Credit: Photo by Karolina Grabowska from Pexels
We hear about blockchain all the time. Often it is portrayed as a make-or-break technology, with the power to change so many financial processes within our lives. This article, however, focuses on the use that it may have in the race to Net Zero and how viable these options are. This article builds upon the information released in the special edition of our newsletter on blockchain and explores the potential initiatives that incorporate blockchain technology. It looks at changes taking place within the industry, followed by a set of case studies that serve to show a wide range of uses for Blockchain, demonstrating its versatility and innovative potential. Our comments, questions and reservations are also included, particularly on the possibility of using blockchain without the development of tokens or NFT’s. We hope to provide information on the subject but also to ask some interesting questions about where this fits in to a Net Zero pathway and shed light on to the imaginative possibilities that will help, and are already helping, regeneration. We conclude that the possibilities of Blockchain do seem plentiful as long as we maintain a strong focus on climate impacts and opportunities.
Before we dive in, we would like to introduce the term ‘regeneration’. It may or may not be familiar to you in this context. First suggested by Paul Hawken, the idea is to replace the term ‘sustainability’ with regeneration. There are two reasons for doing this: firstly, the specific term ‘sustainability’ has become prevalent to the point of near irrelevance. We have broadly lost sight of the fundamental idea that to be sustainable means to be permanently sustained. Instead, it has become a by-word for improving, or a subjective marker for some indeterminate level of greenness. Secondly, even if used correctly, sustainability simply means maintaining the status quo. We are, as Hawken argues, past this point. We need to go above and beyond sustenance and start reversing the damage caused. In other words, we are moving past the narrative that doing ‘less harm’ is an adequate goal, and instead strive towards active change.
Blockchain is a platform upon which protocols can be built, all within the transparent and tamper-free parameters of the blockchain space. For cryptocurrencies built on blockchain, the way in which tokens and currency are mined or created is important to explain, as it can have a large climate impact.
There is a shift currently occurring in the Blockchain universe; the change from proof-of-work (POW) to proof-of-stake (POS) and even proof-of-authority (POA). But what does this mean, and what does it mean for currency creation?
The first consensus mechanism used on blockchains was POW. POW is a mechanism to authenticate cryptographic products through the amount of energy that was expended to create that product e.g., mining Bitcoin. This, although not inherently bad for the environment as renewable sources of energy can be used, is often fuelled by non-renewable sources of energy, thus contributing towards CO2 levels. Just 1 Bitcoin transaction uses 1,544kWh to complete; nearly half the power an average UK home uses in one year!
Within a POS consensus mechanism, validators instead stake capital which then can be destroyed should the validator act in a dishonest way. This creates a higher level of responsibility for the validators with reduced centralisation. In terms of energy, the same vast quantities are not needed to prove authenticity. This also lowers barriers to entry. It also makes a 51% attack more costly for the attacker and thus serves as a deterrent.
POA is similar to POS, however instead of staking capital validators stake their own reputations and identity. Naturally, this requires a more rigorous identification process for validators, who would have to exhibit certain criteria to be considered. The incentivisation is through validators acting honestly and contributing to the function of the network, rather than through energy or even capital.
Both POS and POA use far less energy than POW, lessening the environmental impact they have. The shift is significant and important, promoting a more honest, environmentally-friendly, incentivised Blockchain – free from the climate based critiques so prevalent at this time. Additionally, funding nature-based solutions (NBS) using Blockchain could be an efficient way to incorporate green products into a supply chain.
Frodo Technology Ltd, a financial bank ecosystem, hopes to bring the population of people with no formal bank account to a hyperconnected environment without centralised finance. Their token, FRDX, does not need mining which means that transactions are processed with the same energy requirements as an ordinary computer network, meaning the crypto currency has negligible environmental consequences. Naturally all one needs to access such an ecosystem is a device that can connect to the internet and an internet connection itself. Could a mine-free future be the way forward for cryptocurrencies?
In this section we examine case studies for use within reforestation or afforestation initiatives, carbon markets, farming and plastic pollution. This section aims to shed light on the many imaginative uses of blockchain that go beyond standard cryptocurrency.
Blockchain for Forests
A perfect example of the use of blockchain for forests is Veritree, who have partnered with the Cardano Foundation, a decentralised finance (DeFi) protocol aiming to rival other notable layer 1 protocols such as Ethereum. Together, they have created the Cardano Forest. This is a reforestation endeavour, backing up tokens with planted trees that can be monitored and verified, offering those that participate a non-fungible token, commonly known as NFTs, as well as other bonus perks.
Their goal is to plant 1 billion trees by 2030. Currently they have planted 1,001,000 across projects in Kenya, Madagascar, Indonesia, Nepal, Senegal, and Haiti. Each project is curated to maximise environmental conservation, human wellbeing, and climate action, with a variety of species of tree, native to each country, used. Veritree is currently partnered with Samsung Electronics America to plant and track 2,000,000 mangrove trees along the Madagascan coastline.
Planters provide key planting and socioeconomic data directly from the field, the data is then collected and verified by both the organisation and Veritree before being minted on the blockchain. Then you can track and verify the performance of your trees using photos and various geospatial technology. Sponsors benefit from an integrated platform that incorporates NBS (Nature Based Solutions), plant and monitor, track progress and engage.
For context, 1 million trees is the same as taking 6000 ICE cars off the road for a year, equivalent to 24,000 tons of CO2!
If Veritree were to complete their goal of planting 1 billion trees by 2030, assuming that all of these trees were properly cared for and continued to absorb CO2 effectively, they would absorb 24 million tons of CO2 per year – the same as over 5.1 million British people’s carbon footprints (based on a 4.66 MtCO2 per capita per annum). Interestingly, the average American emits 15.5 MtCO2 per year, and so the Cardano Forest would only account for 1.5 million people, using this metric. The World Economic Forum stated that if each person in the U.S. planted one tree per year it would offset only about 3% of the carbon dioxide they produce each year. By contrast, it would offset 26% for somebody in India with an average per capita carbon metric of 1.9 tons per year. It is crucial to bear these levels in mind.
Binance charity is another trying to build the world’s first ‘decentralised forest’. After a donation process, the tree NFT is given to the buyer with the ability to track the saplings, along with the Tree NFT certificate. The goal is to plant 10 million trees, with 355,084 currently planted across 27 countries.
According to their FAQ’s, for the average American to offset their carbon footprint they would have to plant around 8-10 trees per year.
While their ‘Protect our planet’ is not their only charitable fund, it has currently raised nearly $2 million USD out of a $10 million USD goal. They have a transparent list of donors, with transactions details as well as fiscal documents listed on their website.
In our Carbon markets article, we briefly explained and showed the uses that Blockchain could have in the Voluntary Carbon Market (VCM). Within it we explored Toucan, a protocol using Blockchain to transact tokens for carbon offsets. This is only one example, but the overall use of blockchain within this market is for the tokenisation of offsets, transacting verified offsets with tokens bought which then can be traded for DeFi products across Blockchain.
Verra, the main issuer of carbon credits recently announced it would ban the conversion of retired Verra credits into tokens – impeding Toucan’s business model. While Verra argued that the move was in defence of transparency and Toucan met the announcement with a level of positivity, KlimaDAO said that “while Verra’s decision is a broadly positive move forward for the Web3 carbon space” Verra has “done little to engage with the emerging on-chain carbon market, as made evident by the frustration of many working in this space.”
In effect the issues within this space will work themselves out with the passing of time. While it seems a roadblock at the moment, the move was made to ensure transparency and exclude the exchanging and use of junk credits, which is of course positive. Perhaps this is an indicative case of innovation outpacing regulation, forcing bodies such as Verra to retrospectively implement reactive rather than proactive policies.
Toucan’s current statement urges the bridging of carbon-credits on chain to be paused until further notice– with Verra unavailable for further comment, only advising new information will release in the future. For more information on Toucan, please find our interview with them at the bottom of our article on the VCM.
The Regen network uses blockchain to focus on farming. Regen Network focuses on ecological health, and rather than viewing farmers as food producers they promote them as land stewards. By using satellite imaging as well as drones they train machine learning models to recognise ecological indicators and make predictions about ecosystem health. Farmers provide the data which Regen Network evaluates using ‘Ecological State Protocols’(ESP’s) on the Blockchain, before sending a field scientist to carry out an inspection, the results being saved to the regen ledger. This is a more efficient way to verify ecological outcomes, better using valuable time and resources.
ESPs are algorithms that primarily utilize remote-sensing data to determine the change in state of a specific facet of ecological health. An example of this would be a soil carbon ESP, which would track the change in soil carbon in a given piece of land over a given period of time. Ecological Agreements are smart contracts tied to the outcomes of Ecological State Protocols. For example, a rancher could demonstrate via a soil carbon ESP that they’ve sequestered 100MTCO2 over the past year in their ranch land. A carbon market utilizing an Ecological Agreement could pay them automatically when this carbon sequestration is verified. This is significant, providing faster connectivity to actors, rewarding them without delay for their work.
The use of blockchain in this initiative, to provide transparency to the processes of carbon sequestration, payment and verification, aids in the mission of the Regen Network to improve ecological heath within agricultural practices, therefore contributing to the regeneration of the planet.
Plastic Bank uses blockchain technology for transactions to ensure security and transparency. Developed with IBM, it turns plastic into currency by setting up collection and recycling centres across third world countries, allowing people to deposit plastic in return for tangible benefits such as phone charging, food, water, cooking oil or children’s tuition.
The plastic that is picked up is recycled and turned into ‘Social Plastic’ which is sold to manufacturers to produce more sustainable products. The use of blockchain ensures that no fraud, corruption, or theft is committed, securing payment for impoverished people in areas with high levels of plastic pollution. As of January 2022, they have picked up over 41 million tonnes of plastic across 540 branches with over 37,000 members.
Plastic bank does not have a token affiliated with their organisation and their use of blockchain is only as a secure platform to be easily accessed in communities that otherwise would not be able to open a bank account. This use of blockchain is incredibly innovative, ensuring regeneration while being profitable for the most vulnerable communities, which so often have to bear the brunt of polluting industries.
As shown, there are many initiatives already in place that utilise blockchain technology for regenerative projects. However, where applicable, the range of NFT products available in return for donations or for the purchase of tokens, arguably, have a low market value, offering little incentive other than doing a good deed. Perhaps partnerships with well-known or rising NFT artists could do much in giving exposure as well increasing the financial value of these NFT’s which would serve as more of an incentive to buy tokens and so plant more trees, aiding in regeneration.
Another angle perhaps not considered is the creation of individual tokens. While blockchain itself has proven it can be an amazing tool for transparency and data, many of these initiatives continue to introduce their own tokens as a way of monetising their processes, with transactions for tokens being backed by trees, for example. These projects could instead be backed by a whole host of other products and solutions. The question we would put out there is: are these tokens distracting, compared to their utility in the open market and if so does this not take away from the journey towards Net Zero?
Thinking in terms of cost, one estimation is as high as $200,000 to create a new cryptocurrency with no marketing additions. As for creating NFT’s there is a range; from as little as $0.1 to upwards of $500 including market fees, with platforms such as Ethereum being the most expensive to list an NFT on.
The future of blockchain for climate change is bright, there is little doubt about that. The small array of projects that have been explored in this article are a glimpse of the opportunities that are out there to monetise regeneration initiatives. As mentioned, the creation of tokens is not necessary to utilise the huge potential of blockchain, with Crypto being a massively contentious issue in recent weeks. While these events shouldn’t be a barrier to those who wish to invest in Crypto, it reminds us of its fragility as an infant industry still. In light of this, I would question whether this fragility, in the context of our already fragile climate, is what the regenerative movement needs? Arguably the success of initiatives like the Plastic Bank show that these additions are not intrinsic to the success of blockchain implementations, and in some cases serve as more distracting than fruitful.
Blockchain clearly has many uses, its underlying characteristics mean that a wide range of imaginative businesses can use the technology for varying climate change initiatives. As mentioned there are a few reservations about the adoption of tokenisation and creation of NFT’s, which are common when using this technology. The potential is huge for regenerative blockchain usage if we can prevent overcomplication and misdirection, and it is exciting to think that many of these initiatives are already having substantial impact.
In all, the utilisation of Blockchain technology can only be a positive within this space, and as we see some of these initiatives come to fruition, hopefully this will stimulate further implementation and integration of Blockchain for climate change.