Sometime in January twelve years ago, protesters occupied Wall Street’s Zuccotti Park to protest economic inequality, while an anonymous developer deployed the original reference implementation of Bitcoin.
Among the first 50 transactions was this cryptic message, “The Times reported on January 3, 2009 that the Chancellor of the Exchequer was about to launch a second round of bailouts for banks.” For me and many others, this is a clear indication of the intent of Bitcoin’s emergence to provide an alternative to the unjust global financial system controlled by central banks and politicians. The application of blockchain technology with a focus on social impact is a core part of this space. Back in 2013, when I first explored the potential for impact that blockchain technology could have in the supply chain, others began using these decentralized networks to provide equitable banking, tracking charitable donations, and carbon credits for those who were unbanked.
So what makes blockchain technology an effective tool that can build a more equitable, sustainable world? Most importantly, do the growing carbon emissions of blockchain render these benefits meaningless?
What makes blockchain a powerful tool with social impact?
Blockchain has the ability to drive positive impact on a wide scale. Part of this power lies in the consistency of the value creation that users achieve through participation in the network. Unlike centralized networks like Facebook, Twitter or Uber where only a very small number of shareholders control and benefit from the network’s growth, blockchain enables incentive systems that benefit the entire network.
When I first experimented with blockchain technology, I saw an incentive system so powerful that it might retool capitalism, and that’s why I chose to try it. The power of a decentralized network lies in its transparency. Any transaction on the blockchain is verified by multiple parties, and no one can edit the data without informing the entire network.
Unlike the secretive and ever-changing algorithms of large tech companies, blockchain contracts are public, as are the laws around who can change them and how. The result is a tamper-proof, transparent system, and as a result, blockchains have earned the proverbial “trust machine” reputation. Thanks to these characteristics, applications built on blockchain have the potential to have a positive impact on society and the environment, both in terms of wealth distribution and in terms of reconciling finance with nature.
Blockchain can enable the unification of basic income through a system similar to Circles, can drive local currency reform through a system similar to Colu, can promote an inclusive financial system through a system similar to Celo, can popularize pass-throughs through a system similar to Cash App, and can even promote the Seeds and Regen Network through a system similar to Environmental asset protection. (Editor’s note: Circles, Colu, Celo, Cash App, Seeds, and Regen are all blockchain projects) I am passionate about the potential for positive system change created by blockchain technology. Beyond that, we can incentivize a circular economy and revolutionize the way charitable donations are distributed. We’ve barely scratched the surface of the applications that can change the world based on blockchain technology. However, Bitcoin and other similar public blockchains have a huge drawback; they consume a very large and growing amount of energy.
Blockchains consume energy by design, but there is another way
The way transactions are secured and trusted on the blockchain is highly energy intensive. In fact, blockchain currently accounts for 0.58% of global electricity use, while bitcoin mining alone consumes almost as much electricity as the entire U.S. federal government. This means that when discussing sustainability and blockchain technology today, you have to balance the long-term system benefits with the immediate need to reduce fossil fuel consumption. Fortunately, there are greener ways to power the public chain. One of the most promising solutions is “Proof of Stake,” a consensus mechanism that does away with the energy-intensive mining process required by Proof of Work (PoW) and instead relies on network participants to place financial assets on their future trustworthiness. As the world’s second largest crypto asset community, the Ether community has invested nearly $9 billion in PoS proof-of-stake and will implement the consensus mechanism as early as October.
A Bloomberg report this week hinted that the shift could reduce Ether’s energy consumption by more than 99 percent. There is also a conscious drive in the crypto community to address energy consumption, or rather, blockchain technology is accelerating the adoption of more environmentally friendly energy sources. Last month, a new Crypto Climate Agreement (CCA) was launched by Ripple, the World Economic Forum, Consensys, Coin Shares and the Energy Networks Foundation, among others, which states that by 2025, all blockchains worldwide will use 100% renewable energy. Today, the carbon cost of blockchain limits its overall value-add. However, if PoS Proof of Stake proves to be as beneficial as PoW Proof of Work, this will open up a climate-friendly tool that can incentivize sustainability and increase trust at scale. The potential for this is enormous.
Building a fairer, more transparent future on the blockchain
Today, we cannot ignore the growing carbon footprint of the blockchain. However, with a dramatic change in both the amount and type of energy used in blockchain technology, we could soon create a tool to incentivize social and environmental progress at scale. As with any new technology, the path of blockchain from concept to actual solutions for businesses is not a straight line, and you may have witnessed or overseen projects that failed to deliver, and I understand where there may be skepticism.
But with incredible applications emerging every day, and serious thought and investment in being able to reduce blockchain energy consumption, let’s not write off the value that blockchain technology can bring. The opportunities of blockchain technology for business and our planet are enormous, especially in terms of increasing trust through public transparency.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/blockchain-and-sustainability-an-oxymoron-or-a-panacea/
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