2,442 words, ~ 7 .5 min read
This piece is the first of a three part series, in partnership with Katapult. Parts two and three of the series will include a company deep dive, profiling a business in this space, as well as a live session designed for our community’s participation. Stay tuned!
This report will explore the use of blockchain technology in climate change mitigation. While we will touch on emissions from crypto ‘mining’, considering that topic has been explored at length of late, we will focus on how blockchain tools, as well as crypto, can fuel innovative climate solutions.
Blockchains are systems of recording information that are very difficult (perhaps impossible) to change, hack, or cheat. They are digital ledgers of transactions that are duplicated and distributed across a network of computer systems. Each block in the chain contains a number of transactions. Every time a new transaction occurs, a record of it is added to every ledger in the network.
The most popular application of blockchain technology to date has been cryptocurrencies. Bitcoin was the first. However, cryptocurrencies are only one of many blockchain use cases. Other blockchain applications include recordkeeping, tracking supply chains, decentralizing community organizations, or verifying the identity of citizens.
Some blockchain technologies are part of the climate problem, especially cryptocurrencies that use greenhouse gas “GHG”-heavy consensus protocols. This doesn’t mean that blockchain technology can’t be a resource for climate solutions. Below are benefits that crypto and blockchain can offer in the fight against climate change:
Here are the climate challenge areas in which blockchain can have outsized impact. (to go deeper on these climate tech challenge areas, checkout our content overview)
Bitcoin, Ethereum, and other blockchains are here to stay. Currently, they produce a lot of emissions (Bitcoin contributes to ~0.5% of global GHG emissions by some estimates). The opportunity here is to reduce this energy consumption by switching the consensus protocols used for validating data (more on this later) and transitioning the grid used to ‘mine’ to more renewable energy sources.
Blockchain technology is a powerful tool for solving the trust and double-counting issues that are present in carbon removal efforts and offset marketplaces.
Blockchains can support significantly improved reporting and analytics for earth and climate data.
(Shoutout to Josh Green from Going Green who compiled a great primer list of crypto x climate projects which we expanded upon below)
Markets for carbon offsets
Markets for climate data
Leveraging blockchain and crypto to solve climate problems
Reducing energy consumption and emissions (more on this in the “where it's headed” section)
Transitioning crypto to renewable energy
Offsetting existing carbon emission of crypto
PoW → PoS. While different blockchains share similar peer-to-peer approaches, they differ in what consensus protocols they use for validating data. Importantly, different consensus protocols vary drastically in energy intensivity. The ‘Proof of Stake’ (PoS) protocol for example requires less than 1% of the energy consumption that ‘Proof of Work’ (PoW) does. Major blockchains, like Ethereum, are transitioning from PoW to PoS, which would make them more climate friendly. Other consensus protocols, like Chia’s Proof of Space, offer similar benefits.
Mining with renewable energy. In this new report, CoinDesk discusses Bitcoin’s accelerating transition to clean energy. About 40% of Bitcoin mining is currently powered by renewable energy, versus 20% for overall energy consumption worldwide. Can the Bitcoin mining community actually catalyze the global transition to renewable energy ☀️?
Debate over the carbon emissions of crypto will continue to hamper blockchain adoption. Mora estimates that the computer processing power needed for the Bitcoin network alone could result in a global temperature rise of 2°C by 2050. Others say such estimates are inflated, possibly by as much as 75%, as miners increasingly embrace cheaper renewable energy, like hydropower and geothermal (more on this below). The main takeaway? This debate isn’t going away, and it’s already harmed public perception of blockchain tech considerably.
Governments will choose a side. China has cracked down on crypto mining, moving to shut down over 90% of its Bitcoin mining capacity amidst growing climate concerns. El Salvador, on the other hand, became the first country to adopt bitcoin as legal tender (even proposing that it be mined using volcanic energy) 🌋.
Blockchain will enable new ways to fund climate research... See for instance what VitaDAO has done to build a decentralized collective for funding early stage longevity research. This could be replicated for climate research.
...and fundraise for other creative projects, too. John Palmer used Mirror to fund an essay in exchange for ownership of the work. This allowed him to devote his time to writing the piece, which still exists as a public good for anyone to read. Jesse Walden dubbed this experiment “Patronage +”, essentially patronage + *possibility* of profit.
New financing models will gain steam. DeFi (decentralized finance) is an umbrella term for a whole host of concepts and financing models including flash loans, yield farming and liquidity pools. Climate solutions are in need of alternative financing models. Will blockchain solutions be just what's needed?
We’ll trust corporations less and code more. Climate pledges and “net zero” promises aren’t enough. We have the technology to make transparency the norm when it comes to corporations’ climate commitments. Don’t give your word. Show your code. 🤝
Other Moonshot 🌙 applications: Blockchains may enable more ambitious solutions too, such as more democratized and accessible hedging of weather risks. The livelihoods of an estimated 2-3 billion people affected by weather. With blockchain, hedging can be less expensive; whereas at current, weather derivatives are traded on global exchanges and really only available to multinational energy companies or giant farming operations. See Arbol in the players section for more.
Climate DAOs. Decentralized Autonomous Organizations (DAOs) are groups with no central management. For some, these internet-native organizations represent the next step in the evolution of social and economic coordination; blockchain technology and smart contracts streamline voting, decision making, and the allocation of digital assets toward a common goal. Take a look at DAO applications such as pooling capital for investments or facilitating community curation and organization — there are many climate challenges these could be applied to.
Community tokens. Community organizers can mint tokens as a tool that empowers creators and communities to share in more of the value that they create. Bankless gives paid members a token each month. FWB has members convert USD into $FWB and buy into their community. Tokens can be used for event access, voting, and bonus features. Can we take these models a step further and create token rewards that motivate members for taking positive climate action? Ben Hunt certainly thinks so; read his proposal for Proof-of-Plant blockchain consensus protocol. 👀🌱
Align Incentives. The Two Degrees NFT by Terra0 addresses the relationship between global warming and the survival of ecosystems depicted in its art. The project monitors the annual average temperature globally; if it rises above a certain threshold, the NFT token is ‘burned’ 🔥, (i.e. removed from circulation). This post includes the technical details of the ‘2 degrees’ smart contracts, which could lay the foundation for others to build new automated actions and incentives triggered by global temperatures 🥵.
Hold corporations accountable for climate pledges. Blockchains can be utilized (via smart contracts) to better calculate, track and report on the reduction of the carbon footprint across an entire supply chain. Who will build the open startup equivalent for individual corporations to report their true carbon emissions and progress towards net zero?
Encourage collaboration toward emissions tracking. The distributed nature of blockchain technology enables cross-enterprise collaboration to enable emissions traceability across complex supply chains. The World Economic Forum has released a proof of concept that focuses on using blockchain to track emissions in mining and metal companies ⛏️. Where else might this same framework be applied? 🤔
Promote greater efficacy. The World Bank estimates that the carbon credit market will grow to $185 billion by 2030. While it’s a crowded space already (see players section), using blockchain to ensure the efficacy of these carbon markets will be crucial to meeting emission targets 🎯.
Give people bragging rights (for good). Crypto offers people new forms of bragging rights. Vitalik Buterin, co-founder of Ethereum, writes about how NFTs have a shot at solving systemic funding deficiencies in many types of public goods and creative spaces. Here is one of his potential ideas which could be applied to climate:
Oh and in case you haven't... 🙃
Climate Crypto Resistance. Right now, a number of cryptocurrencies are still part of the problem. This has profound impacts on perception of cryptocurrencies and blockchain projects. Because of these existing problems and perception, many are reluctant to build climate solutions on the blockchain. More education is needed within the climate space to see that blockchain technology can be a powerful solution 📢.
Adoption. Crypto can be complex. From understanding the basic concepts of blockchains, DAOs and DeFi, to actually setting up a personal crypto wallet, the space is a ways away yet from true mainstream adoption. Unfortunately, this is especially true of the most vulnerable and climate affected populations, where access to the internet is often limited.
Association with “net zero”. “Net Zero” targets are not a panacea for climate change mitigation. At current, many blockchain climate solutions are concentrated on carbon offset markets. There’s a risk that if the carbon offset market changes significantly or becomes less en-vogue, people may conflate this with failure of blockchain climate solutions as a whole. We would ideally like to see blockchain climate solutions tackle a wider range of climate challenges.
Must have or nice to have? One may argue that the opportunities listed above could all be built without blockchain. Which blockchain solutions benefit the most from a distributed ledger versus say, a simple database? The growing climate tech businesses in this space will have to prove their blockchain-based climate solutions truly have an advantage. Of course, if they do, this advantage should also prove itself over time 📈.
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