– by Raj Kapoor –Founder, India Blockchain Alliance
Blockchain is a revolutionary disruptive technology and represents a change of cultural paradigm for the way in which information is shared. Companies are rushing to understand how they can use blockchain distributed ledger technology to innovate processes, products, and transactions. In a globalized world where environmental sustainability is a critical success factor, what is the role of the blockchain?
I’m truly passionate about blockchain’s potential to create positive system change. Add to the above the power to incentivise a circular economy and revolutionise the distribution of charitable donations – and we’re still seeing only the tip of the proverbial iceberg of world-changing applications that will be enabled by blockchains.
Having said that, we all are aware that most concerning implication of blockchain technology for the environment relates to its energy consumption and, therefore, its possible negative impact on climate.
However, bitcoin and other similar public blockchains have one huge flaw – they use an extremely large and growing amount of energy. The way in which transactions are secured on the blockchain is highly energy intensive. In fact, blockchains currently account for 0.58% of global electricity consumption, whilst Bitcoin mining alone consumes almost as much energy as the entire U.S. federal government!
This means that today, when it comes to discussing sustainability and blockchain tech, we have to balance the longer-term systemic benefits against today’s urgent need to reduce fossil fuel consumption. Blockchain has reached a critical mass of complaints about its sustainability issue.
Although surrounded by virtuous intentions to upend the status quo and offer an alternative to an unjust global financial system controlled by central banks and politicians, blockchain is facing severe criticism from environmental proponents for its high energy use.
Like other emerging ICT-based technologies, blockchain also raises concerns about electronic waste (e-waste). Competing miners require more and more efficient mining hardware, leading to quick obsolescence, roughly every 1.5 years
The key is to make a transition towards green recovery and co-exist with nature. Anything short will not suffice. In fact, this should be a prerequisite for a global sustainable development pathway.
The Shifting Paradigm
The current standard process of transaction verification, based on the proof-of-work algorithm, is ‘extremely energy hungry’. And this is definitely harmful for the environment. As the adoption of blockchain technology gains momentum, it could counteract climate change mitigation efforts, as electricity remains largely generated from fossil fuels worldwide.
Bitcoin was claimed to be 20 000 times more energy intensive than Visa. Nevertheless, Bitcoin is only one cryptocurrency, which is only one application of blockchain. We can only imagine the impact going forward.
The “greening” of the blockchains kicked off with one of the most promising solutions – ‘Proof of Stake’, a consensus mechanism which does away with the energy-intensive mining process required by ‘Proof of Work’, relying instead on network actors staking financial assets on their own future trustworthiness. The Ethereum community, users of the world’s second-largest cryptocurrency, have already invested close to $9bn in transferring to Proof of Stake reducing costs by over 90%.
There’s also a conscious drive amongst the crypto community to address the type of energy being consumed (or better, to use the technology to accelerate adoption of greener energies). Last month, the newly launched Crypto Climate Accord—including Ripple, World Economic Forum, Consensys, Coin Shares and Energy Web Foundation—announced its goal for all of the world’s blockchains to be powered by 100% renewables by 2025.
The Solutions for Today
In fact, there are some blockchains that have been ahead of this curve and are actually making that impact. One that catches the eye is 5irechain. Not only does 5irechain run on a Sustainable Proof of Stake algorithm that does not require mining, but also its consensus algorithm quantifies and assigns its nodes based on a node’s Environmental, Social and Governance (ESG) score. This slings seamlessly with the UN Sustainable Development Goals 2030.
It is important to note that there are other versions of the Proof of Stake (PoS) consensus algorithm that do not require mining for transaction validation such as the pure PoS, the Delegated PoS, and the Nominated PoS, however, the flaw in those algorithms is they have no consideration for a transaction validators’ sustainability reputation, and they inadvertently support cartelisation of consensus by awarding transaction validation to those that stake the most.
This way, the largest holders of that particular cryptocurrency will end up always winning the contest, scoring even more of the rewards and keep getting richer. The 5ire’s Sustainability Proof of Stake (SPoS) considers the validators ESG score as 20% of the weight in selection of node and include other factors to make the node selection fairer. And it’s heartening to know that the Founders are Indian and are aligned to the Indian Government’s sustainability and climate impact initiatives.
I am particularly impressed with the 5irechain which calls its consensus protocol the sustainable proof of stake (SPoS). SPoS has been made more democratic by considering multiple factors beyond the staked amount when a node is assigned based on Stake, Reliability, randomized voting, sustainability score (ESG), and previous nomination.
This way, the SPoS provides major advantages over other consensus algorithms. These advantages go beyond what proof of stake (PoS) consensus mechanism provides over proof of work (PoW) consensus mechanism.
This chain is the 5th generation of distributed computing web 3.0 solution, a decentralized ecosystem that embeds ESG metrics in the consensus level and aims to bring a paradigm shift from a for-profit to a for-benefit economy. Their goal is to create user-centric sustainability-driven & interoperable public, private, and hybrid solutions. By embedding sustainability both in the network’s base layers and in the upper decision-making that democratically commands the network forkless upgrades.
Their ecosystem also democratically empowers self-governed DAOs that are actively working towards the 2030 UN SDGs Agenda implementation and provides them the infrastructure to accelerate this vision. Now this should be the fundamental premise of the blockchain technology if it is to be sustainable and scalable.
5irechain is also aligned with the United Nations’ 17 global goals. 5ire directly addresses social issues like education, financial inclusion, poverty, education, climate, renewables, solar amongst others and possibly the world’s first sustainable blockchain ecosystem. Not only is it aligned, 5ire has tokenized 17 SDG Goals and scraped data from 600 ESG points. Now that is innovation!
Today, we cannot afford to ignore blockchain’s growing carbon footprint. However, with ambitious changes and blockchains like 5ire both the volume and the type of energy the technology uses, we could soon unleash tools with the power to incentivise social and environmental progress at scale. As with any new technology, blockchain’s path from concept to practical enterprise solutions is not always straight line.
Blockchain applications beneficial to renewable energy diffusion, energy efficiency and the reduction of energy consumption are also being explored. In fact, IBM and Energy-Blockchain Labs are experimenting with a blockchain-based green asset management platform for trading carbon assets in China in a more efficient way.
EnergiMine has developed a blockchain-based rewards system that uses digital tokens to incentivise consumers to save energy. The issue remains whether these niche initiatives will scale up and whether their benefits are offset by blockchain’s own energy consumption.
But with incredibly exciting applications emerging every day, and serious thought and investment going towards reducing blockchain’s energy consumption, we can never ignore the value it could bring. Blockchains have an emerging role in sustainability by helping foster collaborations between consumers and producers, by assisting people in adopting more sustainable lifestyles, and by helping companies improve their sourcing and recycling practices.
With growing innovation in the blockchain space, India is primed to make a major impact. ESG will be an essential part of next-generation finance operations. ESG will drives long-term returns. COP26 and the decisions around ESG will bring a green innovation in blockchain and would place India, at the forefront in aligning with the UN SDG’s. That is a matter of pride, and we are happy to be a part of this green tech revolution.
About the Author
Raj is the Founder of India Blockchain Alliance and an Advisory Board Member at several blockchain companies like 5ire, Floyx and Chainsense UK and the Founder and Chairman of the India Blockchain Alliance, the largest Indian emerging technology tech think tank.
He is a global, Blockchain & Cryptocurrency & FinTech Educator, Certified Bitcoin Professional (CBP), Blockchain Solution Architect, and friend of disruptive ideas, protem Chairman for Organization of Blockchain Technology Users (OBTU). He is also the Asia Lead, Technology & Innovation at Blockspace Technologies Ltd.
Raj has helped organize India’s biggest Blockchain and Cryptocurrency events across major cities. Raj has also spoken at several international seminars and conferences in Boston, LA, Amsterdam, Copenhagen, Singapore, Durban, Nicosia and Vienna, Dubai, and Singapore
Raj regularly speaks in Tech events in India, UK, USA, Africa, Malaysia, and Canada and is also a TedX speaker. Besides blockchain, Raj is skilled in AI, Robotics, Cyber Security. IoT, and Cloud Computing. He has spoken in over90 international and national events. Raj has also authored over 15 courses in Blockchain and crypto and is soon publishing a series of books in the blockchain domain.
Raj is also a regular contributor to several technology publications including Times Tech India, NDTV Profit, Daily Tribune, Business Standard and more. Raj was also selected this year as a top cryptocurrency and blockchain influencer by Asian Market Cap. Raj is also mentoring 20+ blockchain start-ups across the globe.
Raj has designed and worked on 4 Blockchains, 5 Centralised Exchanges, 3Swaps and 3 DEX’s.
He is now working with his team on India’s own indigenous blockchain with Chainsense Ltd. Raj is also working on the world’s first sustainable blockchain 5ire, which is aligned with the UNS sustainable Development Goals.