The arrival of the blockchain has been compared to the invention of double-entry book-keeping, which enabled the modern economy. But it now has implications that reach far beyond finance, to governance and sustainability.
For sustainability, blockchain technology could be a game-changer. It can generate trust where there is none, empower citizens and bypass central authorities.
Environmentalists are waking up to blockchain’s potential to boost the sustainability of industries such as forestry, energy, fisheries, organic food and mining, as well as improve carbon accounting, air pollution monitoring, material recycling and more.
In a nutshell, blockchains — or “mutual distributed ledgers,” as they are sometimes called — are simply self-governing, tamper-free, online databases that nobody owns, yet everybody can trust.
A blockchain consists of records arranged in batches called “blocks.” Each block references and identifies the previous block using a cryptographic function, forming an unbroken, verifiable chain of custody for whatever good or service is being exchanged. A built-in validation system ensures that nobody can tamper with the records. Old transactions are preserved forever, and new transactions are irreversibly added to the ledger. The blockchain ledger is not managed by a single body, but is distributed: It exists on multiple computers at the same time, and anyone with an interest can take a copy.
A well known application of blockchain is Bitcoin. Bitcoin’s total market worth exceeds US$28 billion — greater than large companies such as Renault. The Bitcoin currency is completely secure because it uses a digital protocol that relies on cryptography: the blockchain.
So, how would we actually use blockchain in conservation and sustainability?
Physical goods can be traced throughout their life cycle. The start-up firm Everledger in London certifies and tracks trade in diamonds, to reduce sales of stolen gems or conflict stones from warlords. The technology platform Provenance, also in London, is developing a blockchain-based protocol to track resources and materials.
Take forestry as an example. Let’s say Ikea wants to sell a desk made from wood cut in a sustainable forest in Indonesia. For it to guarantee the product contains that wood, the company needs to follow the wood all the way from harvest through milling to production of the final desk.
Right now the wood products industry does this through certification and labeling. But what if the tree-cutter’s neighbor donates a couple of logs grown on unsustainably managed land? Different certification organizations deal with such cheating in different ways, forcing timber companies to choose one labeling system or another. This in turn leaves the companies vulnerable to getting locked into one system whose governance begins acting like a monopoly and ramps up labeling prices.
The Programme for the Endorsement of Forestry Certification, responsible for more than 300 million hectares (700 million acres) of certified forests, has been investigating blockchain as an alternative solution for tracing provenance.
The benefits are clear enough. Since blockchain records transactions openly and permanently to its ledger, and this dynamic ledger is generally available to anyone who wants a copy, it opens up the whole tracking process to scrutiny while at the same time preventing any monopolistic third party from controlling the system.
From a birth certificate to a fish or a forest, the blockchain can certify the existence and ownership of anything that can be digitalized. For example, a certificate stating a community owns a forest can be logged in the blockchain with a time stamp. The certificate’s authenticity can be proved by showing a document that returns the same hash. Start-up companies are beginning to do this — the firm Benben in Accra is developing land-title registries for Ghana using the blockchain, and Georgia and Honduras are doing the same. This could limit the eviction of local populations by industries or corrupt governments.
Two billion adults worldwide lack banking services. The blockchain could allow them to enter the financial economy: bitcoins can be transferred without a bank account. Communities that have rights to natural resources could receive direct payments in bitcoins for ecosystem services or for meeting conservation targets. Healthy ecosystems could replace other forms of capital storage, such as cattle.
The blockchain could ensure that conservation and development funding is used as intended. Money can be tracked, attached to a specific purpose, have an expiry date or be released when project milestones are met. Funds cannot be siphoned off. Middlemen are cut out.
The blockchain makes it easier to collect insurance against, say, crop damage by wildlife. Payments are immediate, minimizing delay or corruption, although clerks are still needed to assess the damages. Communities could trade renewable energy through the blockchain affordably, quickly and reliably without being controlled by a third party. An Ethereum-based trading platform for carbon credits was launched in March 2017 on the Russian carbon market by a climate finance group.
The potential for blockchains to contribute to environmental protection in other ways is vast as well.
“What they’re really good for is authoritative data logging, pretty much in real time, that people can access,” says blockchain expert Michael Mainelli. “If you’re trying to measure a tributary flow, or do satellite reconciliations with forestry sensors on the ground, you can set up relatively inexpensive, easy-to-run networks that just log everything you’re trying to track.”
For the moment, however, discussions about this technology are still about potential, with people building proofs of concept and running trials. According to Mainelli, it could be a while before the blockchain revolution really takes hold in the environmental sector.