Blockchain and its carbon footprint

Considering all the areas of application of the blockchain reveals the horizon of a possible new transformation of our society, but above all of our environment. The latter is often the element excluded from the great industrial revolutions. However, since 2015, the environment has been the host of great debates and represents a great challenge for the future of society and our planet. Can the blockchain protect the environment or will it feed on it and harm it? This technology is mainly known for its application in the use of cryptocurrencies. Since its introduction in 2008 as a Bitcoin transaction ledger, the technology has spawned hundreds of cryptocurrencies (Ethereum, NEO, Shiba Inu, Litecoin). The use of a blockchain is not limited to cryptocurrencies, but can also apply to other areas (logistics, medical, patents, copyrights, votes or creation of artistic or digital content).

Birth of techno and perspectives

The blockchain: functioning and limits

A blockchain is made up of a set of blocks. So far it’s easy, it’s all in the title. The blocks are defined as data, it can be a list of transactions (1), or a list of the use made of wifi or “smart contracts”. It should also be understood that these blocks have limits, in fact, if I take the example of Bitcoin, one block records an average of 1500 transactions. When the blocks of the chain reach saturation, it is therefore necessary to add new blocks, in the context of Bitcoin, this operation is called mining. “Mining” consists in making the computing power of one’s computer available to the network for a monetary reward. In essence, the miner has to solve billions of mathematical operations (2) that follow the cryptographic protocol used by the network (3). For Bitcoin, this validation operation is called proof of work. Once the new block created complies with the cryptographic protocol, the miner who first verified the validity of the block receives his reward and this new block is added to the top of the chain (thus the new Bitcoins are created).

Why use a blockchain: areas of application

The use of a decentralized and tamper-proof certification system is suitable for monetary transactions, but the use of a blockchain is possible wherever the FITS (4) model applies (fraud, intermediaries, throughput, stable data – fraud, intermediaries, transaction throughput, data stability). A blockchain can be disruptive in any field and for any sector where: the risk of fraud is high and security and trust require substantial investments, a large number of intermediaries act without bringing any real added value, the number of possible transactions per second is limited or constrained and where the data is table in time.

In 2021, the use of the blockchain will spread. Institutions, governments and companies actively participate in its development: for governments we can mention the United States, which has filed a patent (5) for a postal voting system that would use a blockchain. We can also mention countries such as South Korea, Thailand, Japan, but above all China (6) that will embark on the creation of digital currencies as early as 2022. Several financial institutions are already using blockchain, both to perform interbank reconciliations (with the Corda blockchain ( 7) in Italy), or to promote interoperability between private and public blockchains with the Quorum of JP. Morgan (8). Big economic players are not excluded, Microsoft launched Lition (9) in 2020 and integrated it into its Azure cloud offering as the first BaaS (Blockchain as a Service) so that developers can build applications on this basis. At the end of 2019, Samsung built a wallet (safe materials area) into its phones that allows cryptocurrency users to conserve their assets.

The speed with which this technology will be adopted depends on 3 main elements: it must offer a level of trust greater than or equal to that existing, it must make aspects of our daily life easier and it must be simple to use.

CSR and environmental impact

It remains an axis often set aside by the great industrial or digital revolutions. These are the impacts on the environment and on CSR. There is still no comprehensive study, and the results of the available studies should be viewed with a grain of salt (given the lack of empirical information on this technology and methodological differences). However, those who cite Bitcoin are a good example of the environmental issue at stake. They are aimed at the business of Bitcoin, but still highlight the hidden costs associated with the use of this technology.

Energy consumption and the environment

The first environmental aspect is energy consumption. A study conducted in 2014 by two Irish researchers shows that systems based on the concept of blockchain with proof of work (Bitcoin for example) can be qualified as energy sinkholes (11), “Bitcoin’s mining activity will represent energy consumption of a country like Ireland. The use of proof of work induces an excessive consumption of electricity and computing time which is increasing exponentially in the world. “Economist Hyun Song Shin (12) (13) defines the system validation of the proof-of-work necessary for the Bitcoin blockchain an environmental disaster. According to a study published in Nature and Climate Change (14) in 2018, emissions related to the use of Bitcoin could push global warming above the threshold of 2 ° C in less than 30 years, despite efforts made during COP21. In 2019, Bitcoin alone accounted for about 0.1 ~ 0.3% (between 58 and 80 TWh) (15) of global electricity consumption (15). or more than the annual consumption of electricity from Switzerland or the world fleet of electric vehicles). Given that 67% (16) of global electricity production is provided by fossil fuels, it is possible to establish a direct causal link between global warming and the use of the blockchain.

Corporate social responsibility

Another environmental aspect is the management of electronic waste. Blockchain like any other ICT produces a significant volume of e-waste. In the example of Bitcoin, mining creates stiff competition and leads to the renewal of IT equipment (on average every 1.5 years). Two perverse effects emerge: the first is that this strong demand stimulates the sector and accelerates the development of some technologies, in particular for micro-components (this was true before the Covid crisis). The second is that this strong demand adds stress to the entire IT sector and drives up the price of raw materials and other components (17). These two effects accelerate the renewal of IT equipment. For Bitcoin mining, the business contributes to the annual production of 30 Kilo Ton of electronic waste (just under the mass of an aircraft carrier such as the Charles de Gaulle). It should also be noted that the “eternal” nature of the information contained in the blocks raises the question of the right to be forgotten and the GDPR. At any time, any actor can consult the information without any censorship.

In conclusion, the first studies, carried out on part of the activity linked to the use of Bitcoin, indicate an ecological disaster and cause fear of an iceberg effect when the topic is extended to all blockchains.

However, the energy-intensive methods indicated in these Bitcoin studies such as proof-of-work are losing ground to alternative methods that consume less computing power and energy. Although a full assessment of the different methodologies available and their environmental impact remains to be done in order to establish a “greener” standard, the sector is aware of these problems and is multiplying alternative approaches.

The blockchain can help de-opacify current energy consumption and production processes, which would increase the renewable share of our energies. A promising example in the logging sector (18) (19): Although there are many certifications and labels to ensure the renewable and eco-responsible nature of the products in this sector, many regions do not adhere to these standards. The added value of the blockchain is to be able to make information on the origin and processing of a product completely transparent for all the players in the supply chain. The final consumer could therefore be sufficiently informed to make a choice that goes in the direction of protecting the environment, but also child labor or even the human rights of women and minorities (20).

(1) If we take the example of a cryptocurrency like Bitcoin, then we are talking about a transaction log
(2 The hash function acts as a decryption key. It is therefore necessary to verify that all the data of this new block complies with the encryption rule and that by applying the key to the data to encrypt it, we will be able to decrypt it with the same key.
(3) For Bitcoin, this is the “SHA-256” hash function.
(4) FITS: fraud, intermediaries, throughput, stable data. Model proposed by Dr. Adrian McCullagh Ph D. (IT Sec), LL.B., GAICD, Ph.D. Lawyer and researcher at the University of Queensland in Australia
(5) blockchain /? sh = 155a81843336
(12) Hyun Song Shin, “Chapter V. Cryptocurrencies: Looking Beyond the Hype”, in BIS 2018 Annual Economic Report, Bank for International Settlements, June 2018
(13) Michael Janda, “Cryptocurrencies like bitcoin cannot replace money, says Bank for International Settlements”, ABC (Australia), June 18, 2018
(15) See: Cambridge Bitcoin Electricity Consumption Index
(16) OECD data 2016
(18) Kouhizadeh and Sarkis, 2018
(19) Figorilli et al., 2018
(20) PEFC has shown interest in this technology

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