The Role Of Blockchain In Creating A Sustainable Future

Blockchain technology has the potential to build a more sustainable world, reducing emissions while incentivising and rewarding good behaviour that benefits the environment

Blockchain is revolutionising the way we think about security, transparency, and accountability. But beyond its ability to transform commerce, blockchain is also paving the way to create a more sustainable future. From tracking carbon emissions to enabling sustainable supply chains, blockchain has the potential to provide innovative solutions to some of the most pressing environmental challenges.We can achieve this by making blockchain technology itself sustainable, and using blockchain for sustainable applications.

Making blockchain technology sustainable

We can take three approaches to make blockchain technology sustainable. The first being, utilising off the grid, renewable energy sources to run the network which can reduce energy cost and positively impact the profitability of blockchain operations.As per the Bitcoin Mining Council (BMC) survey in 2022, the global bitcoin mining industry’s sustainable electricity mix stands at 59.5per cent. Even a study by the University of Cambridge in 2021 indicated 39 per cent of the energy used in Bitcoin mining comes from renewable sources, and this number is expected to increase as sustainable blockchain technology becomes more widely adopted. This shows that even though it is difficult to determine the exact percentage, renewable energy does play a role in bitcoin mining.

The second approach is to upgrade the network to a more sustainable design philosophy. Ethereum, for instance, transitioned from “proof of work” which required miners to use powerful computers to solve complex mathematical problems to validate transaction and add blocks to the blockchain to a more sustainable "proof of stake” (PoS) protocol. The PoS relies on validators who hold a stake in the network to verify transactions and secure the network leading to much reduced energy consumption. In fact, Ethereum’s transition to PoS is expected to reduce the network’s energy consumption by as much as 99 per cent because only the invested miners (validators) will expend energy to solve a block of transactions.

Another approach is Pure Proof Of Stake (PPOS), adopted by Algorand. PPOS is also based on the idea of staking to validate transactions and secure the network. However, the difference lies in how it selects the validators. Here validators are chosen based on a more complex process that considers multiple factors, including the amount, validators reputation, and performance of validator’s previous block proposals. In addition, Algorand doesn’t require setup or maintenance fee, and both individual and business can use it at net-zero carbon cost.

Now the big question is how we can make use of such a powerful blockchain technology to help further the cause of sustainability at a global scale. I believe that blockchain technology can help us pursue sustainability goals along three central themes: Energy redistribution, carbon credit trading, and sustainable supply chains.

Streamlining energy redistribution

When it comes to sustainable energy redistribution, blockchain serves a dual purpose. It can aid in the monitoring of energy consumption and allow for peer-to-peer energy redistribution without wastage.

Brooklyn Microgrid is an excellent example of this. In 2017, it was one of the world’s most unique electric power distribution systems, powered by solar panels that utilised blockchain technology to monitor the production and consumption of energy. Residents could buy and sell solar power with one another, creating a more sustainable energy system.

Today, companies such as Australia based Powerledger, South Africa based The Sun Exchange, WePower, Exergy are using blockchain technology to create more sustainable and decentralised energy systems. As the technology continues to develop, we can expect to see more innovative and impactful use cases emerge in the coming years.

Supercharging carbon credit trading

In the recent decade, carbon credits have become one of the most popular ways for corporations to reduce their carbon footprint. The Blockchain for Climate Foundation is aware about this and uses blockchain technology to monitor carbon credits and reduce emissions which have been a challenge in the past. The foundation allows users to buy and sell carbon credits, which can be utilised to offset emissions.The technology provides transparency and accountability in the carbon credit market, making it more trustworthy and dependable.

Making supply chains sustainable

Finally agriculture could be the most significant beneficiary of blockchain technology. Blockchain can assist in resolving the long-standing supply chain monitoring issue, enabling us to monitor how raw materials are produced and allowing consumers to make more sustainable choices while ensuring that farmers receive a fair price for their crops.

Moyee Coffee, a coffee company in Ethiopia, is already putting this into practice. Moyee Coffee partnered with local cooperatives and farmers in Ethiopia to create a blockchain-based platform that records every stage of the coffee supply chain, from farm to cup, and allows everyone in the ecosystem to track it.

Blockchain technology has the potential to build a more sustainable world, reducing emissions while incentivising and rewarding good behaviour that benefits the environment. By harnessing the power of renewable energy sources and implementing zero-emission architecture, blockchain has the potential to become a truly sustainable technology.

(Vikram Tanna is ceo, Mzaalo (Xfinite).)