Special thanks to Jake Hirsh-Allen and Jay Singh for valuable comments.
While Dogecoin was capturing imaginations with its 6,000% bull run this year, Amazon deforestation hit a 12-year high, plastic pollution permeated every corner of the Earth, CO2 emissions continued their steady rise and our planet’s ice caps deteriorated faster than ever. For those concerned about “building back better”, are blockchain technologies a harmful distraction or a much needed opportunity?
In order to move towards a more sustainable economy, we need to make net-negative technologies a backbone of our society. That is, we need to build circular economies around pulling CO2 out of the atmosphere, incentivize the conservation of ecosystems and adoption of low carbon diets, as well as power the world with clean energy. In order to manage all this, we’ll need to reliably measure, report and verify these activities. Here’s where blockchain and cryptocurrencies come in. In this piece, you’ll learn about a few key applications of crypto as a sustainable economy enabler and some thoughts on future prospects.
Crypto as a sustainable economy enabler
Accountability for the oceans
On June 2nd, 2021, a container ship carrying toxic chemicals began to sink off the coast of Sri Lanka causing one of the most significant environmental disasters in years. In order to report on the significance of the event, the Washington Post had to trace serial numbers from various shipping websites and contact the company operating the vessel, X-Press Feeders, multiple times until they declined to comment. If important information such as the mechanical condition of the ship, maintenance records, class of cargo, and crew competence was stored in a blockchain, it’s likely authorities (or any member of the general public) could have predicted the risk of this event occurring and taken preemptive action. When such information is unassailable, the accountability of those involved deteriorates and society at-large is unable to control for such externalities. Similar to how applications are being built for land rights and forest conservation, crypto also has important implications for how to govern the global fishing industry more effectively, expose supply chains and create new forms of finance for ocean cleanup and protection.
Fears of environmental disaster as oil-laden ship sinks off Sri Lanka (BBC)
Ecosystem conservation
Already, we’re seeing efforts being made to use smart contracts to incentivize forest conservation. Gainforest uses satellite imagery to monitor regions of the Amazon that local communities steward. The longer these forests are left in good health, the more funds get automatically unlocked for that community — thereby rewarding preservation. In Canada, the World Wildlife Fund is using blockchain in its Atlantic DataStream project to overcome data gaps and silos on community freshwater ecosystems. By utilizing a public ledger, crowdsourced data (and, importantly, metadata) has stronger reliability guarantees.
Land registries
How do you know who is responsible for what land to conserve? Unreliable mechanisms for land administration, taxation and investment have long been understood as a bottleneck for sustainable development. Where proof-of-title records are nonexistent, sparse or disjoint, unsustainable land use can go unabated. Smart contract models such as DomaCom and RealT that have proved their worth in the fractional real estate industry could be extended to efficiently keep track of usage rights and help settle land contests by facilitating compelling new forms of joint ownership. In places like Sweden and Georgia, blockchain-based land registries have driven down operational costs by 90% — benefits that could go a long way in collecting and maintaining the high-quality land tenure data necessary for sustainable oversight.
Insights for sustainable agriculture
This year, the Food and Agriculture Organization of the UN (FAO) released a state of play and outlook report on how blockchain could enable a worldwide carbon data network, allowing farmers and policymakers to track management practices, investments, and carbon credits. Food producers and audit agencies are already piloting the use of blockchain to stimulate the uptake of climate-resilient farming practices. Other applications such as obtaining transparency on fair prices, food safety, and soil quality could also be facilitated through crypto technologies. Last year, Boombloc partnered with the Malaysian government to enable the traceability of palm oil. As critical mangrove ecosystems continue to get destroyed for rice, palm oil and rubber, technology frameworks that can enhance consumer awareness, incentivize and assist first mile producers to better manage their resources will make local and global markets more resilient.
Carbon credits
As large corporations seek to neutralize their environmental footprints, the carbon credit marketplace has been growing rapidly. However, the process remains obscure with a few actors controlling monitoring and verification. Regen Network is a company seeking to combat this by building a public carbon marketplace to drive regenerative land management. Their blockchain uses the more energy efficient Proof-of-Stake protocol to enable fintech infrastructure for ecological data, assets, and agreements. Their project raised more than $10.5 million from a private token sale. Nori is another company that has been established to eliminate the double-counting of carbon credits and is collaborating with the U.S. Department of Agriculture’s emissions reductions accounting framework.
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A microgrid and depiction of sentient computer (Vox)
Solar energy production and trading
Similar to how Gainforest and Cryptocorals are using tokens to finance ecosystem preservation, SolarCoin is a token that rewards solar installations. Solar energy producers can claim these coins at a rate of 1 SolarCoin per 1 MWh of verified electricity produced. While the cryptocurrency has not yet achieved its goal of making solar energy free, it has been integrated within one of the largest solar inverter companies globally. As more distributed renewables resources get installed, the need for them to interface appropriately with traditional power markets grows. Blockchain provides the perfect data structure for creating decentralized renewable energy marketplaces. Incumbents such as LO3 and Electron — two of the earliest blockchain players — have seen continued success receiving investments this year from Shell Ventures and UK government, respectively. The German government is also funding projects to demonstrate the feasibility of blockchain for reducing grid bottlenecks.
International agreements
Blockchain protocols are ultimately consensus mechanisms for any kind of data. While the first use cases have been related to financial transactions, the need to reach consensus lies at the heart of all human activity. Climate change has been one of the most challenging issues to establish agreements on. Recognizing the difficulty nations have experienced in meeting the Paris Agreement targets, the Blockchain for Climate Foundation was established in order to enable the implementation of complex border carbon adjustments, national carbon inventory trading and build trust into carbon markets.
Future prospects
In his political philosophy, Glen Weyl suggests that “most environmental issues are best seen as conflicts over resources that bring benefits to many people if preserved”. If humanity’s collective myopia to the tragedy of the horizon is our greatest threat to long-term prosperity, it’s likely that blockchain could provide us with the right social data structure to solve it. Energy networks will be transformed into distributed renewable energy resources, citizens will have more power to see and shape the supply chain they engage with, environmental risks from freight, farming and mining will be mitigated, and markets will emerge from the appropriate taxation of negative externalities.
The future will see a new international order replete with crypto-backed cooperative systems at every level of abstraction from energy trading to environmental regulation. Blockchain will help us better organise the past and the present for the future — a world beyond the shortcomings of 20th century capitalism, where resilience is achieved through accountability, multilateralism, and pluralism. Or maybe all the Dogecoin millionaires will buy lamborghinis instead.