Blockchain is wildly misunderstood. And it is not hard to guess why — it is a new technology.
But blockchain is not just any new technology. It is a new technology that is expected to revolutionize the world. The stakes are much, much higher.
Take cryptocurrencies like Bitcoin or Dogecoin, for example, which are shrouded in controversy for encouraging wanton, greed-driven pump-and-dump schemes on the global scale. The tremendous volatility and uncertainty of Bitcoin are believed to have the potential to disrupt entire markets.
Like Bitcoin, the value of Dogecoin has also skyrocketed. However, Dogecoin was started as a joke. Yes, that is right. It was started as a joke, a parody of the world’s obsession with cryptocurrencies. And hence, while many big-league investors have invested in Bitcoin, an old and arguably ‘established’ currency, many are wary of Dogecoin because they believe it lacks real value, that its value is a function of speculation, about speculation.
Still, cryptocurrencies are just one example of a blockchain-based application. While their reputation is nefarious, the reputation of blockchain, the underlying structure, is very good. (Well, mostly. We will get to that later.) This is because sustainable growth and sustainability are top priorities for today’s stakeholders. And blockchain is the technology that could help us achieve that goal.
But before we understand how blockchain enables sustainability, let’s first understand what blockchain is and how does it work.
Blockchain explained: What is blockchain?
Cryptocurrencies are based on blockchain, which, in turn, is based on Distributed Ledger Technology (DLT).
DLT, as the abbreviation suggests, is a network technology in which a digital ledger or register is duplicated and distributed on every computer machine that is part of the network. Whenever a transaction on the network takes place, such as the exchange of information, every copy of the register distributed across the network is instantly updated with the new information, signifying everything from what to whom and when.
Blockchain, therefore, is simply a system to record information. However, it is different in two critical ways.
First, the information that blockchain records chronologically is immutable. It cannot be altered. What this means is that blockchain-based technologies are virtually impossible to hack. A hacker might tamper the ledger’s information on one system, but in order to ‘hack’ a blockchain, he or she must tamper with every other copy as well. Doing this simultaneously, for thousands, and perhaps millions, of participants is next to impossible.
Second, blockchain, being distributed, is decentralized, and therefore, transparent. When a transaction takes place and the duplicated ledger is constantly updated, every computer on the network has the knowledge of every transaction that has ever taken place. There is no single agent or set of agents in a hierarchy exclusively authorized to access this information. The data can be tracked and traced by anyone. It is fully transparent.
Decentralization and data integrity are the primary allures of blockchain. This could very well be the Next Big Thing. But not just for finance. Blockchain’s tremendous impact goes beyond revolutionizing global payment methods. It has the potential to redefine a variety of industries from agriculture to healthcare.
How blockchain enables sustainability
The fact that blockchain technology is incorruptible coupled with the fact that it is open, transparent, and traceable makes it ideal for driving sustainable growth. Here’s how.
More transparent, less corrupt supply chain management
Since blockchain is a shared database, whose information is immutable, whose information, every bit of it, is recorded chronologically, it is next to impossible to ‘game’ or ‘rig’ the system.
A parallel can be drawn to money, which is minted by an independent authority. There is no clear and efficient way to determine how much money is currently circulating in an economy. There is, however, a clear and efficient way to duplicate money. Money, therefore, is vulnerable to corruption. It is vulnerable to counterfeiting.
Information on a blockchain, on the other hand, is immune to both corruption and counterfeiting.
The ability to track or trace information in this manner could be a blessing for supply chain management, for instance. Supply chains pretty much run the global economy, but they are fiendishly complex and, therefore, vulnerable to mistakes or misunderstandings. A malicious agent may take advantage of this vulnerability to trick participants.
Blockchain, of course, overcomes the vulnerability as the ledger is available to every participant — updated, duplicated, and verified after every transaction. All sources are visible. There is no room for counterfeits. Blockchain promotes ethical trading, which promotes sustainable growth.
Take StaTwig, for example, a graduate of the UN Innovation Fund, which is planning to use blockchain to track the delivery of vaccines in developing countries. Or, Anheuser-Busch InBev, the multinational brewing giant, piloting a project in Zambia to ensure transparency in the pricing of crops. The farmers, who have been underpaid historically, can determine fair prices with the use of blockchain.
More accountable public institutions
The same logic of transparency also applies to funding supplied by public institutions and philanthropists.
Blockchain can be hugely beneficial to tax administration, for example. And hence, the ability to track and trace information makes for more accountable public institutions.
In fact, It is already happening.
Transparency is a crucial reason why eminent institutions such as the American Red Cross and Human Rights Foundation accept donations in cryptocurrencies.
In fact, UNICEF CryptoFund announced massive investments in blockchain last year, investing in eight technology startups based in developing economies that are planning to use blockchain to solve global challenges. Similar to tracking vaccines, the foundation invested 125 ETH (Ethereum, a type of cryptocurrency) in the startups in the hope of tracking the delivery of rice and other crops. Even mitigating diseases. Perhaps stopping the next pandemic in its tracks.
In 2019, a Bitcoiner donated more than $50 million in Bitcoins to more than 50 charities via a fund called the Pineapple Fund. Then, last year, GiveTuesday, the combined initiative of 92nd Street Y and United Nations Foundation, was given a crypto-twist. In the US alone, it raised more than $400 million with the help of technology giants like Microsoft and Facebook.
There are dozens of blockchain-based initiatives like this that are working towards the same goal: making the world more sustainable and better to inhabit. There is The Giving Block, or No Kid Hungry, or Pencils of Promise, to name a few more.
Given its open-source distribution, user-centric framework, and that it is decentralized, a blockchain is a powerful tool that can change the world for good.
More responsible consumption
The incredible ability to track resources and transactions with perfect accuracy also enables institutions to limit unnecessary consumption.
Take, for instance, the Mining and Metals Blockchain Initiative, which was launched in 2019. The MMBI was spearheaded by seven heavyweights including De Beers and Eurasian Resources, and its purpose is to use blockchain technology to track their greenhouse emissions. A big part of which is, of course, keeping a close eye on their supply chain management.
Similarly, automobile pioneers like Volkswagen and Ford are also planning to use blockchain to mine materials ethically and responsibly.
Greater data security
A big part of sustainable growth is governance — how ethical shareholder decision-making is, or whether businesses are adhering to government regulations, among other practices. And therefore, equally important is, in a data-driven economy, data governance.
Data governance solutions constitute a combination of practices that ensure that the data moving about an organization is of the highest quality. Its purpose, however, is also to ensure that the data is safe and secure.
Since blockchain is immutable, it is also virtually un-hackable. Blockchain stands for data transparency, but also data integrity and security.
Challenges to blockchain
Like any other technology, blockchain has its opportunities, but also its risks.
Yes, blockchain could redefine supply chain management, which impacts agriculture, transportation, healthcare, and a plethora of other industries. Yes, it could revolutionize finance worldwide. Yes, it could change the world for good. But only so if we deploy it responsibly. Only then can we make a meaningful contribution to sustainability.
Blockchain makes transactions or the exchange of information incredibly fast and efficient, but it also consumes a lot of power. Though blockchain’s reputation is mostly good because not only does it consume power but quite a large share of that power is used to complete transactions that are driven by greed or malevolence.
However, like any other solution, the problem can be solved in only one way: global cooperation. That’s how sustainability is achieved.