Businesses must prioritize environmental sustainability now more than ever. Our planet is undergoing significant changes; people expect all industries to take responsibility. Although the blockchain sector faces criticism for its environmental impact, it has the potential to create a sustainable future. Sustainable blockchain technology brings substantial environmental advantages that we cannot ignore.
Blockchain technology is gaining popularity. The speed of its development is impressive, considering its early stage. It is undergoing a massive transformation, just as Amazon transformed e-commerce. Meanwhile, some concerns are raised about its environmental impact.
Even so, proponents say blockchain is moving toward a greener future with efficient financial transactions, lower carbon emissions, and reduced energy consumption. It also holds the potential for transparency and sustainability. Blockchain can be a powerful tool for positive change and promote environmental accountability in a new era.
What Is Blockchain Technology?
In 2009, an individual or group named Satoshi Nakamoto, still unknown introduced Bitcoin to the world. This fundamental development gave birth to BTC and laid the foundation for a revolutionary technology called Blockchain.
Blockchain is a public ledger where transaction records or any other data can be stored. No one person, company, or government controls the information it contains. Therefore it is a decentralized network. It makes blockchain a peer-to-peer network where all participants can control the records and flow of information.
Moreover, it reduces transaction fees and increases efficiency. Because it is distributed, this network is difficult to hack or destroy. In blockchain technology, transactions are grouped into blocks. Previous blocks then connect with new blocks and form a blockchain. After adding data to the block, it cannot be removed or changed.
Blockchain’s user-controlled system attracts a lot of organizations and individuals who want to prevent third parties from accessing their data. The blockchain space is growing rapidly, with thousands of new startups and projects launching monthly.
Companies are adopting blockchain solutions to address their business needs and sustainability.
8 Ways Blockchain Protects The Environment and Supports Sustainability
Below are some specific areas where blockchain can positively impact the environment.
1. Supply Chain Management
Almost everyone wants to buy ethically produced products, but such information is often unavailable and hard to verify. Before reaching the store, a product passes through many hands. It’s easy for companies to lie about their manufacturing, the chemicals they utilize, where they dispose of waste, or how they treat their workers fairly. Blockchains can track products throughout their journey from manufacturer to store shelf.
This emerging technology helps prevent inefficiencies, waste, unethical practices, and fraud by making supply chains more transparent. Furthermore, it can help customers know about how each product is produced and transported so they can make more environmentally friendly choices. For example, blockchains can ensure that the fruit sold in the market really comes from a sustainable grower.
These verifications can be done through Blockchain applications like FoodTrax. It tracks food from source to shelf. Provenance is another start-up to make the supply chain more transparent.
2. Energy Consumption
Blockchain’s electricity consumption is often misrepresented, with many people assuming it uses the same energy as an entire country. However, the reality is that it is reducing energy consumption in many cases. Many blockchain systems that require a lot of energy use electricity generated by computers. This supply comes from solar and geothermal power, which are renewable sources.
The PoS consensus mechanism consumes significantly less energy than the traditional proof-of-work mechanism. Ethereum successfully implemented the PoS mechanism last year with the Ethereum 2.0 upgrade, called “Ethereum Merge.” This initiative is expected to reduce Ethereum’s carbon emissions by 99.95%.
3. Carbon Tax
Currently, it is hard to find the environmental impact of each product. Notably, the carbon footprint is not factored into the price. However, users have little motivation to select products with low carbon emissions, and companies have little incentive to sell them.
Using blockchain, the carbon footprint of each product can be accurately tracked, preventing any data tampering. This helps calculate the appropriate carbon tax that should be applied when selling a product. Expensive products with a higher carbon footprint encourage consumers to choose environmentally friendly products.
However, a blockchain system could rank companies and products based on carbon footprint, improving environmental accountability and transparency.
4. Funds Monitoring
When donating to an environmental charity, tracking the flow of funds or monitoring how they are utilized for specific purposes can be challenging. Inefficiency, Corruption, and Bureaucracy are still rife in the charity space. Blockchain technology helps ensure that funds reserved for specific purposes should never be misused due to complex administrative processes.
Blockchains allow funds to be transferred without needing a bank account. That is helpful for people in countries without well-developed banking systems. This means funds can be sent directly to those in need without involving third parties. Bithope and Bitgive are two charities operating with cryptocurrencies.
Current recycling programs often fail to provide sufficient incentives for people to participate. Each city is responsible for managing its own recycling programs. But many places have no recycling programs due to a lack of oversight.
A blockchain-based recycling program could incentivize people to participate by offering a financial reward. Participants will receive digital tokens for collecting recyclables such as bottles, plastic containers, or cans. Such recycling programs already exist in many places worldwide, particularly in Northern Europe.
However, implementing this technology will facilitate transparent data trackings such as volume, cost, and profitability. It will also enable an impact assessment by each location, company, or individual participating in the recycling program.
Here are a few notable blockchain projects dedicated to recycling:
- Social Plastic, also known as Plastic Bank, is a project focused on converting plastic into a form of currency. They set up collection centers in developing countries where individuals can deposit used plastics. In return, they receive currency and services like phone charging or cooking fuel.
- Recycle Coin is a blockchain-based mobile app that is currently under development. It will allow people to exchange their used plastic containers with a special token.
6. Blockchain Technology In The Fashion Industry
Companies like H&M and Levi Strauss have adopted blockchain technology in the fashion industry to support sustainability efforts. They utilized blockchain-based systems to trace the source of raw materials. However, they ensure ethical production.
Undoubtedly, blockchain technology significantly impacts humanity’s path toward sustainability. Using blockchain, we can better share and distribute resources, safely exchange value without intermediaries, and better manage greenhouse gas emissions to combat climate stress.
7. Environmental Treaties
Environmental treaties are agreements by different countries to work together and solve critical environmental problems. Sometimes governments or companies lack the motivation to keep their promises.
Blockchain technology can prevent governments and corporations from backsliding on their environmental commitments or misreporting their progress. Thanks to blockchain, important environmental data can be transparently tracked and verified, making manipulating or hiding information difficult. Because when data is added to the public blockchain, it stays there permanently.
8. Cross-Border Payments
Blockchain technology is changing the financial landscape significantly and disrupting the traditional financial system. Digital currencies and blockchain are becoming increasingly popular and widely used. Many transactions are made using this technology. Central banks are also rushing to create their digital currencies.
Blockchain-based payment platform provides cost-effective and fast international transactions. It eliminates the need for intermediaries and paper-based documentation and reduces the physical transportation of funds. However, blockchain technology contributes to a sustainable financial system by simplifying processes and reducing energy emissions.
Advancements In Sustainability Solutions
Blockchain’s potential to contribute to environmental sustainability goes beyond carbon credits and energy consumption. By 2023, we can expect more blockchain systems dedicated to sustainability, including those designed to track water use.
Governments and regulators are focusing on developing clear environmental standards for various industries. After establishing the regulatory framework, they plan to use the blockchain system to monitor and ensure compliance with these regulations. However, implementing such processes is environmentally friendly and facilitates business operations.
Businesses, companies, and countries must create solutions linked to a common goal to achieve a better future. Blockchain technology and cryptocurrency have become key contributors to this quest. They can foster teamwork between governments, businesses, and individuals, bringing about positive change in the world.
Blockchain technology is under development and cannot solve the problem of climate change alone. However, various businesses need to consider the potential of blockchain.