Never in the history of the world has environmental sustainability been more important to a large company. The planet is showing signs of dramatic change and citizens are demanding more accountability from all industries.
The blockchain community is often treated as part of that problem, much of it a misunderstanding. Blockchain technology could actually help the global shift towards a sustainable future.
The potential for sustainable blockchains is enormous, and the environmental benefits are too great to ignore. Of course, like any other industry, there are still challenges to be addressed, but they are already recognized and actively addressed.
Where else in the industry has the #2 project reduced energy consumption and greenhouse gas emissions by more than 99% in less than 10 years?
Sustainability in 2022
Today, the importance of environmentally sustainable business development is central to the general story. Big names have announced a variety of projects to tackle sustainability, and often do what they say they will.
However, many companies are half-conceived, with vague metrics and easily interpreted targets. The lack of transparent oversight and clear standards exacerbates the situation.
To improve their image, some companies make their efforts look more environmentally friendly than they actually are. This only serves the interests of business owners, and creates a sense of distrust among citizens.
Blockchain is often criticized for its environmental impact. While it is true that Bitcoin and other proof-of-work (PoW) chains have a large environmental impact, proof-of-stake (PoS) chains are extremely energy efficient. In fact, the Ethereum network moved to PoS and energy consumption decreased by 99.9%.
Additionally, efforts are underway to address Ethereum’s past energy consumption through the newly formed Ethereum Climate Platform (ECP). ECP includes ConsenSys, Microsoft, Aave, and Polygon.
Blockchain can be used to improve the tracking of greenhouse gas emissions for organizations in their supply chains and to verifiably prove emissions, such as through new green certifications.
Due to the inherent immutability, accountability and transparency of blockchain, blockchain can track environmental metrics such as carbon balance and hold companies to account for their sustainability claims.
For example, smart contracts can automate the process of tracking greenhouse gas emissions at every stage of a business. This information is reported to various surveillance services and can also be passed on to the public. The verifiability of the data, enabled by encryption technology, eliminates any forgery or ambiguity.
Advantages of cryptography
Cryptography also helps protect corporate privacy in reporting. With zero-knowledge proof technology, it is possible to present unforgeable evidence that can prove the correctness of information without disclosing the information.
In layman’s terms, companies can provide evidence of different energy consumption performance and greenhouse gas emission standards without exposing the underlying data. Companies are now reluctant to report the details of their businesses that contribute to greenhouse gas emissions.
Another avenue where blockchain could become a sustainability solution is the tokenization and distribution of environmental assets. A recent example is the rapid development of the carbon credit market. From certification bodies such as Verra and Gold Standard to international organizations such as the World Economic Forum (WEF), it is attracting attention from all over the world.
Projects such as KlimaDAO and Toucan are working to tokenize carbon credits, spurring important discussions about the future of carbon markets and how blockchain technology can be used.
There are also blockchain-native projects such as Nori that focus on solving the scaling issues and limited supply of the current carbon market. Nori’s forward-looking approach wasn’t widely recognized at first, but a recent partnership with Bayer has also opened up the possibility of large-scale deployment.
The United Nations (UN) is also calling on blockchain stakeholders to take action on climate change, supporting Web3 community-led efforts.
Blockchain’s role in environmental protection goes beyond energy footprints and carbon credits. In 2023, many systems with a focus on sustainability will be launched. Things like water consumption and plastic production can also be tracked and reported.
Governments and regulators can set clear acceptable levels of environmental impact in various industries and monitor them using blockchain. Not only is it good for the planet, but it can also streamline business processes by providing a clearer picture of greenhouse gas emissions.
Electricity grids can also be managed with blockchain and smart contracts. Power delivery can be largely automated and tracked, which makes energy consumption much more equitable.
Applications that improve energy demand management will also become easier and can provide incentives for electricity users. The huge potential that blockchain brings makes investment in renewable energy infrastructure more accessible.
The aforementioned ECP epitomizes the mentality of the Web3 industry as it grapples with this big challenge. Aside from attempts to reduce Ethereum’s past carbon footprint, ECP is also looking to create a positive impact by investing in scaling blockchain-powered greenhouse gas reduction technologies.
not a panacea
Another important potential for applications such as blockchain and DeFi (decentralized finance) lies in the global South (emerging economies in Africa, Latin America and Asia), which are most affected by climate change and business-induced consumption. Being able to provide tools that empower the community. In the supply chain, etc., it will bring about a high level of transparency and verifiability in the fair distribution of income and the improvement of treatment, and can create the next generation of fair trade.
Blockchain technology is definitely new, and no one believes that blockchain itself will be a panacea for dealing with climate change. But more industries should consider what blockchain technology can offer.
The first and most important point may be to hold companies that claim to be operating sustainably to account. But there are many other possibilities.
The world should abandon the perception that blockchain is just one of the problems and pay more attention to blockchain. Blockchain is supposed to be one of the solutions.
Mr. Stefan Renton: Head of Sustainability at Polygon.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Original: 2023: The Year Blockchain Becomes a Sustainability Solution