Is blockchain technology a tool to boost sustainability?

By 2050, the Earth is conservatively estimated to be 2°C warmer by the end of the century, and the world's ice sheets are melting at much faster rates than in the previous century, leading to increasing sea levels.


Simultaneously, the world is losing much of its biodiversity, which scientists predict would have “unprecedented and unpredictable” implications for life on Earth.


Considering this, global sustainability efforts are now more important than ever.


Fortunately, innovative techniques may be used to solve the most important issues.


What is Blockchain?


For several years now the term blockchain crops up in discussions, either hailed as THE next new thing (akin to the internet in the 90s) or vilified as a glamourised checksum that requires prohibitive amounts of energy and provides no real advantage to anything.


Sure enough, the technology has had its fair share of media coverage and scandals already.


So, what is it and is it important for your business?


Trying to avoid technical details as much as possible, blockchain technology is an automated, autonomous, decentralised bookkeeping system.


In particular, it is a system that is designed to be tamper-proof. (Caveat: Every tool is just as good as the craftsman using it and with sufficient criminal energy and monetary means anything can be tampered with!)


As you will be most likely aware the first "real" (<-- a tricky choice of word given the ethereal subject matter) application was the cryptocurrency Bitcoin.[1]





A few early adopters (or reckless gamblers, depending on your point of view) got quite rich very quickly.


Some of them also got quite poor again very quickly when it turned out that their new-found assets were not exactly as secure against hackers as they thought they would be.


Blockchains are one technology that is gaining traction in the field of sustainability.


Blockchain technology is playing an increasingly important role in sustainability by facilitating consumer-producer partnerships, improving transparency in supply chain, and assisting businesses in improving their procurement and recycling practices.


Another significant advantage of blockchain technology is the ability to ensure transparency.


Simply put, blockchains keep track of who buys what from whom and when.


This ensures if a company claimed to be resource-positive and to reduce its environmental impact, that can be checked and (possibly) challenged and this is important for companies because more than 50% of consumers would pay more for sustainable products designed to be used in the framework of the circular economy.[2]



Blockchain for sustainability




Problems


Apart from the security problems hinted at above (cf. Mt.Gox) [3,4] the main problem is that calculating the transactions in blockchain systems is far from trivial and requires enormous amounts of energy.


At this point it is worth mentioning that there are two different approaches to calculating these transactions.


One is called proof-of-work [5] and it is comparably fail-safe.


It is also computationally more demanding, hence slower and more energy-intensive.


The other is called proof-of-stake [6] and is slightly less fail safe, but also less computationally demanding, hence faster and less energy-intensive.



Proof of work vs Proof of stake


When it comes to currencies (our money!) making the safest choice is imperative.


At present, the banking world appears to be unsure as to what to do with this technology.


Some players see significant potential in it, others point out at the energy required to run such systems and basically pronounce it still-born.[7]


According to experts in the matter, the two important features that blockchain technology can bestow upon the economy are A) automation, and B) trust.


In order to see what that means let's look at a few examples.


Cattle herders


Trust and automation are perfectly exemplified in the collaboration between a Brazilian Steakhouse (Fogo de Chão)[8] and agri-tech company HerdX.[9]



Brasilian steakhouse Fogo de Chao



The latter provide solutions to farmers such as herd monitoring and supply chain traceability.


The monitor each animal as part of the herd which allows the farmer to intervene in case behavioural anomalies occur.


Here the benefit is that customers at the steakhouse can rest assured they eat meat from animals that have been cared for properly.


This brings us to a question raised by supply chain expert Stefan Gstettner in an interview with the Wharton School's online business journal:[10]


How many people are really that interested?


How many people really take out their mobiles in a restaurant (or in a supermarket etc.) to scan a QR-code which tells them when the animal from which their steak was cut was born, where it lived, or how and when it died?


Your guess is probably as good as ours.


Diamond traders


The Diamond Trading Company (DTC, a subsidiary of De Beers) [11,12] has implemented a supply chain traceability product called Tracr.[13,14]


It is aimed at certifying the identity of the gem in question, its weight, colour, clarity, and, most importantly, its place of origin.


Little technical could be found but apparently this works from the rough stone to the polished gem. With such a certificate the buyer can be certain that the diamonds were ethically traced, i.e. that they are not conflict diamonds.



DTC USA - Diamond trading company


These two examples show that it is important not to forget that erroneous input can never give correct results.


In computer science the acronym GIGO is used to summarise this concept: Garbage in, garbage out (or, conversely, Gospel in, gospel out, if the input is known to be correct).


The blockchain may calculate all transactions correctly, however, if the steak, the gem, or the lettuce leaf that is supposed to be traced and certified by this technology is falsely entered into the system the resulting factually correct, but meaningless.

Kitten pictures


The gaming industry is also looking into blockchains.


A point in case is CryptoKitties, a game based on blockchain technology.


The aim of the game is to collect cartoon cats and it was originally intended as a bait to lure users into the cryptocurrency Ethereum.


The game used the same resources as the cryptocurrency and as the company behind it grossly underestimated the pull of the game the system nearly caved in under the load of all the traffic generated by the game.


This resulted in what should by definition not happen - delayed and even unprocessed transactions. This has resulted in users loosing real money and highlighted the problem of scalability which plagues all blockchain systems.[15]




Crypto-Kitties are the new hype



Blockchains can help building a more sustainable supply chain


The circular economy is one of the answers of sustainability: reducing materials and waste, reusing items, and recycling materials.


This model means that goods and services are traded in closed loops or cycles, ensuring that fewer and fewer things go to waste.




From linear to circular economy


In this case, too, blockchain could lend support.


The circular economy is one of the answers of sustainability: reducing materials and waste, reusing items, and recycling materials.


This model means that goods and services are traded in closed loops or cycles, ensuring that fewer and fewer things go to waste.


In this case, too, blockchain could lend support.


In addition to transparency this technology also guarantees traceability.


Transparency and traceability work together to make item provenance quick and simple.


As a result, being able to tell the difference between genuine and fake goods aids in the fight against counterfeiting and the harm it does to our natural resources, as well as fair labour practices.


Moreover, blockchain technology provides customers with sufficient knowledge about genuinely sustainable goods, allowing them to make informed decisions.


Finally, blockchain is streamlining the supply chain by creating immutable, time-based databases for each point, including manufacturing, collection, transportation, arrival, and even disposal.


A centralized supply chain, such as Walmart's, Amazon's, and IBM's, then aids businesses in optimizing operations, developing new products, and increasing productivity.


As a result, running costs are reduced, and, most significantly, waste is reduced.


They can also help with resource conservation.


However, since blockchain technology is still in its infancy, it could be some time before more businesses around the world find out how to use it efficiently for the sake of long-term sustainability.[16]


So, is blockchain tech the thing for your business?

That of course depends on your business!

The pivotal point is the 'Real world - Information technology'-interface.


How do you link your products or services to this electronic form of bookkeeping?


The other point is that at present this technology is probably more suited to large players (banks, industries) and not so much as yet for the average SME (unless, of course, the SME in question is working in that field anyway).


If you have technologies you think of incorporating into your business and you would like an expert opinion on the environmental, social, and economic implications, do not hesitate to contact us by clicking on the button below!






[1] https://en.wikipedia.org/wiki/Bitcoin (Last accessed on May 9th, 2021)

[2] http://blog.wizsec.jp/2015/04/the-missing-mtgox-bitcoins.html (Last accessed on May 9th, 2021)

[3] https://www.nytimes.com/2016/05/26/business/dealbook/mt-gox-creditors-seek-trillions-where-there-are-only-millions.html (Last accessed on May 9th, 2021)

[4] http://blog.wizsec.jp/2015/04/the-missing-mtgox-bitcoins.html (Last accessed on May 9th, 2021)

[5] https://en.wikipedia.org/wiki/Proof_of_work (Last accessed on May 9th, 2021)

[6] https://en.wikipedia.org/wiki/Proof_of_stake (Last accessed on May 9th, 2021)

[7] https://www.reuters.com/article/us-banks-blockchain-r3/top-banks-and-r3-build-blockchain-based-payments-system-idUSKBN1D00ZB (Last accessed on May 9th, 2021)

[8] https://fogodechao.com/ (Last accessed on May 9th, 2021)

[9] https://herdx.com/ (Last accessed on May 9th, 2021)

[10] https://knowledge.wharton.upenn.edu/article/blockchain-supply-chain-management/ (Last accessed on May 9th, 2021)

[11] http://www.dtc.com/ (Last accessed on May 9th, 2021)

[12] https://debeersgroup.com/(Last accessed on May 9th, 2021)

[13] https://www.reuters.com/article/us-anglo-debeers-blockchain/de-beers-tracks-diamonds-through-supply-chain-using-blockchain-idUSKBN1IB1CY (Last accessed on May 9th, 2021)

[14] https://www.bloomberg.com/news/articles/2018-05-10/de-beers-tracks-first-gems-from-mine-to-shop-using-blockchain (Last accessed on May 9th, 2021)

[15] https://fortune.com/2018/02/13/cryptokitties-ethereum-ios-launch-china-ether/ (Last accessed on May 9th, 2021)

[16] https://www2.deloitte.com/us/en/pages/operations/articles/blockchain-supply-chain-innovation.html (Last accessed on May 9th, 2021)


Image by Huma Kabakci

Leader in sustainability

THE PODCAST