Crypto, blockchain, and the environment: the other side
One of the most prominent critiques of cryptocurrencies, and Bitcoin specifically, is that the mining process associated with its proof-of-work protocol is highly carbon intensive. Some have gone so far as to claim Bitcoin is an environmental catastrophe, and that it is responsible for “setting the oceans on fire!!”
The purpose of this post is not to dispute this claim, although I have challenged it in a previous blog post. Instead, I want to shine a light on some of the positive use cases of cryptocurrency and blockchain in fighting climate change. This post will be the first, an introduction if you will, in a new series called Crypto, blockchain, and the environment: the other side.
For far too long, the prevailing narrative has focused on the negative aspects of crypto and blockchain as it related 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.
According to the United Nations:
In this post, we are going to take a brief look at some of these benefits and exciting use cases. It will by no means be a deep dive, but in future posts in this series, I will be addressing each of these areas in greater depth. For this overview, we will be highlighting three categories of use cases: transparency and accountability, the efficient provision of financial services, and supporting vulnerable populations.
Transparency and accountability
One of the most obvious use cases for blockchain and cryptocurrency, as it pertains to climate change, is its ability to increase accountability and transparency. As countries set more aggressive targets to curb carbon emissions, and the public demands greater accountability for polluters, it will be important to ensure that trustworthy and reliable processes are in place to monitor emissions and other forms of waste.
One project that aims to do just this is VeChain’s Digital Carbon Footprint SaaS platform. This platform “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. This allows companies to more easily track the overall carbon footprint of their operations.
Another application of this technology by VeChain can be seen in their partnership with ReSea, a non-profit organization that aims to end the ocean plastic crisis. ReSea, in partnership with VeChain and DNV, created a blockchain-based process for tracking the removal of plastic from the ocean, ensuring an easily auditable supply chain from removal, all the way to disposal and repurposing of the plastic.
Technology such as that demonstrated in VeChain’s solutions could enable monitoring agencies to more efficiently and reliably track carbon footprints, clean up efforts, and much more, to help ensure they are able to hold polluters accountable for their climate impacts.
Efficient provision of financial services
Although Bitcoin typically gets a bad rap for the energy intensity of its proof-of-work protocol, the environmental impact of the global financial sector is far worse. 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.
Since then, there has been much in the news about strides being made by Bitcoin miners to use more eco-friendly energy sources for their operations. But of course Bitcoin isn’t the only player in the game, and there are other cryptocurrencies and DeFi projects that are highly energy efficient, such as Algorand, Cardano, and Solana, among others.
If the world were to largely adopt a more decentralized financial system, it could drastically cut down on energy consumption, as well as the massive physical footprint of the global financial sector. It may be optimistic to think that DeFi will ultimately replace the legacy banking systems, but if it did, the environmental benefits could be immense.
Supporting vulnerable populations
Although there is still much that can be done to prevent the climate crisis from worsening, unfortunately there has already been irreversible damage to the climate. A recent report from the UN’s Intergovernmental Panel on Climate Change highlights how greenhouse gases in the atmosphere have already reached levels high enough to all but guarantee climate disruptions for the foreseeable future.
That being said, in addition to working to stop the crisis from getting worse, it is also important to consider how blockchain and crypto can be used to support vulnerable populations who are most likely to be impacted by climate change.
One way this can be done, is by using blockchain technology to ensure aid can get to those most in need as quickly as possible. There are already multiple blockchain start-ups that are testing novel ways to provide aid directly to beneficiaries. One of these projects, Rahat, which was launched in Nepal, uses mobile-based blockchain tokens to rapidly provide aid to victims of natural disasters, which can then be spent at vendors for essential supplies. A similar project, developed by the World Food Programme, was rolled out to 100,000 people in refugee camps in Jordan to simplify the process of purchasing groceries. For this program, the funds provided to beneficiaries are stored on an account maintained on a blockchain, and they need only scan their iris (that’s right, their eye!) to spend their funds at the local grocery store. This cuts out the need for financial middlemen, and beneficiaries do not have to worry about securing cash or a food voucher. In the event of disasters due to climate change, similar applications could allow for the rapid disbursement of aid to beneficiaries.
Beyond providing direct financial aid to those in need, there are also ways that smart contracts can be used to mitigate the impacts of climate change on the most vulnerable. Recently, I highlighted Etherisc, a project built on the Ethereum blockchain that utilizes smart contracts and the Chainlink oracle to provide affordable crop insurance to smallholder farmers in Sub-Saharan Africa. Crop insurance helps protect farmers by insuring them against losses due to environmental causes, but often, this vital insurance is prohibitively expensive.
Etherisc uses smart contracts to automatically make insurance payouts during extreme weather events that are tied in to the blockchain via Chainlink’s oracle network. The end result is a fair, transparent, and tamper proof process, where payouts are made in a timely manner. Furthermore, it is estimated that this technology will reduce the costs required to issue a policy by 41%, making it much more affordable to low-income farmers.
These three projects showcase some of the ways that cryptocurrency and blockchain can be used to support vulnerable populations by providing more rapid and trustworthy responses to climate-change related disasters and extreme weather.
Conclusion
Above, I highlighted three potential use cases for blockchain and cryptocurrency in the fight against climate change. Despite the bad rap that crypto has received when it comes to the environment, it is clear that the potential is there for it to be a serious force in combatting climate change and supporting those most vulnerable to its adverse effects.
Although the widescale implementation of these use cases may seem far off, all of them are already being put to use to some extent, and have the potential for scalability. I look forward to digging into these use cases further in future parts of this series, with a deeper dive in to each of these three areas, and the potential for scaling and wide-scale implementation.
What are some of the other use cases of crypto and blockchain when it comes to fighting climate change? What do you think of the three use cases highlighted above? Tweet us at @Crypto_Altruism, we’d love to hear from you.
