Blockchain: the digital enabler for a sustainable future
Creating a sustainable future is more vital than ever before. Both initiated in 2015, the Paris Climate Accords and the United Nations Sustainable Development Goals (SDGs), have given us a blueprint and foundation to work with. However, if our world is to achieve the targets set by these accords, technological improvements to our infrastructure and systems are much needed. The application of modern technologies, like blockchain, is the key to improving our world and creating a sustainable future.
Challenges facing sustainable project management today
Sustainable project management is the implementation of systems, resources, and methods to deliver results while being simultaneously conscious of the processes to guarantee a net positive environmental, social, and economic impact. It is a way to ensure that projects are not realized at the expense of the earth and its limited resources. Ultimately, improvements to sustainable project management can help prevent the negative impact caused by harmful factors such as overconsumption, carbon emissions, water contamination, and deforestation.
However, there are significant challenges facing sustainable project management today. First, there is a serious lack of trust, verifiable information, and transparency from global supply chains. Second, the prices of services and products producing greenhouse gas emissions do not reflect the costs incurred from the harmful effects of global climate change. Areas such as real-time data monitoring and data storage, resource management, administration, and logistics can all benefit from better accountability, verifiability, and traceability.
How does blockchain contribute to sustainability?
Blockchain–as a technological utility–can provide immense value in efforts to support and improve sustainable practices. Blockchain truly shines when it is applied to a complex network of stakeholders with little trust, like that of the private corporations, NGOs, and political institutions cooperating to tackle sustainability goals. The next section will list blockchain’s beneficial characteristics and share examples of blockchain applications in sustainable practices.
Impactful features of blockchain that can help improve sustainability
- Immutability: On-chain records are immutable, and therefore also verifiable in real-time.
- Transparency: Blocks of data, including all on-chain transactions, are completely transparent and cannot be altered in any way, creating a trustable data record.
- Traceability: A permanent block of data is created at every stage on a product’s journey, so purchase records, like which buyers buy what from whom, can be monitored and traced from a supplier’s raw material and producers to wholesale and/or retail stores.
- Decentralization: Blockchain networks are decentralized, enabling users to collectively build, work, and distribute data in a peer-to-peer environment.
If transactions and data records are immutable, transparent, traceable, and decentralized, corporations and other stakeholders are easier to hold accountable for their environmental impact. Through these aspects, blockchain provides the new digital infrastructure that enables trust for sustainable practices to grow and develop. The next few sections introduces three detailed use cases of blockchain technology to improve sustainability: environmental data monitoring, global supply chain, and sustainable infrastructure/society.
Environmental data monitoring
Air pollution and plastic waste are two of the leading causes of environmental damage. Blockchain tech can digitally enable efforts to improve the processes for tracking and supporting these causes.
Blockchain technology enables more efficient and cost-effective data monitoring and data storage, in addition to real-time data collection and analysis of carbon data for prompt decision-making. Any data recorded on-chain is fully transparent, immutable, and verifiable, making transparent data easily accessible by any party.
Currently, centralized institutions like the government gather, store, and publish air pollution data. For example, organizations like PlanetWatch are working with environmental institutions like the European Organization for Nuclear Research (CERN) and utilizing blockchain tech to open-source the entire process. Users can record all the air pollution data collection, storage, and publication real-time data on-chain in exchange for PLANET tokens.
Furthermore, the exact amount of plastic waste contaminating the ocean is extremely difficult to track. Researchers estimate it is somewhere between 1 and 9 million tons of plastic. Although tracking plastic waste is difficult, beach clean-ups and other efforts can be tracked and coordinated.
Companies like Empower are building an economic system that generates value out of plastic waste. Users can organize global cleanups to collect plastic waste, deliver it to a collection center, and reap rewards for the amount of plastic collected. Additionally, their efforts are all recorded on-chain. This system enables recyclers, corporations, and consumers to make a real positive impact on the environment, in addition to rewarding them for their actions.
Global supply chain
In today’s globalized supply network, there are dire consequences for stakeholders if products like perishable goods that require timely precision cannot be traced throughout every point on the supply chain. Additionally, transparency and traceability are vital for ensuring product quality and safety within supply chains. Blockchain tech can be used to reduce supply chain risks like fraud and corruption to maintain impeccable standards of safety and quality.
Blockchain tech boosts both the transparency and traceability of supply chains via secure and decentralized databases that enable trust and safe storage of data for all stakeholders. For example, smart contracts can allow for better automation and verification of not only a product’s origin, but also its quality.
The table below illustrates the potential for blockchain technology to address sustainability challenges in global supply chains.
|Issue pertaining to challenge
|Blockchain use cases
– Resource overconsumption
– Agricultural production leading to greenhouse gas emissions
|Estimated 1 to 9 million tons of plastic in oceans
Global food production accounts for one-third of greenhouse gas emissions
|– On-chain “green” verification of environmentally friendly products
– Better transparency and accountability in carbon trading and energy markets
– Easier to monitor and trace raw material, product, waste, and carbon footprint data on blockchain
– Ensure compliance with climate accords by secure access to verifiable records
|Transparency of supply chain
|Fraud and corruption
– Mislabeling and manipulation of products
– Exploitation for private interests
|Adulteration of cooking oil (Taiwan, 2013)
|– Decentralized network enables better tracking of distributed information and promotes multilateral peer-to-peer collaboration and accountability
– On-chain storage of historical performance and data to ensure sustainable practices
|Traceability of goods
– Poor safety and quality regulations
|Salmonella contamination in peanut butter (North America, 2022)
|– Secure, on-chain data storage to strengthen food security
– Trace food’s origin and verify quality for better accountability and efficiency
– Safer management of transaction data through immutable blockchain
Furthermore, blockchain-driven systems encourage not only more sustainable production, but also more sustainable consumption. In regards to production, organizations can access trustable on-chain data, support environmentally conscious stakeholders in the supply chain, request suppliers to reduce environmental impact, and carbon credits can incentivize more sustainable practices.
In an increasingly environmentally conscious world, organizations that practice sustainable production can attract consumers who practice sustainable consumption. These consumers can make more educated decisions based on easier access to trustable information and data. Lastly, decentralized networks allow for closer interactions between producers and consumers–or between other stakeholders in the supply chain–to improve transparency.
Sustainable infrastructure and society
Blockchain can become a technological enabler for sustainable infrastructure and a sustainable society. Globally, both local and national governments are already implementing blockchain in areas such as resource management and administrative services. For example, in California, the government has been utilizing blockchain tech to monitor groundwater in Sacramento; additionally, both the UK and EU monitor electric charging systems via blockchain networks.
Here are three ways blockchain can enable more sustainable infrastructure models:
- Increase accessibility via a digital infrastructure based on new transactional market models, incentivizing both consumers and institutions to contribute to sustainability and creating a paradigm shift in market demand
- Enhance awareness to sustainability goals by allowing stakeholders to easily access and track standardized sustainability data on infrastructure projects to increase compliance
- Generate new sources of financing for sustainable infrastructure projects and incentivize existing pledges to greenhouse gas reduction by creating blockchain-enabled financial platforms that improve financial transparency, liquidity, and access
Example 1: DeFi infrastructure model
This infrastructure model is based on tokenization and a decentralized financial platform that allows investors and other potential stakeholders to invest directly in sustainable infrastructure, without the need for a middle man to facilitate financing. First, a security token will be issued that allows investors to receive a ROI based on the infrastructure project’s performance, Second, a utility token will also be issued to allow token holders to access and use any services provided by the project. Both blockchain-powered tokenization and decentralization enables automation of processes, and reduces not only administrative costs, but also dependance on mediators.
Example 2: Blockchain-enabled infrastructure contract management model
Smart contracts can streamline and automate contract management in infrastructure projects. Anyone can track and verify on-chain legal documents. Therefore, this enhances transparency in multi-party agreements and trust between stakeholders. Moreover, stakeholders can not only view terms and conditions in real-time, but also validate contract versions throughout the entire process. Once a legal document has been finalized, the immutability of blockchain records also makes it impossible to change.
A common misconception of blockchain technology is its energy intensity. The notion is blockchain and its applications, like bitcoin mining, are immensely energy intensive. However, it’s important to note that only blockchains that use a proof-of-work (PoW) consensus protocol, such as Bitcoin and Ethereum 1.0, are energy intensive.
Since the creation of Bitcoin, the first blockchain, many sustainable blockchains using Proof-of-stake (PoS) consensus models have been developed to help offset the carbon footprint caused by PoW blockchains. PoS blockchains are far less energy intensive; therefore, they are considered eco-friendly or “green” blockchains. The Tezos and Algorand blockchains (introduced in detail below) are two prominent eco-friendly blockchains.
Tezos is a decentralized open-source blockchain that can execute peer-to-peer transactions and also act as a smart contract deployment platform. Being a PoS blockchain, it consumes less energy for technical maintenance. Some of its key features are being eco-friendly, secure, scalable, and self-upgradeable. Moreover, because it’s energy-efficient, developers can build blockchain applications on the Tezos platform that are equally energy-efficient and sustainable. Ultimately, this allows developers to focus on innovation without compromising sustainability.
Algorand is a permissionless open-source blockchain network, specifically developed to solve blockchain security, speed, and decentralization. In 2021, developers of the Algorand Foundation announced that the Algorand blockchain is completely carbon-neutral. Algorand owes its energy efficiency and sustainability to the network’s high transaction speeds and low transaction fees. Additionally, unlike Bitcoin, Algorand tokens are not mineable to enable a carbon-negative system and be sustainable.
Limitations of blockchain on the path to a sustainable future
Although the blockchain industry is shifting towards a more sustainable direction, there are still several obstacles to the implementation of blockchain tech for sustainable practices.
- Blockchain is not only a novel technology, but the industry is also still in its infancy. Therefore, potential adopters need to be educated and convinced about blockchain’s benefits.
- Effective government regulation has to catch up to the speed of blockchain development. Until then, there will be fear and uncertainty among potential adopters.
- Continuous usage of energy-intensive proof-of-work consensus protocols
- Dependence on internet: most global supply chains start in developing countries with limited infrastructure
Web3, crypto, and the blockchain industry as a whole are progressively becoming more sustainable. There are organizations like the Crypto Climate Accord working to have all blockchains powered by renewable energy by 2025. Take a look at their audit document for tallying the environmental impact of cryptocurrencies. Additionally, the Bitcoin Mining Council recently published a report surveying 32% users of the Bitcoin network and stated that miners were using a 67% renewable energy mix.
The eco-friendly direction the industry is moving towards is a great sign because blockchain technology is the future. Moreover, blockchain is a powerful tool for the implementation of sustainable practices and a more sustainable future– or not be used at all. Hopefully, it is the former.
For more detailed information on how blockchain tech can be used for carbon capturing and trading, read this helpful article.