Bitcoin has been hailed as ‘the future of money.’ As I write this, a single bitcoin is worth over $34,000 USD. In 2009, when Bitcoin was released, a single bitcoin was worth $0.0008. That is less than one tenth of a cent. In between, billionaires have been made. Bitcoin’s incredible rise in value and popularity occurred primarily due to the novel technology it is based on, called blockchain.
Blockchain is an extremely secure record-keeping system, invented as a public transaction ledger for Bitcoin. Transaction records are created in batches called blocks, which are validated, chained together cryptographically, and stored on a distributed network of computers. The appeal of the technology lies in the fact that transaction records are stored permanently and openly and are virtually impossible to tamper with. Every record has an exact time and sequence and cannot be altered, deleted or undone. This has led to a tremendous number of potential uses, ranging from financial services to healthcare to supply chains to conservation.
Blockchain technology is tamper-proof largely because of the transaction verification system, called a “consensus method” (so named because the entire network must agree on the validity of each transaction). The consensus method used by Bitcoin is called proof of work. The idea behind proof of work is that every time a block is added to the blockchain, a complex mathematical problem must be solved as “proof” that the block is valid. In the case of Bitcoin, these mathematical problems are solved by a network of “miners” using powerful computers dedicated to the task. They all compete across the network and are rewarded with small amounts of Bitcoin each time their computers successfully solve a problem. The reward ensures there will be plenty of miners, and the miners in turn prevent fraud, because adding a fraudulent transaction to the blockchain would require more computing power than the entire network of competing miners.
The downside of proof of work is that it requires tremendous quantities of energy. The Cambridge Bitcoin Electricity Consumption Index (CBECI) shows that Bitcoin’s mining network currently consumes an estimated 105 TWh of electricity per year, which is 0.48% of the entire world electricity consumption. For reference, this puts it somewhere between the nations of Kazakhstan (population 18.7 million) and the Netherlands (population 17.5 million). This number is expected to increase as Bitcoin’s popularity and price continue to rise, such that Bitcoin is seen as a threat to the planet (Truby, 2018). In fact, it’s been suggested that the electricity demand from Bitcoin mining could create enough CO2 emissions to warm the planet by 2 degrees Celsius within a few decades (Mora et al., 2018).
However, there are two caveats to consider. First, research by CoinShares estimated that at least 74% of Bitcoin mining activity is powered by renewable electricity, as miners are largely distributed in areas where hydroelectric power is abundant (Bendiksen and Gibbons, 2019). Second, proof of work is not the only blockchain consensus method being used. For example, Ethereum, another popular cryptocurrency, is switching from proof of work to a consensus method called proof of stake. In proof of stake, a “committee” of validators is randomly selected from a pool, all of whom must put up a certain number of their own tokens (e.g. coins) as collateral in order to create and validate new blocks on the blockchain. The proof in this case is the “stake”, the tokens themselves, which the validator will lose if they attempt to verify fraudulent transactions. Overcoming this would require massive amounts of tokens. As an incentive, the validators are rewarded with some amount of the transaction fees that are required for transactions on the network. And because there are no mathematical problems to solve, the energy usage required for proof of stake is minimal. Proof of stake and other alternative consensus methods have not been as well tested as proof of work, and skepticism remains as to whether any of them will ultimately be successfully. However, the fact that such alternatives are being actively researched and implemented (especially in Ethereum, which is the second-largest cryptocurrency behind Bitcoin) offers hope that the environmental threat posed by blockchain technology will diminish or even disappear over time.
The same verification protocols that render blockchain technology a potential threat make it an innovative and useful conservation tool. For example, products can be traced from source to destination to verify sustainability or compliance with environmental standards. A company called Provenance created a blockchain system for verified tracking of yellowfin and skipjack tuna fish caught by fishermen in Indonesia (the largest tuna-producing country) all the way to the point of sale (Le Sève et al., 2018; Provenance, 2018).
Another use of blockchain for conservation is in providing incentives to landowners to reward them for conserving forested land instead of allowing it to be cleared. Large companies may place a lot of pressure on landowners in ecologically rich low-income countries to convert their environmental resources into money by clearing forests for palm oil plantations or cattle grazing. This can be counteracted through blockchain technology by offering value in the form of climate or water credits that can be converted to other currencies. For example, GainForest uses crowdfunding to reward farmers in the Amazon for preserving rainforest. Farmers are paid through blockchain and rainforest preservation is verified by remote sensing satellites (Greene, 2018; Le Sève et al., 2018).
Power Ledger uses blockchain technology for peer-to-peer trading of renewable energy on a decentralized energy system (Le Sève et al., 2018; UNDP, 2018). This provides incentives for installing renewable energy sources, as any excess energy produced can be sold for profit. Energy sources can also be traced and verified through the blockchain to ensure renewability.
Plastic Bank recycles plastic waste, using plastic as a form of currency to help people in developing nations who are living in poverty (Katz, 2019). Plastic bottle collectors can exchange collected plastic waste for money, items, or services such as school tuition, medical insurance, and internet access, through a blockchain-based app. The plastic waste is then sold back to manufacturers to be reintroduced into the supply chain. Plastic Bank currently operates in Haiti, the Philippines and Indonesia, and has collected more than 14 million kilograms of plastic waste from the ocean.
Blockchain technology is still in its infancy, and these pioneering examples only scratch the surface of what is possible. However, there are significant problems that need to be solved, and many of the solutions must come from governmental policies. Access to blockchain requires access to the internet, but a 2018 report by the World Bank found that only 14% of people in countries classed as low-income had access to fast, reliable internet (World Bank, 2018). This compares to 82% of people in high-income countries. Therefore, an internet-dependent solution to reducing economic inequality must begin with an increase in the distribution of reliable internet access to poor and rural communities. Richer countries must incentivize and aid poorer countries to invest in improvements to their digital infrastructure. This is certain to be a complex and challenging task.
Energy use should also be reduced in order to ensure net positive effects on the environment. The energy-intensive proof of work consensus method should be avoided and replaced with low energy consensus methods such as proof of stake. Governments can promote this change through regulations, taxes or carbon-based registration fees (Truby, 2018). But this task must be approached with care, because forcing changes on existing blockchains could undermine trust in the system, and aggressive regulations could discourage new startups and growth in the industry (Truby, 2018).
If these problems are solved, blockchain technology could be a game changer. With its promise of decentralization, transparent, tamper-proof transaction records, and international tokens which have the same value in the poorest countries as they do in the richest, blockchain technology has the potential to help reduce global economic inequality and promote environmental sustainability (both directly and as a consequence of reduced economic inequality).
Bendiksen, C., & Gibbons, S. (2019). The Bitcoin Mining Network: Trends, Composition, Average Creation Cost, Electricity Consumption & Sources.
Katz, D. (2019). Plastic Bank: launching Social Plastic® revolution. Field Actions Science Reports. The journal of field actions, (Special Issue 19), 96-99.
Le Sève, M. D., Mason, N., & Nassiry, D. (2018). Delivering blockchain’s potential for environmental sustainability.
Provenance (2018) ‘From shore to plate: tracking tuna on the blockchain. Provenance’. Report. London: Provenance
Truby, J. (2018). Decarbonizing Bitcoin: Law and policy choices for reducing the energy consumption of Blockchain technologies and digital currencies. Energy research & social science, 44, 399-410.
UNDP (2018) The future is decentralised: blockchains, distributed ledgers and the future of sustainable development. New York: UNDP.
World Bank (2018) ‘Individuals using the internet.’ World Bank Data.