Blockchain — how can technology impact our journey to a sustainable future?

Blockchain — how can technology impact our journey to a sustainable future?

Image via NASA on Unsplash

Blockchain technology can be applied beyond cryptocurrencies that are often mistakenly considered synonymous. Instead, this articles looks at the application of blockchain for sustainability and an enhancement of social trust.

Blockchain technology — an emerging paradigm-shift comparable to the rise of the Internet:[1] promising decentralization of power, transparency, and security with over $1bn of venture capital money already invested in blockchain-related companies.[2] The technology makes organizations re-think our model of governance, as well as sharing and storing information.

Short recap — what is blockchain?

Blockchain is a type of distributed database hosted across a network of multiple participants. It provides a way to share information and transfer digital assets in a fast, tracked and secure way (Ko & Verity, 2016). The World Economic Forum (2017) defines blockchain technology as “distributed, not centralized (unlike the internet); open, not hidden; inclusive, not exclusive; immutable, not alterable; and secure.”

What is more, the information or assets on the blockchain are accountable and tamper-proof — the transaction cannot be influenced, hacked or reversed. These qualities are enabled thanks to the cryptography technology that takes the place of central entities. Information stored on blockchain can be any token of value or shared data value. Consequently, it can be anything from monetary payments to intellectual property and personal data (Ko & Verity, 2016).

How does it function?

Essentially, blockchain technology allows actors to exchange information with no central entities. Instead, it automatically creates and maintains a distributed network. The blockchain network constitutes numerous individual computers called ‘miners’, which comprise the supply-side of the network.

The information is parcelled up into blocks and sealed. Each block is then added to the previous one to form a chain. By using distributed ledger technology, the ‘chain of blocks’ is not stored centrally, but copied and distributed around an entire network of actors — could be individuals, NGO’s, public institutions, businesses. Each time someone adds a new block to the chain, it is added to everyone’s copy simultaneously. [3]

Transaction process on a blockchain. [3]

Trust — essential social fabric

Blockchain is often referred to as ‘trustless’ or ‘trust minimizing’. That is due to its inherent nature — being based on cryptography technology and consensus algorithm — blockchain technology is decentralized, transparent and verifiable. This, in turn, creates trust among the actors on the block, people or organizations, because trust no longer serves as an issue. [3] Essentially the combination of transparency, immutability, resiliency, and decentralization creates a secure space, where the integrity of the entire system — every participant and every transaction — is supported by the network.

Considerably, one of the fundamental aspects of Social Sustainability Principles stresses the importance of trust. There are several essential elements of a vital and resilient social fabric. Trust stands out as especially important.

Trust can be seen as the glue holding social systems together. It is associated with low levels of corruption, democratic stability, and relative economic equality. When people trust each other, independent of gender, age, culture, and competence, it is easier to collaborate and to be creative together. And, when people trust public institutions it becomes easier to build a well-functioning society. Vice versa, when trust erodes we experience increasing problems with, for example, segregation, corruption, conflicts and higher crime rates.[4]

Therefore, blockchain can play a vital role in facilitating the creation of resilient social structures. That means more inclusivity with an equalized power among people. Thanks to a decentralized information, each person has a transparent access to the information stored on blockchain. This, in turn, can lead to a more transparent, responsible society.

Blockchain and Sustainability

Blockchain allows people to trade and share information directly with each other, cutting out the need for middlemen and creating a decentralized network. Thus, unsurprisingly centralized bodies, traditional institutions, and governments are hesitant or even hostile towards the technology. Particularly, the cryptocurrencies are on a radar, with China and Vietnam introducing a ban on cryptocurrencies in 2017.[5]

However, there is another side of the coin to this issue. According to the recent publication by the United Nations Development Program:

“the transformative power of blockchain technology should not be seen as a threat to existing systems of governance; rather, it should be seen as an opportunity for national and international institutions to defend the rights of those they represent and to accelerate our collective progress towards meeting the United Nations’ Sustainable Development Goals.”

What is more, the authors argue that blockchain can bring transparency to complex, opaque, and corrupt systems. The technology is able to provide verifiability to commercial processes. Significantly, it can ensure individual privacy and at the same time guarantee autonomy, as well as bring security and resilience to vulnerable infrastructure. Blockchain can facilitate a variety of sustainability, humanitarian and environmental initiatives in fulfilling their full potential.[3]

Consequently, there are numerous blockchain-based applications that create opportunities for a more sustainable world:

1. Increased transparency in the opaque, complex supply chain; transparent information about the individual and collective action.

2. Reduced bureaucracy and power asymmetries; strengthened accountability loops.

3. Incentivize socially responsible and environmentally friendly behaviour with purpose-driven tokens.[6]

Let’s look into one example of the blockchain based application for sustainability.

Case: Proof of plastic recycling — turning plastic waste into a digital currency

Plastic Bank — a social enterprise based in Vancouver, Canada aims to use recycling to reduce ocean plastic and global poverty. Started in 2013, the enterprise currently operates in Haiti, and recently the Philippines, with plans to expand to Brazil and Indonesia.

The company encourages people to collect plastic waste and deliver it to the local processing centers.

David Katz, founder of Plastic Bank explains: “I realized we had to challenge our perception of plastic and make it too valuable a commodity to simply throw away into a river or stream”.

Thus, as a reward, collectors can receive a payment in money, or other life-changing rewards like schooling for their children, food or phone top-ups. Recently, another form of payment became possible, as Plastic Bank partnered with IBM to unveil another innovation.[7] Blockchain technology is implemented to track the entire cycle of recycled plastic from collection, credit, and compensation through delivery to companies for re-use. The system based on blockchain-powered token rewards supports the recycling of plastic waste and incentivizes the collection of plastic in exchange for valuable commodities.

Image via The Plastic Bank.

The invention is mostly aimed at plastic collectors, enabling them to track how much they have collected. However, the technology also provides a digital wallet through which they can store their earning. This is particularly relevant for the people, who for some reason do not and cannot have a bank account, and for whom it is dangerous to carry cash with them[8].

Remarkably, blockchain technology also allows the corporate partners to track every dollar invested in the project and follow downstream all the way to the local recycling entrepreneurs they support. Hence, they are well informed and can see the positive impact and their own contribution to the world’s poorest communities.

Blockchain is a tool, not a silver bullet

Ultimately, building a sustainable future and meeting the Sustainable Development Goals will require a great dose of innovation and experimentation and even more importantly a “whole of government” approaches to work beyond silos. Blockchain technology, if used correctly, can accelerate and facilitate this transition and bring about shared an understanding of common goals and automatize trust, thanks to its decentralized, distributed nature. [3]

Nevertheless, it is important to keep in mind that blockchain technology cannot force people to behave in a way that benefits society and the environment. Change for a more sustainable world does not happen by itself. Blockchain technology and token inventive mechanisms have a great potential to facilitate the transition. However, the technology is just a tool, not a silver bullet.[6]

Finally, as stated by Deanna Macdonald chief executive officer of BLOC, an open collaboration platform using blockchain:” All the elements to fight climate change don’t have much to do with blockchain at all. What the technology can do is provide opportunities for consumers, retailers and producers to choose practices that are sustainable, but the onus remains on people themselves.”[9]

[1] https://hackernoon.com/95percent-blockchain-technology-d28673e55673

[2] https://www.coindesk.com/bitcoin-venture-capital/

[3]http://www.undp.org/content/undp/en/home/librarypage/corporate/the-future-is-decentralised.html

[4] Missimer M (2015). Social sustainability within the Framework for Strategic Sustainable Development. Blekinge Institute of Technology, Department of Strategic Sustainable Development. ISBN; 978–91–7295–307–9

[5] https://www.mirror.co.uk/tech/why-banks-hate-bitcoin-cryptocurrency-11433562

[6] https://medium.com/crypto3conomics/blockchain-sustainability-7d1dd90e9db6

[7] https://www.ibm.com/case-studies/plastic-bank

[8] https://www.forbes.com/sites/annefield/2017/11/29/the-plastic-bank-using-plastic-to-create-a-global-currency-for-the-poor/#4f961b547433

[9] https://www.eco-business.com/news/the-promise-and-peril-of-blockchain/


Blockchain — how can technology impact our journey to a sustainable future? was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.