Week 10: Blockchain & Sustainability

The journey towards sustainability

We have seen three iterations of blockchain technology to date since its inception in 2009:-

• Blockchain 1: Cryptocurrency, initially Bitcoin then many others.
• Blockchain 2: Smart contracts pioneered by Ethereum & the Ethereum Virtual Machine.
• Blockchain 3: Larger scale applications of non-crypto use-cases plus scalability.

There is no doubt that the Proof of Work (PoW) protocol that Bitcoin is based on is energy intensive but there is a movement towards using more renewable sources to make it more environmentally friendly. Proof of Stake (PoS) on the other hand is around 99% less energy intensive hence better for the environment.

It's important to put PoW mining into context. A Galaxy Digital analysis in 2021 concluded that Bitcoin's annual PoW mining energy consumption was roughly half that of gold mining & about 40% of that of the global banking system's. Based on the fact that as of 2022, around 300 million people or 5% of the global population have access to crypto, it will be interesting to see how this move to more renewal mining will be able to scale with adoption.

7 ways blockchain can help the environment

A recent study by futurethinkers.org came up with 7 ways that blockchain technology can help the environment: supply chains, recycling, energy, environmental treaties, non-profits, carbon tax & changing incentives.

As we reflect on these powerful use-cases of blockchain, let's keep in mind the three key pillars of the technology; decentralisation, transparency & immutability. One of the main elements that adds substantial value in all of the above use-cases is transparency as this is one way to build trust between parties which don't always trust each other.

In a 2022 study the Organisation for Economic Co-operation & Development (OECD) concluded that the use-cases of blockchain narrowed down to three defined areas:-

Financing infrastructure:

• Unlock new sources of financing.
• Mobilise existing industry pledges to carbon reduction through establishing new financing platforms.?
• Lower the cost of capital for infrastructure projects.
• Improve liquidity, transparency & expanded access to finance.

Visibility & alignment:

• Bring visibility to alignment with sustainability goals by enabling countries & stakeholders to track data & information on infrastructure projects.?
• Standardise data, assess asset performance & enhance compliance (such as to sustainability or ESG standards), which may be further augmented when they are integrated with remote sensors (internet of things), or linked to deep analytics like artificial intelligence applications.?

Awareness & access

• Enhance awareness & access by acting as a transaction-enabling infrastructure of new market models.?
• Incentivise & increase institutions’ & consumers’ willingness & ability to contribute to building long-term sustainability, driving also changes within industries to adapt to the shifting demands of consumers.?

Wrap-up

There is no doubt that we are just beginning to understand that blockchain technology has many powerful use-cases besides cryptocurrencies & as more people & businesses begin to experiment with it, we will see a lot more especially when artificial intelligence (AI) is added into the equation. Time will tell.

Disclaimer

This series of newsletters complements the weekly blocklunch45 sessions and is for educational purposes only as my mission is to educate as many business leaders, entrepreneurs and consultants as possible about the miriad of amazing use-cases of blockchain. It is not financial advice in any shape or form and the examples given are to illustrate the content only.

If as a result, participants and / or readers decide to invest on any of the companies or brand names mentioned, then that is entirely at their own risk. Please do your own research (DYOR).

If you are interested in joining the blocklunch sessions then please email me at [email protected].

Jeremy Williams.