7 ways blockchain and crypto can help in the fight against climate change
Happy Earth Day!
Today is Earth Day, and in honor of this, we wanted to highlight the many ways that blockchain and cryptocurrency can be used to help in the fight against climate change. For far too long, the prevailing narrative has focused on the negative aspects of crypto and blockchain as it relates to climate change. However, not often discussed are the many ways that this revolutionary technology could play an essential role in combatting and adapting to climate change in the future.
In fact, according to the United Nations:
In this post, in honor of Earth Day, we highlight 7 ways blockchain can help in the fight against climate change.
1. Tokenized carbon credits and carbon sequestering assets
In 2021, we saw numerous projects emerge that tokenize carbon credits and carbon sequestering assets as a unique way to help reduce carbon emissions. The most notable of these, of course, is KlimaDAO, a “carbon-backed, algorithmic digital currency,” with each token backed by one tonne of verified, tokenized carbon reduction or removal. In short, for each token that is minted, Klima DAO backs it through the purchase of carbon credits.
By taking these carbon credits off the market, and locking them in the KlimaDAO treasury, the theory is, that it will help accelerate the price appreciation of carbon assets, making token holders a return, while helping incentivise companies to adapt more quickly to a low carbon future, and helping carbon removal projects become more profitable. To date, KlimaDAO has “absorbed” over 17,000,000 tons of carbon, which is the equivalent of over 85,000 hectares of forest, and 3,751,182 cars annually.
Another innovative application of tokens in the fight against climate change, is to use them to tokenize carbon sequestering assets, such as trees and rainforests. This is exactly what the Celo Foundation is aiming to do with their new Climate Collective.
The Climate Collective, which features 10 companies including Curve Labs, Kolektivo, Moss, and Regen Network, will take a community driven approach focusing on the tokenization of rainforests and other carbon sequestering assets. Over the next four years, the initiative will aim to add tokenized trees to the Celo reverse so that the Celo stablecoin is backed in-part by rainforests.
Over the next four years, the goal is for 40% of the Celo reserve to transition to tokenized rainforest and other carbon sequestering assets, which based on today's numbers, would allow for the protocol to own $340M worth of newly planted rainforest, representing roughly 135 million large rainforest trees.
2. Greater supply chain efficiency
There are few industries that are as natural of a fit with blockchain as supply chains. I mean, they both have chain in their name, after all. Blockchain has the potential to help create more efficient, transparent, and eco-friendly supply chains that will revolutionize the sector for the better.
A great example of a blockchain based supply chain project is Statwig, which aims to improve the efficiency of food and vaccine supply chains. By making use of the immutable, tamper-proof nature of blockchains, StaTwig utilizes open ledgers to create a transparent supply chain. StaTwig’s platform allows you to track important resources and products, such as vaccines, from start to finish, as they go through all steps from production to distribution.
According to StaTwig, the percentages of food and vaccines that end up going to waste due to supply chain failures are 30% and 50-60% respectively. Blockchain, by creating more open, tamper-proof, and transparent supply chains, can help drastically cut down on the amount of waste in supply chains.
Another project improving the efficiency of supply chains,is VeChain’s Digital Carbon Footprint SaaS platform that aims to bring more transparency to the process of tracking an organization's carbon footprint. According to the VeChain Foundation:
“VeChain’s brand new Digital Carbon Footprint SaaS Service is a powerful, rapidly deployable tool, enabling enterprises of all sizes to re-engineer their carbon footprint data management practices. This new offering is also the first of its kind to benefit from the combination of decentralized ledger technology and a SaaS business model.”
This platform provides a practical solution to the challenge of unverifiable data that often comes with environmental reporting. Whether it’s reporting one’s carbon emissions, the amount of bycatch in their fishing operations, or whether produce meets organic certification standards, it can be hard to independently verify data, especially with so many moving parts in complex supply chains.
VeChain’s platform, on the other hand “allows enterprise users to log key data and integrate it with world-leading third party assurance providers within VeChain’s partnership network”. Through every step of the supply chain, users can enter data, which is stored on the blockchain, and enables organizations to see their impact across the entirety of the process from production, to delivery, to sale.
3. Greater support for climate refugees through DeFi solutions
One of the unfortunate realities of climate change is that it will likely result in massive displacement of vulnerable populations, resulting in a new wave of refugees. The World Bank has estimated that there will be 143 million more climate migrants by 2050 from Latin America, Sub-Saharan Africa, and Southeast Asia.
Blockchain is well situated to provide innovative solutions to some of the most common challenges that refugees face, whether it’s the need to move money across borders, to have a system for storing credentials and identification, or the provision of aid including one-off support or an Unconditional Basic Income (UBI).
There are already many great projects in place that provide solutions to the challenges highlighted above. Leaf Global FinTech, for example, has developed an accessible solution for refugees and vulnerable populations which enables them to store and access their funds regardless of where they are, making it much easier to move money across borders. Impact Market, on the other hand, is using blockchain to provide UBI in the Celo cryptocurrency to individuals residing in vulnerable communities, including a number of refugee settlements.
4. Accessible decentralized insurance for vulnerable populations
With an increase in extreme weather events due to climate change, there will be an increased need for reliable and efficient insurance to protect individuals, especially in vulnerable communities, by providing them with financial security in the event of extreme weather events that impact their livelihood. Unfortunately, insurance is highly inequitable depending on where you live in the world and your financial situation. Insurance for those in developing countries can be prohibitively expensive, and thus, those from low-income backgrounds may not have protections on their homes or livelihoods in the event of extreme weather events.
Blockchain-based insurance platforms can help address this by providing decentralized insurance that cuts out the need for an intermediary, thus greatly reducing costs. One project that is doing this today, is Etherisc, an innovative, blockchain-based platform for crop insurance. Crop insurance, or agricultural insurance, is an essential tool for farmers looking to mitigate the impacts of unpredictable weather events and helps insure them against losses in crop yield due to environmental causes. Etherisc is built on the Ethereum blockchain and makes use of Chainlink’s oracle network which provides a reliable connection to external weather data sources. In the event of an extreme weather event, insurance policies are triggered automatically and payout the insurance to the policy holder.
5. Fundraising for environmental causes
Crypto fundraising has gained incredible momentum in recent years, with approximately $300,000,000 USD worth of cryptocurrency donated to charitable causes each year. One of the main ways in which cryptocurrency is donated, is through third party platforms such as The Giving Block. In fact, dozens of environmental-focused non-profits accept crypto donations through The Giving Block including Ocean Conservancy, Woman’s Earth Alliance, Rainforest Partnership, National Park Foundation, and many more. The Giving Block even operates an Environmental Impact Index Fund, where users can donate cryptocurrency which will be split amongst dozens of non-profit organizations included in the index.
We’ve also seen a number of environmentally focused NFT projects that raise awareness of environmental causes and donate funds to a variety of environmental charities. These include ConservatioNFT, SolTreez, and Crypto Coral Tribe, among many others.
6. A more efficient financial system
Blockchain can also help create a more efficient financial system by eliminating the need for legacy financial infrastructure. The infrastructure behind the global financial system is immense. First, there of course the hundreds of thousands of bank branches and the estimated 3.5 million ATMs. Then there are the head offices in towering skyscrapers, and all the background infrastructure, such as data centres that keep the financial networks running. In a previous blog, I highlighted one study that estimated the electricity consumption of the global banking system to be a whopping 263 TWh per year, more than twice that of Bitcoin.
In a world without the need for so many physical bank branches and ATMs, and with a greater reliance on digital currencies, there will also be less of a need for individuals to travel to banks to do business and withdraw or deposit cash. This, in theory, could help reduce Carbon emissions by keeping cars off the road and reducing gridlock.
7. Organizing communities around environmental causes
Decentralized organizations create new ways to organize the community that previously didn’t exist. They provide a structure that communities can take advantage of to organize, raise funds, influence decision making, and deliver important services. This could include local neighbourhood groups creating a DAO to raise funds to protect against climate emergencies, or a granting DAO providing grants in cryptocurrency in support of environmental causes. When it comes to DAOs, their potential as a tool to organize communities is truly amazing.
There are a couple great examples of projects making use of DAO structures and the web3 community to organize a community around their environmental cause. One example is ClimateDAO, which aims to make use of activist investing to drive climate action. Essentially, they pool together money from contributors and use the funds to purchase shares in publicly traded companies. They then use these positions to enact strategic change in the companies through proxy voting, initiating shareholder proposals, and advocacy.
Another example is EarthFund, a DAO governed by the 1Earth utility token, that organizes a decentralized community looking to tackle humanities biggest problems. The platform enables token holders to vote for and crowdfund “world-changing projects” such as the EarthFund Carbon capture project.
Conclusion
In it clear that blockchain can and should be an essential tool in the fight against climate change. Of course, blockchain is not a panacea for all of the environmental woes being felt in the world, but it can certainly go along way in helping address this urgent crisis.
Although the widescale implementation of some of these use cases may seem far off, all of them are already being used to some extent and have the potential for scalability. Only time will tell if this technology is used to its true potential, or if humanity misses out on all the amazing benefits and advantages that blockchain can bring to the fight against climate change. One can only hope the former will be true.
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