Climate change is accelerating, and dozens of industries are playing their part in the fight against it. The blockchain industry is no exception, coming under scrutiny recently for its role in increasing emissions. Luckily, being a young technology, blockchains are able to adapt and integrate new solutions more easily than long-established industries. In this blog post, we will look at what role sustainable development blockchain plays in combating climate change and reaching net-zero emissions, and the green blockchain projects that are already having a positive impact on the environment.
Blockchain for sustainable solutions to climate action
Climate change is heavily tied to current processes in the agricultural, construction, energy, and transport sectors of the economy. Environmentally friendly cryptocurrencies and blockchain technology can play an important role in the fight against climate change as countries, regions, cities, and businesses work together to implement the Paris Agreement on climate change. They need to use all available innovative and advanced technologies at their disposal, which includes the new generation of blockchain technology. Blockchain can streamline processes by eliminating intermediaries in the supply chain through decentralization and promote greater transparency. It can also foster greater stakeholder engagement as well as build trust in finance, leading to more action.
Blockchain sustainable development goals for climate action:
- Carbon trading. High-emission organizations using blockchain will be able to track their carbon footprints in real-time and meet quotas by purchasing carbon credits from low-emission countries.
- Clean energy trading. Blockchain technology will allow the development of peer-to-peer renewable energy trading platforms where consumers can sell or exchange renewable energy that is tokenized through assets.
- Increasing funding flows. Financial transactions involving international actors in the fight to improve the climate are becoming more complex, causing delays in funding. Blockchain platforms will be able to unite and simplify the management and control of financing, coordinate projects working to different goals, and manage those who are spread across different continents. This will increase efficiency, reduce transactions and make climate-related sustainable development more attractive to private investment.
- Better tracking and reporting. Blockchain technology can provide greater transparency about greenhouse gas emissions and make it easier to track and report on emissions reductions, eliminating potential double-counting issues.
The potential of blockchain and cryptocurrencies is enormous in the combat against climate change, but there is still work to do when it comes to reducing energy consumption. Below is a comparative table of consumption per transaction for the Bitcoin and Ethereum Proof-of-Work blockchains and the Ethereum 2.0 Proof-of-Stake blockchain.
Proof-of-Stake to address environmental concerns
Since 2016, there has been a gradual transition to Ethereum 2.0, in which the inefficient Proof-of-Work protocol will be replaced by the more energy-efficient Proof of Stake. Here, payments are processed by validators, and coins are mined using staking. This transition should help reduce high-energy consumption, solve scalability challenges, high fees, and slow transaction problems.
Proof-of-Stake means that validators handle the production of blocks and confirmation of transactions by maintaining a node on the network (requiring 32 locked ETH). A node can be a PC with a fast internet connection or any other data processor with specific software. They consume much less electricity than mining farms. Read more about Proof-of-Stake block validation here.
This model will significantly reduce the cost of network fees (by 99.95%) and, as stated above, successfully reduce energy consumption and environmental impact, thereby moving Ethereum into the green energy blockchain category. Experts predict that in total, Ethereum using Proof-of-Stake will consume about 2.62 megawatts. This energy consumption can be compared to the resource consumption of a small town in America.
Is blockchain technology a sustainable solution to reach net-zero emissions?
The introduction of innovative technologies, in particular blockchain, in activities related to reaching net-zero emissions, helps to find new efficient ways to preserve the environment.
Among the most suitable mechanisms for the practical application of blockchain technology to ensure the reduction and achievement of net-zero emissions are:
- resource rights management;
- traceability of the origin of raw materials or products;
- material incentives for environmental activities.
Below, we are going to describe 3 relevant blockchain projects aimed at achieving net-zero emissions.
Open Forest Protocol
Open Forest Protocol (OFP) launched a blockchain solution for accelerating the global response to climate change via (re)forestation initiatives. They’ve built a system that will allow people to access transparent measurement, reporting, and verification of reforestation and forest conservation projects, laying the foundation for an accelerated response to humanity’s greatest existential threat.
According to a UN report, Forests and Climate Change, forests and woodlands are important stores of the planet’s warming CO2, absorbing 30 percent of industrial emissions and fossil fuels. Their role in capturing and storing carbon is critical to reducing carbon dioxide emissions and achieving net-zero emissions.
OFP consists of a web application for data uploads from the field, a blockchain-based structure for the trust verification of environmental data, and the resultant open-source database upon which climate solutions can be built. Their tools allow anyone from around the world to start a forest project, credibly report its progress, and seek funding from global funders/investors.
The Open Forest Protocol Ecosystem is built on the NEAR protocol, a climate-neutral layer one blockchain. OFP uses NEAR to scale forest-based climate solutions. The blockchain advisor for the project is Igor Stadnyk, CEO of INC4.
“We were excited to take on this challenge as we knew it would be a huge step forward for the ecosystem, demonstrating NEAR’s ability to effectively and securely run such an important project on its blockchain.”, comments Alina Tustanovska, Chief Operating Officer at INC4.
Power Ledger is an Australian tech startup that developed the world’s first energy trading platform. Using blockchain technology, the company helps people exchange energy, trade green goods, and invest in renewable energy.
For example, users can sell surplus energy from their solar panels to their neighbors or sell stored solar energy. They set prices on their own in order to trade energy at a cost advantageous to them. All transactions are recorded on the blockchain, which ensures the safety and transparency of transactions.
Blockchain technology can play an important role in providing new technological solutions to address pressing environmental problems, including climate change, biodiversity loss, ocean & air pollution, water management, and waste reduction. Solutions built using blockchain technology can open new sources of funding for environmental programs, allowing different people to help combat climate change.
As we can see, there are a lot of innovative projects that are actively helping to achieve climate goals – rather than being another problem, blockchain can present solutions for all sectors to use.
INC4 provides a full range of blockchain solutions for modern businesses, such as smart contract development, blockchain development, dApps, DeFi, mining software, wallets, or any other unique DLT solutions. Get in touch to receive a free consultation of your business.