What Are The Environmental Effects Of Blockchain Technology?

The internet and all its trappings are supposed to offer new efficiencies that benefit the environment. The ability to send an email rather than a letter saves trees. Video-conferencing reduces carbon emissions because people can connect face-to-face remotely rather than getting in a car or on a plane. Big data is and will continue supporting an economy that’s far more efficient than ever as well as playing a role in identifying new solutions that allow for sustainable development.

blockchain. credit: Fré Sonneveld, UnsplashBlockchain plays a big role in these developments thanks to its ability to decentralize data and processes while also ensuring top-tier security. Indeed, blockchain technology is largely considered to be a huge part of the future of business thanks to its applications in supply chains, healthcare, insurance, travel, retail, and even energy. Like all new technologies, it also comes with some disadvantages and limitations.

There is concern among some groups that blockchain may produce incredible benefits for business but destruction for the environment. While there is some truth to the argument in specific contexts, the wider application of blockchain could also prove the reverse is true: blockchain could be one of the biggest enablers of sustainability currently available.

When Blockchain Can Hurt the Environment

Running a blockchain has the potential to require a significant amount of electricity, particularly when mining cryptocurrencies. To mine cryptocurrency (e.g., to generate a new Bitcoin using a computer), you need to run cryptocurrency software to resolve a type of puzzle. The solution and the transaction of the newly generated coin are then added to the blockchain. Every 10 minutes, some server somewhere in the world solves the puzzle and generates a reward, usually 12.5 bitcoins. However, the solution doesn’t become part of the ledger until there are more blocks added.

The problem with mining cryptocurrencies is that it only works well when done at scale: an individual server is worthless. As a result, mining Bitcoin alone uses the same amount of energy as used by the entire island of Ireland in a single year.

Even outside the context of blockchain, the increasing reliance on the servers needed to power blockchain takes an environmental impact. Servers themselves take up physical rooms in buildings and waste huge amounts of energy. Data centers, in particular, are very reliant on energy. A single data center can eat up more power than a medium-size town. Though, some companies, like Apple, Facebook, and Google, are already using renewable energy to power their data centers.

Sticking with the Irish analogy, a quick trip to Ireland demonstrates the impact of data centers not only on energy use but on the local environment. Ireland’s experiencing a surge in data processing, and by extension, a surge in buildings to house them.  As of January 2020, 31 data centers have planning permission in Ireland, and the country is already home to some of the biggest facilities in Europe. In 2019, Facebook confirmed it would begin the second expansion of its behemoth Irish data center from 86,000 to 150,000 square meters. Buildings of these sizes have their own environmental impacts without the use of servers that can’t be offset by the use of renewable energy.

Blockchain’s Applications Can Still Aid the Environment

Not all blockchain applications suck up huge amounts of resources. In fact, the blockchain is already being used to benefit the environment in several different ways. For example, Nori uses blockchain as a tool to power carbon-removal suppliers and eliminate excess carbon from our atmosphere. The Poseidon Foundation uses ‘carbon credits’ to fight climate change using its Reduce platform. It analyzes a product to produce its carbon footprint and relates it to a credit value, which shows the true dynamic cost of consumption.

However, some blockchain applications also have environmental benefits without focusing on carbon removal explicitly. For example, blockchain’s impact on supply chain management will have tangible benefits for the environment as a by-product of its shoring up of global supply chains.

Today’s global supply chains are complex environments that require a huge number of products, parties, and processes and above all, total cooperation. The product of this environment is facing down a supply chain that’s wildly inefficient and inflexible, and the impact of global supply chains on the environment has been devastating. A report from McKinsey shows that 90% of the damage caused to the environment created by consumer packaged goods is the product of supply chain issues.

The blockchain offers these complex supply chains a secure and reliable architecture that also happens to be decentralized. It also offers a new option to seek out sustainable supply chain strategies that were functionally unavailable in this environment without the application of blockchain. What’s more, the blockchain is also transparent, so companies and their partners can see exactly where everything in their chain is or is moving at any point and anywhere in the world. Everyone will be able to make better-informed decisions, and that’s powerful.

Blockchain Evolved Beyond Its Energy-Hungry Origins

While it’s true that blockchain’s early use in cryptocurrency mining is famously energy-hungry, the truth is that blockchain is long past its origin story. While mining Bitcoin demands huge amounts of energy, the quality isn’t an inherent part of blockchain. It doesn’t exist in its newer applications because it’s Bitcoin — not blockchain — that’s digital-labor intensive.

What is true is that blockchain’s applications across the economy, including in supply chain management, healthcare, government, and more, could offer what few prior technologies could. Blockchain’s inherent qualities (transparency, security, interoperability) are what make it a boon to not only technology and industry but to the environment.

Blockchain could allow our economy to seek out truly sustainable processes without undergoing huge, complex changes. If it succeeds, then the world could be much closer to meeting the challenges of adapting to climate change than we realize.