Sustainability and Blockchain: A Better Future
Blockchains and sustainability
Blockchain technology has often been criticized for its impact on the environment, especially when it comes to proof-of-work (PoW) chains like Bitcoin. However, proof-of-stake (PoS) chains are much more energy efficient. For example The Ethereum network recently transitioned to PoSresulting in a 99.9% reduction in energy consumption.
Additionally, the Ethereum Climate Platform (ECP) has been established to address the environmental impact of Ethereum’s past carbon consumption. The ECP is a collaboration between leading industry players, including the Ethereum Enterprise Alliance, ConsenSys, Microsoft, Aave and Polygon, and was launched at the UN Climate Change Global Innovation Hub during COP27.
Using Blockchain for Sustainability
Blockchain technology provides new opportunities to improve sustainability efforts by improving the tracking and verification of emissions. Its immutability, accountability and transparency make it possible to track carbon balances and other environmental metrics, and hold companies accountable for their sustainability requirements.
By using smart contracts, companies can automate the tracking of carbon emissions throughout their business. The information can be reported to monitoring services and made public, with the cryptographic nature of the data ensuring that it cannot be forged or manipulated.
Moreover, the same cryptography can also protect a company’s privacy when reporting leaks. Through zero-knowledge (ZK) technology, unfalsifiable evidence can be generated to confirm the information without revealing it. This allows a company to provide evidence of meeting standards for energy use or carbon emissions without revealing the underlying data.
Another way blockchain can contribute to sustainability is through tokenization and digital distribution of environmental resources. A good example is the growth of the carbon credit market, which has attracted the attention of leading organisations, including accreditation registries such as Verra and Gold Standard and international organizations such as the World Economic Forum.
The UN actively supports the use of blockchain in climate action and initiatives driven by the Web3 community. The UN recognizes blockchain technology’s role in tackling the pressing environmental challenges facing the world.
Advances in sustainability solutions
The potential for blockchain to contribute to environmental sustainability extends far beyond just energy consumption and carbon credits. By 2023, it is expected that an increasing number of blockchain systems focused on sustainability, such as tracking water consumption and plastic production, will emerge. Governments and regulatory bodies can establish clear standards for acceptable levels of environmental impact across different industries and use these blockchain systems for monitoring purposes. This not only benefits the environment, but also simplifies business operations by setting clear expectations for emissions.
A notable feature of blockchain technology and related applications, such as DeFi (decentralized finance), is that they have the ability to empower communities that have been severely damaged by industrial activities that have led to environmental degradation. In sectors such as supply chain management, these communities, especially those in developing countries, can benefit from the transparency and accountability provided by blockchain-based solutions. This will lead to fairer distribution of income and improved treatment, bringing us closer to truly fair trade practices in the future.
It is clear that blockchain technology is still in its early stages and cannot solve the problem of climate change on its own. However, it is crucial for various industries to consider the potential of blockchain. One of the most critical aspects it can address is the accountability of companies that claim to be environmentally friendly. This is only the tip of the iceberg, and the possibilities are endless. It is high time that the world shifts its focus and gets past the misunderstanding that blockchain contributes to the problem. In reality, it has the potential to be part of the solution.
