The Role Of Blockchain In Sustainable Development

Sustainable development, as defined by the UN, is a way of living today so that our tomorrow can be better. And to achieve that, all players of society, be it the government, the corporate/business world and individuals need to play their part. When we work together to fulfil our needs without compromising on the future, then only can we leave a liveable world for our future generation.

And how does blockchain play into this? One of the biggest issues regarding meeting SDG (Sustainable Development Goals) is transparency, accountability, and security of the whole process. To put it simply, there is a lack of trust between the different players needed to fulfil SDG. When a business claims to have reduced its carbon footprint, or when organizations say they have recycled plasitcs, there is an issue of trust between them and the people they are servicing. By using Blockchain technology, this trust can be earned because the way data is stored and shared, is one of the most secure in the world. Not only that, this tool, when used correctly can minimize things like bottlenecks, and blockage while speeding up financial liquidity when needed.

What Is Blockchain And How Is It Secure?
Blockchain is a technology that uses a chain of blocks that have ordered records. Each of the blocks in a blockchain contains three things: a timestamp, transaction data, and a hexadecimal number. This hexadecimal number works as a cryptographic hashtag. The blocks link together like a chain in a chronological manner that is very secure, which is why it is called blockchain.

As for why it is so secure, there are four reasons. They are:

Blockchains are decentralized. This means they don’t rely on a central authority, for example, a bank, while being distributed across a network of computers also called nodes. So, no single entity can either control it or manipulate it.

Advanced cryptography is used by blockchain technology to secure a transaction and create new units. There are public as well as private keys which means only authorized persons can be able to modify and access the data.

There has to be a consensus mechanism within the network nodes before one can validate or agree on a transaction. It can be different things based on what type of transaction it is, for example, you need Proof of Work in Bitcoin transactions. This prevents any third party from maliciously altering any part of the blockchain or the transaction history.

Immutability is the fourth reason why blockchain is considered transparent, secure, and accountable. It becomes very difficult to manipulate data once it becomes part of a blockchain. That is because each block contains a reference to the previous block, so if you want to change the data, you have to manipulate all the blocks following it. To do that not only you will need the consensus of the majority of nodes within the network, but also spend hours computing it!

So, all these make blockchain the perfect technology to transfer, store and use data.

Blockchain And Sustainable Development: How They Go Together

Blockchain in Carbon Credit Tokenization
Every company and business wants to reduce their carbon footprint to do their part in sustainable development. However, there is an issue of transparency and trust when it comes to verifying the claims made by the company/business. With blockchain technology, this can be done transparently and credibly.

And how does blockchain achieve that? To start with, when the carbon credits, which can be related to purchase, production or sale, are recorded in a blockchain, all involved parties can see it, but none can tamper with it. Second, blockchain allows automated smart contracts. What it means is that, when this kind of contract is written in the code, carbon credit is issued to a company/business automatically when it completes its part of the contract, e.g. reduction in carbon emissions. Moreover, the whole system of blockchain is decentralized which means no single entity owns or operates it. Hence manipulating it is impossible which is why there is more credibility and trust when carbon credits are given through blockchain technology.

There are two more ways blockchain improves carbon credit tokenization. Since it tokenizes assets, which are represented as digital tokens, it is possible to own a fraction of that carbon reduction effort. This means more people can buy part of a carbon credit instead of someone buying the whole carbon credit. Secondly, with our businesses becoming global, and blockchain being not confined to a specific location, it is possible to access it from anywhere in the world. Hence you have more people, from diverse fields and societies participating in saving our world.

In simple terms, blockchain for carbon credit tokenization provides a secure, transparent, and automated way to track and trade carbon credits. It makes the process more efficient, trustworthy, and accessible to a larger community of businesses and individuals looking to participate in sustainable development.

Blockchain in Sustainable Supply Chain
One big factor of sustainable development is maintaining an eco-friendly system all through the supply chain. This is all the more important in the agricultural market where there is a great demand from consumers for products that are grown sustainably and are eco-friendly in every step. However, tracing the product from manufacturers to the consumer is a long process and there is a dearth of transparency and traceability in that process. Blockchain technology can eliminate just that, which is why for sustainable development, you will need to increase the usage of blockchain in the supply chain management system.

This is already a $3.15 billion market globally and is most preferred by those who want to have authentic ethically sourced products. That is because, as said before, consumers are very aware of how their choices affect the lives of those down the supply chain and so they want to make choices that benefit everyone in the supply chain.

Blockchain can easily monitor the supply chain as data stored in it can’t be manipulated, erased, or even monopolized by a single authority. So, when a company claims that it is ethically sourcing its material, the blockchain can make sure that the farmers are getting paid a fair price to validate the claim of the company. Not only that, by giving automated carbon credit as discussed above, it will make sure that each step of the supply chain is eco-friendly. Some companies have already embraced this like Moyee Coffee in Ethiopia whose platform records every stage of coffee production in blockchain technology, and everyone in the ecosystem can track it.

Blockchain in recycling
Plastic recycling is a big step towards reducing waste and improving the environment. Blockchain technology can make the method of recycling transparent and trustworthy.

With blockchain, all partners in the plastic recycling industry can keep track of the data and see that the plastic is being truly recycled. It can connect plastic waste producers with recyclers and make sure that the recyclers are compensated when the recycling process is done.

And the way it does so is by issuing specialized non-fungible tokens or NFTs. These NFT tokens are only given when there is indisputable proof that plastic has been recycled. These tokens can be traded or sold by the recycler to companies to offset their plastic waste and show their commitment to recycling and sustainability. It gives recyclers an extra source of income. There are already platforms that are operating as a marketplace for such NFTs. And in the real world, it is taking away more plastics from the environment!

Sustainability of the blockchain technology
The last important way blockchain technology can impact sustainable development is by making the whole technology run sustainably. And there are three ways to make blockchain sustainable.

The first is to make sure that the network running it is run on renewable energy sources that are off the grid. This can reduce their dependence on traditional energy sources and make the operation more profitable. A study in 2021 showed that 39% of energy used in the technology was from renewable sources, and the figure is only going to go up. Hence, by promoting the use of renewable energy, blockchain is not only making itself sustainable but also reducing the dependence on traditional energy sources.

The second way is already becoming quite popular which is shifting from “proof of work” to “proof of stake”. The former needed powerful computers to calculate the mathematical problems that validated transactions and added blocks to blockchains. The second protocol depends on validators who have a stake in the network to verify the transaction and secure the network. Since high energy-consuming computers are not needed for that, it automatically reduces the energy consumption of the technology.

The third approach to enhance sustainability involves optimizing the design and protocols of the blockchain. This includes reducing redundant data stored in the blockchain to lower processing requirements and storage needs. Additionally, adopting advanced consensus algorithm enhancements can make the blockchain network more energy-efficient while maintaining security and resource efficiency. Lastly, implementing layer 2 scaling solutions, such as sidechains or off-chain transactions, helps alleviate the load on the main blockchain. This results in faster and more cost-effective transactions without the necessity for every operation to be processed directly on the main chain.

Conclusion
In the realm of global sustainable development, blockchain stands poised not merely as a technological marvel but as a fundamental pillar. Its influence spans every facet of society, from establishing transparent supply chains to fostering a heightened enthusiasm for recycling. What we witness today represents only the initial layer of this technology; countless more layers will unfold as innovative solutions harness their full potential. With these advancements, we can pave the way for a cleaner and greener world, ensuring a sustainable legacy for future generations.