How features of blockchain support sustainability efforts?
The influence of blockchain on the natural environment is relatively well-known. On the other hand, how features of blockchain support sustainability efforts? Blockchain technology holds immense potential to support sustainability efforts across various industries.
Its transparency helps reduce carbon emissions by identifying more efficient routes and methods.
Furthermore, blockchain networks can facilitate green finance initiatives by ensuring that funds are used specifically for eco-friendly projects. Overall, blockchain offers a promising tool for enhancing environmental sustainability.
Before we see in detail how features of blockchain support sustainability efforts, let’s take a look at what blockchain represents.
What is blockchain?
If you’ve heard of Bitcoin and Ethereum, you may have come across blockchain without fully understanding what it is.
The blockchain represents a sequence of blocks linked to each other in which each block corresponds to a set of transactions. A blockchain is defined as a database stored on a decentralized network.
Unlike traditional banking systems, blockchain aims to be decentralized. This means that instead of having a bank that controls and validates transactions, this role is distributed across a network of computers called validators or nodes.
Every time a transaction is made, it must be approved by these computers according to pre-established rules, which ensure the security and integrity of the data.
The advantages of blockchain can be summarized in 4 points:
- Security: Blockchain uses cryptography to secure data, making transactions immutable and safe from tampering.
- Transparency: All transactions on the blockchain are recorded transparently and are publicly accessible, allowing for full verification and traceability.
- Decentralization: Instead of relying on a central authority (like a bank), blockchain distributed control among many network participants, reducing the risk of corruption or failure of a central point.
- Efficiency: Blockchain, in theory, allows for faster and less expensive transactions than traditional systems by eliminating intermediaries and simplifying processes.
The initial idea for creating blockchain technology remains highly useful today. Transferring money through blockchain can be cheaper and quicker than using traditional money transfer services.
While the idea works very well for cryptocurrencies, there are many other useful applications of blockchain. Some of them are: insurance, real estate, voring, artists royalties, non fungible tokens,logistics.
The pillars of blockchain technology
Let’s take a concrete example with the Bitcoin blockchain operating with the Proof of Work consensus.
A transaction is carried out, transferring BTC from person A to person B. The digital signature determines the sending of the transaction.
Broadcasting the transaction in the network to all computers (or nodes) connected to the blockchain network. These nodes receive a copy of this transaction. They verify and validate the details of this transaction using algorithms.
The creation of a new block takes place. It corresponds to the grouping of several validated transactions. This block also includes a special cryptographic code, a hash, which links it to the last block in the chain, ensuring the continuity and integrity of the blockchain as well as a new hash.
Mining: The mining process begins, where miners use their computing power to find a new hash compatible with the last block in the chain. The miner who successfully finds this hash adds the new block to the chain and is rewarded in the form of BTC. This financial incentive is necessary to encourage miners to participate in the operation of the blockchain.
Blockchain validation and update: Once the new block is added, the Bitcoin blockchain is updated on all nodes in the network. Every copy of the blockchain is identical, making the data immutable and verifiable by anyone, at any time.
Blockchain’s impact on the environment
Before we see how features of blockchain support sustainability, let’s see its impact on the environment.
We should remember that blockchain is a buzzword but is one fit for all solutions. It must be thoughtfully integrated with policy frameworks and other technologies in order to achieve sustainability goals.
Bitcoin, the best-known cryptocurrency, is often stigmatized for its high energy consumption. Bitcoin and first-generation cryptocurrencies are based on the Proof of Work mechanism.
This means that to carry out a transaction in the blockchain (add a new block), all miners (members constituting the blockchain) must validate the operation. This principle is called mining.
Thus, the more miners there are in the blockchain, the more secure the transactions are and the greater the energy consumption, which leads to carbon emissions when it comes to fossil energy sources.
Today, the environmental impacts are such that certain countries, such as China, Kazakhstan and Sweden, ban the mining of cryptocurrencies. Therefore, the sustainability of the entire functioning of the blockchain is threatened if no greener solution is adopted.
Initiatives are emerging to ensure a more sustainable and greener blockchain, like Bitcoin, which can use any energy source, including that coming from waste.
The Proof at Work algorithm is gradually being replaced by that of Proof of Stake, defended by Greenpeace and other environmental groups.
Unlike the Proof of Work mechanism, Proof of Stake does not require all miners to validate each transaction and is drastically less energy-intensive.
This principle is based on asking users to prove possession of a certain quantity of cryptocurrency to validate new blocks in the blockchain and derive profits.
The second cryptocurrency in the world, Ethereum, has reduced its energy consumption by 99.9% by switching from the Proof Of Work algorithm to that of Proof Of Stake.
How can features of blockchain support sustainability efforts
Blockchain technology is revolutionizing sustainability by enhancing transparency, reducing waste, and promoting environmentally friendly practices. But how can blockchain be used to support sustainable business practices?
Here’s how features of blockchain support sustainability efforts and help achieve green agenda :
1. Increasing Transparency and Security
Blockchain creates a secure and transparent record of transactions and product journeys. This immutable ledger ensures that every step in a supply chain, from production to disposal, is traceable. This visibility helps reduce fraud, waste, and unethical practices, ensuring products meet sustainability standards.
2. Enhancing Traceability in Supply Chains
Supply chains are notoriously complex, with many stages and actors involved. Blockchain’s ability to provide a detailed record of the provenance and journey of products allows for better monitoring and accountability. Consumers can make informed choices, supporting businesses that adhere to sustainable practices.
3. Facilitating Sustainable Practices
Blockchain can securely and transparently track and verify the compliance and performance of various actors within the supply chain. This helps improve the efficiency and effectiveness of these chains, enhancing the trust and reputation of the companies involved.
4. Promoting Decentralized Energy Solutions
Blockchain enables the creation of decentralized energy systems where individuals can generate, store, and share renewable energy without intermediaries. This reduces reliance on fossil fuels, lowers the carbon footprint, and supports the transition to a sustainable energy future.
5. Streamlining Carbon Credits and Trading
Blockchain increases the transparency and credibility of carbon credits by securely recording emission reductions and preventing issues like double counting. It facilitates peer-to-peer transactions and smart contracts in carbon trading, making it easier for businesses and individuals to invest in green initiatives.
6. Supporting Green Investments
Blockchain platforms standardize and streamline the issuance and management of sustainable assets like green bonds and ESG-focused investments. They provide a framework that ensures the traceability and verification of the environmental and social impacts, attracting more investors to fund sustainable initiatives.
7. Reducing Carbon Footprint
By promoting renewable energy and reducing reliance on centralized power grids, blockchain helps decrease greenhouse gas emissions. Decentralized platforms like Power Ledger allow users to sell excess renewable energy, promoting a lower carbon economy.
In summary, the impact of blockchain on sustainability is profound. It helps clarify things and promotes eco-friendly actions. It also aids in managing environmental impacts and involves businesses and individuals in sustainability efforts. This ultimately moves us towards a more sustainable future.
What are the SDGs, and why are they important?
In September 2015, the Sustainable Development Goals, which were agreed upon at the Rio+20 summit, were adopted by the UN General Assembly with the 2030 Agenda for Sustainable Development.
By 2030, 17 SDGs (Sustainable Development Goals), which are linked to 169 sub-goals, must form an action plan to free humanity from poverty and put the planet back on the path to sustainability.
These objectives are one and inseparable. They reflect the three dimensions of sustainable development: the economic, social and ecological aspects.
These goals form a unique fusion of two global agendas, namely that of sustainable development and that of development cooperation.
The emphasis of this agenda is on “universality”, meaning that implementation must be ensured not only in the Global South, but also across the entire planet.
In order to monitor progress in achieving the UN objectives and sub-objectives, a set of 242 global indicators(link is external), intended to measure the 169 sub-objectives, was presented in March 2016 by UNSTAT.
Several indicators, and this is a central aspect, must be divided according to relevant categories such as gender, age, geographic location, etc.
For certain indicators, significant methodological conformity already exists while, for other indicators, studies still need to take place.
This is therefore a list that will certainly continue to evolve in the future. It is also important to remember that these indicators only form a global start, with Member States encouraged to provide more precise measurements through refinement at national level.
How can blockchain technology help the environment?
Another way that blockchain technology can support sustainability efforts is by facilitating peer-to-peer energy trading, reducing reliance on centralized power grids, and promoting renewable energy adoption.
Energy is one of the most critical and essential resources for human development and well-being, but it is also one of the main sources of environmental degradation and pollution, especially when it is derived from fossil fuels. Therefore, there is a need to transition to a more sustainable and resilient energy system that can provide clean, affordable, and reliable energy for all.
Blockchain can enable such a transition. It can create a decentralized and distributed energy system. Users can generate, store, and share their renewable energy without the need for intermediaries or central authorities.
This can help users rely less on the power grid, save money on energy, and reduce carbon emissions.
It can give users more power and freedom, while also creating new opportunities for energy producers and consumers.
Blockchain and sustainability – The Bottom Line
Blockchain technology contains many features that support sustainability across different sectors. From facilitating renewable energy integrations to enhancing supply chain transparency, blockchain technology enables proper infrastructure to address social and environmental challenges.
Relying on the unique attributes of blockchain communities and organizations can create solutions for a sustainable future. Blockchain technology can help with sustainability and implementing new standards. This can improve the business world and make our planet a better place.
