Blockchain has been described as “the new internet” and could revolutionise industries such as finance, healthcare and real estate, but it also has the potential to tackle pressing environmental challenges.
Whenever the words ‘blockchain’ and ‘environment’ appear together, it’s usually in relation to the fact that Bitcoin, which uses blockchain technology, consumes more energy than many small countries. It’s the achilles heel of the popular cryptocurrency, and a potential brake on its growth. But there’s another side to the relationship between blockchain and the environment that doesn’t receive nearly as much coverage.
Dig beneath the cryptocurrency craze and hyperbole about blockchain’s potential to upend the current world order, and you’ll find some interesting environmental applications for the technology. These range from tracking food from source to fork, to powering decentralised energy systems and verifying land and resource rights. In fact, a report published by PwC and the World Economic Forum in September, Building Block(chain)s for a Better Planet, identified more than 65 ways blockchain could be applied to pressing environmental challenges.
One of the most obvious use cases for blockchain – essentially a distributed ledger that can create cryptographically secure and trustworthy records of almost any transaction – is supply chain management. Modern supply chains are extraordinarily complex, often spanning several continents and countless suppliers. It can be extremely difficult to verify an item’s origin and whether or not it was ethically produced. But tracking an item back to its source takes mere seconds when its movements are recorded on a blockchain.
These records cannot be erased, there are no middlemen, and everyone always has access to the same information. “That gives you better security, better visibility and better transparency across the supply chain,” says Ben Combes, assistant director at PwC and senior economist in the sustainability and climate change team.
WWF and several partner organisations are already trialling blockchain to track tuna from “bait to plate”, which could help to stop illegal, unreported and unregulated fishing. The Programme for the Endorsement of Forestry Certification (PEFC), which oversees 700 million acres of certified forests, is investigating how the technology can be used to trace the origin of wood. And Unilever and Sainsbury’s are using a blockchain to validate and reward the sustainability practices of around 10,000 tea farmers in Malawi.
Blockchain could also speed the shift from fossil fuels and centralised energy grids to decentralised, decarbonised systems. The Brooklyn Microgrid, for example, allows ‘prosumers’ who generate solar energy from rooftop panels to trade excess energy with their neighbours via a blockchain. “It [blockchain] is not a silver bullet that will solve every problem,” says Peter Bronski, marketing and communications lead at the Energy Web Foundation, a global non-profit organization focused on accelerating blockchain technology across the energy sector. “But in a future where we have millions or even billions of connected devices, what’s the best way to manage them? Is it through a legacy approach of centralized command and control, or might a decentralized approach such as blockchain be a better fit?”
Blockchain could also bring greater transparency to the renewable energy certificate market. And a corporation’s GHG emissions and compliance with environmental standards could potentially be recorded on a blockchain, allowing the public and investors to see if they are honouring their sustainability commitments.
Cryptocurrencies like SolarCoin – which rewards solar electricity producers for the energy they produce – also show how blockchain technology could encourage environmentally friendly behaviour. “What if, for example, a US or UK aid agency wanted to create an incentive to recover plastic,” says Combes. “You could tokenize waste plastic, and wherever it was found in the world, you could transfer value to the person who recycled it. I think that could be hugely beneficial, because global issues can’t be solved by the initiatives of a single state.”
Blockchain could also be used to manage water resources, enabling households, businesses and policymakers to access the same trustworthy data on quality and quantity, as well as peer-to-peer trading of water rights in a given basin. The technology could help to strengthen land and property rights of indigenous communities too. “There’s an awful lot of land that nobody has a sense of ownership over,” says David Rejeski, director of the technology, innovation and the environment project at the Environmental Law Institute, “so it quite often falls into the wrong hands.”
The Amazon Bank Of Codes project is even using blockchain to map and catalogue the environmental diversity of the Amazon rainforest. It aims to make nature’s biological and biomimetic assets more accessible to scientists, while tackling bio-piracy and ensuring fair and equitable sharing of any commercial benefits with the developing nations from which these assets are drawn.
It’s important to note that many of the most exciting blockchain projects are still at the proof of concept stage, and there are significant hurdles to overcome before they enter the mainstream – including the useability of ledger interfaces, the interoperability of different blockchains, and scalability and governance issues. For example, public blockchains such as Bitcoin and Ethereum can handle only between 3 and 30 transactions per second, whereas a blockchain underpinning the energy grid would need to be able to handle millions of transactions per second.
Ashley Lannquist, project lead for blockchain & distributed ledger technology at the World Economic Forum, says working groups and consortia are forming to address the standards problem, and that cross-chain technology which allows different blockchains to communicate and transact could address interoperability concerns. Scalability issues caused by increased competition for transaction capacity could also be solved by having multiple blockchains running in parallel, with a mechanism to keep them synchronised.
The energy consumption concerns that arose from Bitcoin’s growth may be solved by using less energy intensive transaction verification methods. “Much of the energy consumption is predicated on the Proof-of-Work consensus mechanism,” says Bronski. “You have these miners throwing as much computing power as they can at a mathematical problem in order to win a block validation reward, and that’s where you get this runaway energy consumption.”
Once these issues are overcome, the true potential of blockchain for the environment may lie in combining it with other emerging technologies like the Internet of Things and AI. This would allow for real-time monitoring and logging of data from sensors, for example, which could in turn trigger automated payments to suppliers and other stakeholders. So while the relationship between blockchain and the environment may have generated some unfortunate headlines in its early days, its future looks much more promising.
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