Sustainable economic models are becoming increasingly important for companies and end users. At the same time, blockchain technology is seen as the main topic of the future, although it is often associated with high energy consumption and low environmental compatibility.
It is true that blockchain does not have a good reputation because of its ecological footprint. This is due to the fact that, despite the growing knowledge, this term is often still strongly associated with cryptocurrencies such as Bitcoin. They are all listed at Coinmarketrate.com , and all of them are really energy intensive.
Mining, that is, the proof-of-work (POW) algorithm, with which transactions are verified and new coins are generated, is associated with very high computational costs. This is especially important for Bitcoin. Each individual transaction now consumed as much energy as 1.5 average American households per day. The scalability of this currency is rightly questioned.
High energy consumption should also be treated critically, since, for example, most of the cryptocurrency mining was conducted in China. The electricity needed for this often came from coal-fired power plants, so it was extremely harmful to the climate.
With the migration of miners to the USA and Kazakhstan, the whole picture has changed. Now the production of military-technical equipment is mainly carried out from renewable energy sources.
But Bitcoin is not a blockchain, and blockchain is not Bitcoin. In fact, the energy-intensive PoW algorithm has a number of advantages. It’s nice to see how many major energy service providers around the world are already actively engaged in Bitcoin mining, and some of them are even creating their own computer chips.
And what about blockchain applications, besides cryptocurrencies? They are automatically more environmentally friendly.
In the field of blockchain as a technology for companies, there are now many alternatives to PoW that consume less, or even zero energy. For example, a node (in other words, an “access point”) can be installed on an existing server. Depending on the type of application, a protocol with PoW may also make sense, and should not be environmentally harmful.
However, most companies rely on less energy-intensive methods: in a corporate network or a network between well-known consortium members, such strong protection as with Bitcoin is simply not needed. Today we can choose from many different algorithms. Each option has advantages and disadvantages that need to be weighed in terms of application as well as compatibility with the environment.
Most applications with blockchain technology or distributed ledger technology (DLT), which are developed for corporate purposes, can do without energy-intensive PoW. The prerequisite for this is networks that are not freely available, like the Bitcoin network, but require permission.
Instead of proof of work, for example, proof of ownership (POS) can be used to verify and reach consensus. This reduces the required computing power and, consequently, the energy requirement by many times, but these solutions still provide the desired performance.
Can blockchain technology contribute to environmental protection?
One of the important topics is protection against counterfeiting. Counterfeit products are often very contaminated, and therefore pose a threat to the environment.
The new open source blockchain platforms are aimed at raising awareness about the energy consumption of publicly available blockchains and, at the same time, at demonstrating ways to counteract the effects on our climate.
Sustainability has more than just an environmental dimension. Do not forget about the social compatibility of blockchain solutions.
Anti-counterfeiting and production tracking have an ethical component in addition to an environmental one. In addition to protecting consumers, blockchain can ensure that goods were produced in responsible conditions. These decisions are gradually being approved and guarantee fair working conditions in accordance with human rights, not only in the segment of fair trade goods.
Another aspect: in some markets, up to 70 percent of medicines are fake. An estimated 100,000 people worldwide die each year from taking counterfeit medicines. Technology that can prove the authenticity of medical products helps to reduce the risk and smooth out discrepancies in this matter between countries.
As for technologies, the blockchain allows the use of smart contracts that automatically come into force under certain, mutually agreed and unchangeable conditions. This principle can be used, for example, for automatic payments. Thus, delays in payment or withholding of payments are not possible.
The entire business world can benefit from a more trusting, transparent and direct relationship. This also corresponds to the basic idea of the technology: in the Bitcoin Genesis block, inventor Satoshi Nakamoto marked up a message that talks about the collapse of Lehman Brothers and the beginning of the financial crisis. A transparent network in which transactions can be viewed and monitored by everyone, eliminates any corruption in case of acceptance.
Updating the ecological balance and the image of the blockchain
An important condition is to raise public awareness about the difference between blockchain technology and cryptocurrencies. The fact that Bitcoin has a very high energy consumption, which, for example, exceeds the consumption of countries such as Switzerland, is still being discussed in the media. We need more information that there are fundamental differences between Bitcoin and blockchain applications that are now being implemented in practice.
Due to the growing demands for environmentally friendly economic models, the technical development of blockchains that are used for corporate applications is steadily moving forward. We are already on the right track: applications that work to improve the world and, for example, save energy or avoid waste, more than compensate for their energy consumption. This balance will be even better in the future.
Companies are changing: production, products and services are becoming more interconnected and intelligent. As companies change, processes, business models, and ways companies interact with customers and partners change. Blockchain technologies offer interesting opportunities with great potential, especially for connecting machines or “things” with each other (IoT), up to microtransactions based on individual powers of attorney.
On this basis, for example, the coffee maker can independently reorder consumables such as coffee capsules and cleaning products. New payment models for expensive machines in industrial production are also possible: instead of buying such machines, for example, you can enter a payment model upon use. Manufacturers will receive a continuous cash flow, while for smaller companies the obstacles to acquiring such a machine will decrease.
Trust costs Energy
However, the biggest advantage of blockchain technologies is something that is indispensable for any interaction: trust. But this is exactly what presents a serious problem.: as in “analog” interactions, it is difficult to create trust when using blockchain. In order for the data in the block chain to be protected from forgery, they must be verified. This is done by solving algorithms, and this requires huge computing power. If it weren’t for that, it would be too easy to falsify information and thus trust it. But computing power has its price: high energy consumption and, as a result, high CO2 emissions.
If blockchain technologies are to be used successfully and on a large scale, then it is necessary to pay more attention to energy consumption and, consequently, the problem of sustainability.