Blockchain and Sustainability: a relationship to discover

21 November 2018Laura Silva

In this blog series on sustainability, I have so far looked at the relationship between technology and sustainability generally and done a closer analysis of the sustainability use cases of Artificial Intelligence. In this third and final blog in the series, it’s time to reflect on the impact on sustainability of another interesting and much debated technology, blockchain.

With its roots in the financial system, blockchain is still - in spite of the recent “fever” - a relatively new concept to most. It is a digital and decentralised ledger where transparent transactions occur, through digital currencies such as Bitcoin, that are publicly and permanently recorded in the system.
Most discussion about blockchain up to now has been centered around cryptocurrencies. We saw this particularly at the end of last year, when we witnessed an exponential growth in value of digital currencies, with bitcoin leading the way.

However, over time, new conversations have sprung up around uses of the technology behind blockchain, commonly known as distributed ledger technology. Together with the development of Ethereum and the emergence of smart contracts, these conversations have uncovered new potential to bring major innovation to the public sector, healthcare, social security and other areas of society and our communities.

But how exactly? A clear connection between blockchain and sustainability may not be obvious at first glance. However, taking a closer look, it becomes clear that blockchain could effectively play a massive role in fostering sustainable development. As the technology evangelist Vinay Gupta stated last July  during his session (you can watch it here) at the leading UK innovation foundation, Future Fest. 

Transparency and trust as levers for sustainable development

The greatest positive societal impact to be derived via blockchain is the result of its core, game-changing attribute: increased transparency. In the blockchain ecosystem control is decentralised, data and transactions are publicly available and cannot be privately modified. A direct consequence is enhanced trust between all parties involved in any transaction; reducing risks, inefficiencies and transaction costs. And this has incredible, global and local, sustainability-related consequences.

On a global scale

On a worldwide scale, the first thing that comes to mind are global supply chain processes and structures. These are likely to be overhauled and disrupted by blockchain. Traditionally, supply chain opacity has led to waste, inefficiencies and human rights abuse. The lack of visibility makes it hard for small farmers or producers - at the very bottom of the supply chain - to be treated fairly as they end up being exploited by unscrupulous intermediaries. Using a blockchain-based ledger would give transparent tracking of the source of raw materials and ensure that producers get the payments they deserve. 

We can see this happening, in various industries. Within the food sector for example, Starbucks has launched the programme Bean to Cup, which supports coffee farmers in Costa Rica, Colombia and Rwanda enabling them to log and share data on a common ledger.

In the fashion industry, that has seen major sweatshop scandals, consumers are becoming increasingly interested in ethical production. Organisations, such as the NGO, Hecho por Nosotros, are now working with small textile producers to increase awareness around the value of what they produce, sharing the information as data on the blockchain with final consumers.

Blockchain is also making huge inroads in improving philanthropic transparency. It’s no secret that large social investments in developing countries are sometimes incorrectly and unethically redirected. Through blockchain, funds can be better tracked - with the guarantee that they reach their destination - which could, in turn, increase investments with sustainability objectives. The BitGive Foundation, an association aimed at improving philanthropic impact via blockchain technology, has launched an initiative called “Givetrack” which allows donors and the public to keep record of all transactions in real time.

A national perspective

Blockchain technology is being tested and used by an increasing number of enlightened governments with various purposes, mainly to reduce bureaucracy as well as defeat illegitimate or unfair use of funds. At its core, this means contributing to the ability to maintain peace and stable institutions and advance the rule of law in many developing countries where corruption is high and preventing economic growth.

For example, the Georgian government has been pioneering to convert their land registry to blockchain. This ensures titles over land, by digitally recording any sale, registration of new mortgages, rentals and notary services. The transformation has diminished corruption within the government, where the exchange of land titles - and the associated power with them - has traditionally been one of the major problems.

In Kenya a number of startups such as BenBen and Bitland are using the same blockchain-based real estate registry approach to tackle the phenomenon of land-grabbing by foreign private investors.  Land grabbing is one of the most pressing issues for governments in developing countries. Not only are acquired lands often unsustainably and inefficiently exploited but, following the sale, local populations are generally displaced and forced to move away.

The local dimension

Narrowing down the geogrpahic scope, blockchain could support and develop local communities, by enabling a 2.0 version of local currencies. Local currencies are not a new thing. In the UK, the Brixton pound was launched in 2009, followed by the Bristol pound in 2012 and Totnes and Kingston pounds in 2014. Local currencies keep money within the local community, supporting shops and businesses in the area and improving the local quality of life. 

Blockchain-based local currencies are pegged to the national currency (so there’s no risk of hyper valuation as for bitcoin) and allow users to easily pay digitally in the currency and gain rewards for it.
I have been using the East London Pound, a digital local currency launched last year, in cafes, bakeries and shops in my local area. I normally pay through my digital wallet in an easy and flexible way. Using it, I have got to know new people and discovered what’s going on in my neighbourhood, as well as taken advantage of special discounts.

Sounds good but what are the risks?

The examples I have given represent a tiny sample of the potential future uses of blockchain to advance sustainable transformation and there is still much debate around this technology.  This is firstly due to the fact that blockchain is  truly complicated and understanding it properly requires plenty of time and probably a computer science skillset. 

Indeed the potential negatives, which are often less discussed, can be underestimated. For example, the actual cost of adding transactions to the chain (in jargon, “mining”) is going up and verifying transactions requires an increasing amount of computing power and energy. Shockingly, bitcoin transactions currently use approximately as much electricity a year as Morocco, as reported by the Economist. Experts across the world are, however, working to find potential alternative solutions to improve energy efficiency and make the whole system more sustainable.

Blockchain has also developed a bad reputation over time, being identified with a black market where drugs, weapons and other illicit goods can be purchased. This is not helped by the fact that many governments are still sceptical about the technology and therefore tend to be narrowly involved, which results in lack of regulation and protection. 

Nonetheless, there is no doubt that blockchain remains a future disruptor that will drastically change the way people and businesses interact with each other. Time will shed greater light on the actual adoption of this technology, as well as on its implications for sustainability. Some of the applications mentioned above may be realised in the short term, others in the long term, others not at all. However, taking a view of the bigger picture and gaining some understanding now seems like a good strategy. After all, if one has the opportunity to be slightly ahead of the game,  it’s always worth taking it. 

Author: Laura Silva
Published: 21 November 2018
blockchainsustainabilitytechnologysecurityfuture ready

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