Enterprise blockchain to play a pivotal role in creating a sustainable future

Bitcoin (BTC) is often used to criticize all blockchain-based projects. This is understandable as Bitcoin was the first project to use a blockchain, it is arguably the most recognizable, and it is the largest cryptocurrency by market capitalization.

In the first half of this article, I will use Bitcoin as a proxy for all blockchain-based projects because most people associate blockchain with Bitcoin. Anything environmentally positive that can be said about Bitcoin will be doubly true for the vast majority of newer blockchain-based projects, as Bitcoin uses the oldest version of blockchain technology.

Blockchain power consumption

Bitcoin has come under attack for high power consumption. Headlines noting that Bitcoin's electricity usage is comparable to the total consumption of a country is a popular criticism. Comparisons are helpful, but they can have a misleading framing effect. For example, the statistics most frequently cited in these attention-grabbing headlines are drawn from the Cambridge Center for Alternative Finance (CCAF). The same organization too points found that transmission and distribution electricity losses in the United States could power the entire Bitcoin network 2.2 times. Always-on electrical devices in America consume 12.1 times more energy than the Bitcoin network.

So the Bitcoin network uses as much electricity as a small country or much less than a portion of the US energy budget. That's a lot? It depends on how you look at it.

Another frequently used criticism is that Bitcoin's electricity consumption is growing so rapidly that Bitcoin's emissions alone. could drive global warming above 2 ° C, or consume all the energy in the world by 2020. The latter did not happen. Why? First, like most network-based technologies, Bitcoin follows an adoption curve defined by innovation diffusion theory: an "S curve."

Explosive and exponential growth in the first half of the curve slows down considerably in the second half. Second, large and predictable improvements in computer efficiency will continue to lower the energy cost of computing even as Bitcoin's growth slows. Third, such predictions do not take into account the evolving energy mix of Bitcoin.

Blockchain energy mix

Almost all of the energy consumed by blockchain projects comes from the electricity used by the computers that secure the network. Bitcoin calls them "miners", but newer blockchain projects can use much more efficient "validators". Electricity is produced from many different sources, such as coal, natural gas, and renewable energies such as solar and hydroelectric. These sources can generate very different levels of carbon emissions, which largely determines their environmental impact. The two most prominent estimates of Bitcoin's energy from renewables range from 39% in this report at 74% in this report. Either of these estimates is "cleaner" than the US energy mix, which is only 12% of renewable energies.

There is evidence that the public scrutiny that Bitcoin has been subjected to has likely ensured that energy from renewables only increase in the future.

Blockchain is worth it

The energy consumption and composition of Bitcoin is not perfect, nor is it as terrible as is often reported. What is often lost in the conversation about Bitcoin's energy usage is whether Bitcoin's energy usage is worth it. Many industries require energy or produce massive amounts of waste, but most people find the environmental costs worth it. The agricultural industry requires massive outlays of fossil fuels for fertilizers and to power field equipment, not to mention producer harmful runoff. However, despite the negative environmental aspects, we recognize the overwhelming importance of growing food. Rather than rule out farming, we strive to improve the farming environment.

Either to allow the 1.7 billion unbanked to win financial inclusion or offering An alternative to predatory international remittance services, it seems clear to me that Bitcoin is worth the energy use. It is even clearer that the enterprise blockchain is an absolute public good.

Newer alternative blockchain technology applications at least 99.95% less energy than older ones. The enterprise blockchain can use even less energy, as it can be tailored for specific use cases. In addition to using significantly less energy, Enterprise blockchain is helping organizations achieve their sustainability goals.

Blockchain as a key driver of renewable energy

Solar and wind are now cheaper than fossil fuels like coal and natural gas. Solar and wind energy are now comparable to geothermal and hydroelectric. Despite solving the cost problem, renewable energies have several problems that prevent their massive adoption. Geothermal and hydroelectric are linked to geography. Solar, wind and, to a lesser extent, hydroelectric power suffer from intermittences and grid congestion. Intermittence means that they are currently too unreliable. There is no sun at night, the wind sometimes stops, and there are rainy and dry seasons. Network congestion is similar to car traffic. Due to geographical limitations, renewable energies are generally built in rural areas. However, most of the energy is needed in dense towns and cities. Like a car in a traffic jam, electricity takes time to reach its destination.

There are solutions, such as building storage batteries and increasing transmission capacity, but these are expensive infrastructure projects. This is where Bitcoin and blockchain, in general, can help. Unlike Bitcoin, miners and other blockchain projects can be built anywhere. They are profitable businesses, so they can essentially subsidize the construction of renewable infrastructure always using the excess energy produced.

Another promising energy technology that is well suited to blockchain is person-to-person (P2P) electricity trading. These energy distribution schemes give electricity providers and consumers the opportunity to exchange energy without the need for existing external intermediaries and at the same time increase the level of renewable energy. Similar to renewable infrastructure, blockchain-based projects will incentivize the development of P2P power networks.

Blockchain allows the obtaining and origin of materials

Consumer demand for more ethically sourced products is constantly increasing. Companies have to demonstrate that their product is produced in a way that protects the environment and public health, and that it is manufactured ethically. Consumers who distrust greenwash have had to trust on the information provided by the companies. Blockchain-based projects are already changing this dynamic.

Everledger has created tools to increase the knowledge of consumers and companies about the provenance of a certain object. By combining blockchain, AI, and IoT, Everledger digitally streamlines compliance processes and enables companies to prove the true origin of their products.

Transparency and traceability will be crucial to building consumer confidence in food supply chains. Supermarket giant Carrefour and the world's largest brewer AB InBev partnered with enterprise blockchain developer SettleMint to offer a digital traceability solution that uses dynamic QR codes attached to a product during the packaging process.

Green financing

Green financing is the use of loans to support sustainable companies and finance the projects and investments they make. It will be crucial to close the annual SDG funding gap of $ 2.5 trillion, which is Estimate to grow more. A good example of green financing is the green bond market (GB). According to the Climate Bonds Initiative, $ 269.5 billion in GB was issued in 2020.

Unfortunately, the GBs are not without problems, such as confirming that sustainability metrics are authentic or that funds were used to support sustainability. Blockchain can store this data immutable, therefore projects can be verified to meet sustainability requirements. Blockchain can help in other ways as well, such as tokenization.

Oi Yee Choo, Chief Commercial Officer of iSTOX, a Singapore-based digital stock exchange, saying in this interview: "Even in markets where the demand for green bonds is high because investors are motivated by ESG considerations, tokenization helps investors diversify their portfolio across different bonds due to smaller subscription sizes."

The blockchain industry is currently far from ideal in terms of environmental sustainability. However, if it maintains its current trajectory, the blockchain industry will not only be an example, but also an enabler of environmental sustainability.

The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Matthew Van Niekerk is the co-founder and CEO of SettleMint, a low-code platform for enterprise blockchain development, and Databroker, a decentralized data marketplace. He holds a BA with honors from the University of Western Ontario in Canada and also has an international MBA from Vlerick Business School in Belgium. Matthew has been working on fintech innovation since 2006.