2. Smart infrastructure has to enable yield-driven and/or IRR-driven investments
• Yield: Long term investors; rely on dividends and interest on loans/bonds
• IRR: Short to medium term investors; rely on resale value and will forego cash flows
Smart Cities and FinTech
Data, Informational Efficiencies and Infrastructure Investment
An Alphabet Company

8. ©UM-Center for Smart Infrastructure Finance
InfraTech a Moneyball Game?
Uncovering Hidden Value
1. Cyber-Physical Infrastructure Systems: Monitoring, Diagnostics, Insights
2. Smart Infrastructure Financing: Valuing digitization of Real Assets
3. Financial Technology: Fractionalization and tokenization
“By twinning infrastructure into digital assets, we can uncover
informational inefficiencies that change how we value, price and
invest in infrastructure”
M. Perry, Global Head of Product,

9. ©UM-Center for Smart Infrastructure Finance
Infrastructure Data has to Drive Yield or Equity Value
A Risk and Return Investment Perspective
Expected risks
Expectedreturns
Demand-based
infrastructure
Green building/development
Smart water systems
Renewable energy
Transportation infrastructure
Greenfield
Infrastructure
Equities/REITs
Social
infrastructure
Road transportation
Social infrastructure
Fixed income Debt/Private equity/hedge funds
Regulated
Infrastructure
Electric/water utilities
Gas processing
Ports
Airports
Desalination
Rail infrastructure
Brownfield
Infrastructure
Source: Adapted from Credit Suisse Asset Management
*Performance bonds, Green bonds, Green REITs, Securitized debt, Insurance, Derivatives,
Insurance, swaps, fractionalization and tokenization of assets
New real asset/efficient financing models*

10. ©UM-Center for Smart Infrastructure Finance
Tokenization of Real Assets
Capital markets use case: Creation of digitally tokenized assets (based on cyber-physical infrastructure
systems), in which the token either represents:
• a property interest that exists only in the blockchain (such as non-certificated securities) or
• an asset existing off the blockchain.
New origination models

11. ©UM-Center for Smart Infrastructure Finance
Example 1. Variable Interest Rate Security Token
The VIRST is a novel method for funding Smart Infrastructure that connects smart readers/meters on
various forms of infrastructure (roads, bridges, power, water pipelines and public transportation) to a
smart contract. The varying rates of return an investor would receive are based on consumption/usage.
Source: Blockchain Triangle, Bermuda

12. ©UM-Center for Smart Infrastructure Finance
Example 2. Value-Added Token Financing
Tax increment financing (TIF): Governments bank on the increase in property tax revenue resulting
from large projects. The government can “fund” a project by pointing to the revenue the project will
generate once it’s complete.
Value-added token financing: A public-private
partnership facilitating smart infrastructure projects
in areas with an underfunded tax base.
Smart contracts tied to value added services and data
markets drive incremental revenue to pay debt.
Investor
Muni/gov’t-
bond Revenue from base tax
value
Revenue
from total
value of all
properties
in gov’t fund
Trading
Of
tokens
Capital
investment
Detroit Public
Schools
Washington
DC
Bay City
Great Lakes water
authority

13. ©UM-Center for Smart Infrastructure Finance
Risks of Tokenized Infrastructure Financing:
Privacy, Cybersecurity, Performance, Counterparty and Exchange Rate
Social
infrastructure
Regulated
Infrastructure
Expected risks
Expectedreturns
Brownfield
Infrastructure
Data Trust
D1* D2 D3 D4
D5
Data Markets –
Infrastructure Tokens
….
*Different types of datasets organized by privacy, security, asset, and governance attributes
Infrastructure
planning and
design
‘Public data’
(social &
regulated infra)
‘Private data’
(demand-driven infra)

14. ©UM-Center for Smart Infrastructure Finance
Tokenized Financing of Infrastructure:
Privacy, Cybersecurity, Performance and Exchange Rate Risks
Social
infrastructure
Regulated
Infrastructure
Expected risks
Expectedreturns
Brownfield
Infrastructure
Data Trust
D1* D2 D3 D4
D5
Data Markets –
Infrastructure Tokens
….
*Different types of datasets organized by privacy, security, asset, and governance attributes
Infrastructure
planning and
design
Privacy &
Cybersecurity
Cybersecurity
Performance
Demand
Performance
Exchange rate

15. ©UM-Center for Smart Infrastructure Finance
Tokenized Investment in Fractionalized Assets:
Risk Management
1. Identification &
categorization
3. Risk allocation
2. Risk analysis &
Evaluation
Documentation &
monitoring
(smart system)
4. Risk control
Listing and grouping of risks
Causes, effects, consequences, timing
Probability of occurrence
Potential financial damage
Risk mitigation
Risk strategy
Risk taking parties
Developing
Implementing
Steering
Risk handling/mitigation
Early warning/detection
Contract supervision

16. ©UM-Center for Smart Infrastructure Finance
Blockchain-based solutions:
Risk management during tokenized investments
1. Identity Security
3. Security from
insider risk
2. Preventing Data
Manipulation
Transaction and
Communication
Infrastructure
4. Preventing denial of
service attacks;
protection from
compromised nodes
Risk strategy
Risk taking parties
Early warning/detection
Contract supervision

17. ©UM-Center for Smart Infrastructure Finance
Take-Home Messages
1. Fractionalization and tokenization of infrastructure assets is opening
up traditional illiquid assets to efficient (short-term) investors
2. The promise of tokens is only as good as the risk management
strategies associated with 5G and other data-driven informational
assets, including privacy, cybersecurity, and performance.
3. By “twinning” infrastructure into digital assets, informational
inefficiencies change how we value, price and transact infrastructure
4. Private investors and public financing groups are exploring how to
capitalize on the value of data in smart infrastructure systems
5. Examples on public and private infrastructure under study in the US
and Bermuda