Is blockchain the key to a sustainable future?
When most people hear the word blockchain, they tend to think of its most popular use: cryptocurrency. However, the capabilities of this technology are far from limited to crypto. So, with the rising importance of preserving the environment in recent years, there is an important question to ask of blockchain: is it the key to a sustainable future?
The effects of deforestation on the environment are devastating. According to the World Wildlife Fund (WWF), up to 15 billion trees are being cut down every year globally, whilst forest loss and damage is the cause of around 10% of global warming. Deforestation also results in the removal of natural habitats for a wealth of the planet’s wildlife. Therefore, the need to address it – and quick – is imperative.
However, according to Dominic von Trotha Taylor, the CEO of iov42, a blockchain-inspired platform that helps businesses digitally codify their processes whilst ensuring for regulatory compliance and security, one thing could be key to tackling deforestation.
He explains: “Blockchain is very skewed in everyone’s minds around crypto and currencies, and I think that’s just a big bubble of speculation. Most people are not using the current blockchain mechanisms for anything other than speculating on coins, so that’s not what I refer to as blockchain.
“There’s a whole new blockchain evolution called enterprise blockchain, which will be less based around coins. It will be more based around providing fantastic services that create greater efficiency, transparency, and trust. Then you don’t need all these big institutions that give us the trust because its already in the core technology.”
But how does enterprise blockchain work, particularly where tackling deforestation is concerned?
“If timber is legally grown – bearing in mind, there is $150bn of fraud in the timber industry every year – the first concern will be whether the land the trees are growing on is legitimate,” continues von Trotha Taylor. “We’ll know it is probably because local governments say it’s legitimate, but you might also want to know that the people working there are getting paid a fair wage, for example. We can put all that on our blockchain and start to trust that.
“Before we existed, a certification agency likely went there and checked to see if the logs came from that area and whatever else, before exporting companies would get a shipping bill of sales. But now, the people working in the lumber mill can put the data onto the blockchain themselves. We ensure it’s not rubbish they’re inputting too because we’re able to track the identity of everyone who interacts with the spreadsheet. So, if something goes wrong, we can go back to each person individually.
“A company like IKEA, for example, would want to know that they’ve sourced wood that has been grown in the right place and that is true to what it says, so they can tell a consumer where the table they’ve bought has come from and that it’s legitimate. Enterprise blockchain makes this possible.”
Whilst enterprise blockchain might not cover all forms of illegal deforestation, by making supply chains more transparent for legitimate companies, it’s possible to make them more sustainable. And as customers become more eco-conscious, such transparency might become essential for them to operate in the future.
Digital’s carbon footprint
Timber is not the only industry where sustainability could be improved thanks to a more transparent supply chain. However, blockchain is a form of digital technology and digital technologies are responsible for a significant total of global emissions.
According to a 2019 study by the Shift Project, the world’s collective digital carbon footprint accounted for nearly 3.7 percent of all greenhouse emissions. This is comparable to emission levels from the aviation industry. The energy consumption from digital technologies also increased by almost 70% between 2013 and 2020, and with the pandemic accelerating the shift to digital for many industries, the amount of energy being consumed is only going to increase.
Plus, to function, blockchain technology uses computers that are designed to continuously perform micro calculations. In April 2021, the Ethereum blockchain, where most NFTs are currently stored, was consuming 33 terawatt-hours of electricity, which is the same amount as the whole
So, if blockchain continues to increase in popularity, this energy consumption will only increase, and unless the electricity required to power blockchain comes from sustainable sources, the amount of fossil fuels being consumed will increase too.
Brendan Beeken, Founder and Chairman of cryptocurrency trading platform Moni Talks, acknowledges the environmental impact of blockchain.
He comments: “Those of us working in cryptocurrency and blockchain must acknowledge that they, like many industries, impact the environment. Ignoring that is unacceptable and negligent. We should all be trying harder to find more sustainable ways of working. Within blockchain and cryptocurrency, that is happening.
“For some people, using blockchain technology, such as smart contracts, is seen as a step towards environmental responsibility as it reduces the use and waste of physical materials, like paper. That is, for me, too simplistic and ignores the elephant in the room. We should, absolutely, accept our environmental responsibilities, acknowledge the negative impact on climate change elements of blockchain technology have, and develop solutions.”
So, is the industry doing anything to reduce its carbon footprint?
“An obvious example, perhaps, is the use of Proof of Stake as a more energy-efficient consensus than Proof of Work, but that doesn’t do enough,” continues Beeken. “So-called ‘green’ smart contracts are another example. If you think it can take thousands of nodes to execute a smart contract, the environmental issue is obvious.
“What green smart contracts propose is storing the smart contracts on the blockchain but using just one node to execute them. You input the information to trigger a transaction, pointing at the specific node running this contract, and that node calculates and outputs the transaction for consensus. This removes the involvement of the full network in complex computations.
“Of course, there are issues of trust to consider, but mitigation is being developed and the energy-saving benefits of using a single node to execute a smart contract are clear.
“A further example is the Terrapass coin (TPSC). It is an ERC-20 token, stored and sent using Polygon, which runs on the Ethereum blockchain. It was launched last year by Terrapass, a leading carbon offset business. In essence, you, or your business, measure your carbon footprint, buy a metric ton of carbon offsets and receive a TPSC. The money you spend goes into verified projects to combat climate change. You can then hold your TPSC, trade, gift, or if you prefer, use it to buy further carbon offsets.”
According to von Trotha Taylor, iov42 are taking steps to mitigate their impact on the environment too.
He explains: “If you read about some of the first-generation technologies like Bitcoin, you’ll know that individuals are mining on laptops all around the world, which is very inefficient. So, we believe, particularly with dealing with governments and organisations, that we should be using existing infrastructure to help be more efficient. Therefore, we operate out of data centres, using classic data centre technology to scale up quickly.”
A secure – as well as sustainable – future?
As the world becomes increasingly digitalised, sustainability is not the only consideration on people’s minds. With so many companies keeping digital records of its users, protecting personal information is paramount for lots of people and Beeken thinks blockchain will have an important role to play here.
He comments: “Cryptocurrency is, perhaps, the most well-known use of blockchain, but the technology offers so much more.
“We are already familiar with smart contracts and the arrival of NFTs, creating a landscape for digital artists. But for me, the most exciting future use of blockchain is in securing personal information and identity. Protecting your own and other people’s data is essential, especially in sectors like healthcare and finance. We have seen what happens when data is handled carelessly, stolen, or lost. Jurisdictions have attempted to protect people through legislation, such as Europe-wide GDPR, but blockchain could be a solution that actually works.
“There is also massive potential for straight-through processing (STP) to utilise blockchain to work even more efficiently and securely.”
Von Trotha Taylor concurs: “Today, we don’t really have control of our medical data, for example, but I think all that is going to flip over time and consumers will be in complete control of their own data, whether it’s medical or payments data, or whatever else. Blockchain will facilitate all those sorts of things and I think that’s exciting.”
Blockchain’s ability to create transparency and trust certainly provides an opportunity to create a more sustainable future. However, blockchain companies will need to find ways to offset the carbon footprint of what is currently an energy-intensive technology in order to fully realise its true environmental benefits.