The role of sustainability in assessing the utility of blockchains

Blockchain technology has emerged as a transformative force in the realm of sustainability, offering a promising path towards a more environmentally conscious and socially responsible future. Its decentralised, transparent, and immutable nature has the potential to revolutionise the way we address pressing global challenges, such as resource conservation, supply chain transparency, and renewable energy integration.

As we navigate an era where sustainability is paramount, the innovative capabilities of blockchain are increasingly recognised for their capacity to foster positive change, creating a foundation upon which sustainable practices can flourish.

These issues were unpacked in more detail during a recent panel discussion at the Blockchain for Europe Summit in Brussels. The panel was moderated by Tommaso Astazi (Blockchain for Europe) and included:

EU lawmakers’ digital strategy

Maire began the conversation by noting the EU commission, headed by Ursula von der Leyen, has made significant efforts in recent years to push forward regulations and laws in recent years which promote a green strategy. This has occurred alongside an increased push towards a digital future – leading to a natural marriage between the two strategies, she said.

This has culminated in a series of ‘strategic foresight’ reports which shed light on the most relevant and intertwined social and economic challenges the EU will encounter on its path towards sustainability. On this basis, the latest report proposes ten areas where the EU needs to take action to successfully navigate the transition. This should ultimately bolster Europe’s open strategic autonomy and global position in the race towards a net-zero economy.

Not all blockchains are the same

Prinz noted that it is important to distinguish exactly which blockchain technology is being used, as they are not all built the same. He specifically pointed to blockchains which are built on a proof-of-stake model vs a proof-of-work model.

‘It’s not an apples-to-apples comparison. While proof-of-stake may appear more sustainable on the surface, it heavily discounts other factors, such as the integrity of data, in a proof-of-work system‘, Prinz said.

The blockchain trilemma suggests that while a perfect blockchain is decentralised, secure, and scaled, no such blockchain exists because to have two of these three properties, you have to sacrifice one. There have been various efforts to fix the problem, but all of them either make the system more vulnerable to bad actors or water down the model that’s key to the appeal of a blockchain.

However, this thinking fails to take into account the intended use case for proof-of-work. With proof-of-work, all three properties are achieved because they exist simultaneously, and the more transactions there are on the network, the more decentralised and secure it becomes. The design of proof-of-work blockchains aims to achieve scalability while ensuring security and interoperability to enhance and potentially replace traditional value exchange.

By scaling proof-of-work to accommodate a higher number of transactions per block, energy consumption is significantly reduced by default. Therefore, the idea that a mere change in consensus mechanism will automatically offer a more sustainable, affordable, and scalable protocol than proof-of-work is simply not true.

Pre-order our Green Digital World ebook now

To learn about how blockchain can prevent greenwashing, we encourage you to pre-order the upcoming release of our latest eBook – Engineering a Smarter and Greener Financial World with Tokenovate. The eBook will officially be available to download in early November 2023, at which time we will send you the download link by email.

In this eBook, we delve into the fascinating world of blockchain technology and its profound impact on the ESG (Environmental, Social, and Governance) landscape. The potential for blockchain to revolutionise the way we approach ESG issues is truly remarkable. From reducing carbon footprints to promoting ethical supply chains and enhancing corporate governance, blockchain offers a multifaceted approach to addressing the key pillars of ESG.

The eBook will explore how Tokenovate is actively working to address these critical issues. Through the provision of distributed financial market infrastructure and smart legal contracts, Tokenovate enables programmatic lifecycle event management of the pre-trade to post-trade workflow for OTC and exchange-traded derivatives, including Voluntary Carbon Credits (VCCs). This innovative approach is set to transform the landscape of sustainable finance and ESG practices.

Other topics which are set to be discussed include:

In-depth insights into the intersection of blockchain and ESG;

A detailed overview of Tokenovate’s mission and groundbreaking solutions;

A discussion of powerful use cases for Tokenovate and the BSV blockchain, illustrating how transparency, accountability, and sustainability can be achieved across various industries.