Blockchain technology, the very name referred to with cryptocurrencies like Bitcoin, is making waves in various other sectors beyond finance. Among these potential fields of application, the most prominent would be sustainability and sustainable practices. This blog explores how blockchain can help create a more sustainable future with insights from India and across the globe.
Understanding Blockchain
Blockchain is a decentralized, digital, replicated ledger that replicates transactions across several computers in such a way that the registered transactions cannot be changed retroactively. This technology thus ensures the main principles of transparency, security, and traceability for sustainability practices.
Improved Supply Chain Transparency
As far as sustainability is concerned, most blockchain applications are in the field of supply chain management. Traditional supply chains are mostly non-transparent, thus allowing very little insight into product origin and exact processes in the course of their making. Blockchain offers indestructible recordability of all stages in the supply chain—from raw materials to end products.
For example, in India, blockchain can be utilized in the textile industry to track the journey of cotton from farms to the fashion store. This form of transparency can help consumers make an informed decision about the sustainability of the products they buy. At a global level, companies like Walmart and IBM have already applied blockchain to improve food safety and traceability.
Ethical Practices
Blockchain can also ensure ethical industries where exploitation is likely to happen, such as mining and agriculture. Each stage of the process on a blockchain can allow businesses to ensure that no child labour or another unethical practice took part in it. This capability becomes very relevant in countries where the level of governmental control is minimal or low.
For instance, Everledger, a global digital ledger of diamonds, utilizes blockchain to trace diamond origins and ensure they are not conflicting diamonds. The same can be replicated for other minerals and agricultural products to improve fair trade and ethical sourcing.
Reduced Carbon Footprint
This can be further aided by carbon offsetting and trading on a blockchain. Tokenization of carbon credits is possible on blockchain platforms, and their trading is feasible. This brings transparency and efficiency to the process. Companies can trace their carbon footprint and offset emissions by buying verified carbon credits.
In India, Energy Efficiency Services Limited is testing blockchain for its role in increasing the trustworthiness and transparency of the initiatives connected with energy efficiency. On a similar note, organizations across the globe are working on blockchain-based platforms to trade carbon credits, which can eventually result in huge reductions in global carbon footprints.
Renewable Energy Source
It can enable peer-to-peer energy trading between entities, thereby decentralizing the present traditionally dominated energy market. For example, people who have installed solar panels on their rooftops can sell extra energy to their neighbours. In essence, blockchain provides an avenue through which owners can make money by selling their renewable energy to interested parties.
Powerpeers is a project in the Netherlands that uses blockchain to enable consumers to sell and buy renewable energy within their community. Similar pilot projects are underway in India, where decentralized generation of energy can play an important role in attending to the requirements of remote areas with respect to energy.
Sustainable Behaviour Alignment
Tokenization of blockchain could therefore be the driver of sustainability. Each firm can give tokens to consumers who are doing things sustainable for the environment, such as recycling or consuming less energy. These tokens would redeem against rewards, hence motivating more people towards eco-friendly behaviour.
A practical example could be Plastic Bank, which deploys blockchain to return value to people collecting plastic waste. In doing so, participants in the initiative receive digital tokens, redeemable for goods and services, hence making the waste valuable and encouraging its recycling.
Challenges and Way Forward
Although this technology has huge potential, there are some important difficulties: high consumption of energy and weak scalability. Constant research and development, however, are trying to solve these problems. For example, Ethereum—the largest blockchain platform with the biggest market capitalization—is implementing a new consensus mechanism called Proof of Stake, supposedly more energy-efficient.