Blockchain, cryptocurrency, nodes, ledgers, transactions and blocks are just a few of the hottest terms in the field of innovative tech right now.
Yet often the meaning of these terms can be unclear.
Let’s try and make some sense of them by answering some of the most common questions in this area. What’s blockchain? How does it work? What are the main benefits? And how many sectors can it be applied in?
Time to find out more.
First, some definitions
Blockchain is an innovative technology that was officially launched ten years ago, in 2008. It uses cryptography to track transactions that occur between different parties.
It might seem like a simple definition, but it encompasses four big components that make blockchain an integral part of the future digital revolution. We’re talking about decentralisation, possible thanks to the absence of intermediaries and central authorities, transparency, ensured courtesy of shared public archives, security and the inability to change stored information, which is guaranteed by an encrypted, incremental operation tracking system.
These characteristics allow blockchain to create a trust-based system centred around a democratic community which – taking advantage of a peer-to-peer approach – builds up a shared accounts register that is available on the network and accessible by all.
Blockchain: from cryptocurrency to the environment
Originally, the term blockchain was wrongly used as a synonym of Bitcoin. In actual fact, Bitcoin, Ethereum and the many other cryptocurrencies are just a few of the main components of blockchain. The technology is the system upon which all cryptocurrencies are based and it was what made it possible for all the various cryptocurrencies currently on the market to be created.
But that’s not all. Blockchain can be applied in an endless range of sectors. Thanks to its unchangeable structure, which makes interference virtually impossible, blockchain could become an innovative and multi-functional platform for exchanging data, contracts and any other type of information. And it could be used in sectors that couldn’t be further away from the world of payments.
It’s already being applied to help the environment, where blockchain represents a sustainable, zero-impact way of helping to protect our increasingly fragile ecosystem.
But how exactly can blockchain help Planet Earth? We’re about to tell you: so sit down, get comfy and prepare for a journey through the hi-tech green sector.
Blockchain and supply chain management
Ethical purchases are more popular than ever right now. Hundreds of market research studies show that users are increasingly interested in consumer goods that not only deliver quality but also stem from a product cycle that does not harm the environment.
However, when we buy a product of the shelf that seems sustainable, we can never be 100% sure that it really is. And there’s a simple reason behind this: the journey a product has to undertake before it arrives in a store can be extremely long. As it progresses through the various steps of this long chain, information on the materials and substances used in production, on waste disposal and on human resource management practices can be lost or – even worse – falsified.
This is why using blockchain to trace the journey of a product could be a useful practice. By doing this, we ensure that every phase of the supply chain is transparent and consumers have the option to consult truthful, unmodifiable information on products, allowing them to make choices that are kinder to the environment.
Are Km0 products really local? Is a pack of Fair Trade coffee really fair? And is fish really caught using sustainable practices? We could answer all of these questions by incorporating blockchain into the supply chain – and we’d prevent waste, cut inefficiency and root out fraud and unethical practices from producers in the process.
This innovative approach is already a reality thanks to the Foodtrax DApp, a decentralised web application based on Blockchain which makes it possible to track food from origin to store.
Good recycling practices could pay dividends thank to blockchain
How many times have you asked yourself where our recycling really ends up? Does it really even get recycled? Is it actually beneficial for the environment? Despite numerous awareness campaigns, many people still doubt that recycled waste is being properly handled by the bodies responsible.
Frankly, at times they are right. Many towns are still not properly equipped to be able to recycle some types of waste. Only a few places are doing things the right way – and these are like drops in the ocean, unable to make up for the widespread inefficiencies all around them.
The result is an uneven service that serves only to discourage citizens who are sensitive to the issue of sustainability and alienate even further the sceptics. Yet this is another field in which blockchain could make a real difference. By using cryptography to create a secure, certified waste tracking programme, blockchain could be used to launch a system whereby the most sustainable citizens receive money – in cryptocurrency, of course! – in exchange for recycling.
It’s an idea that would undoubtedly encourage participation in recycling, with knock-on benefits for the planet. Evidence for this is provided by a number of Northern European countries, where a deposit system in which recyclable materials like plastic, cans and glass are exchanged for monetary tokens is proving a great success. In response, companies like Social Plastic and RecycleToCoin are already dreaming up innovative projects capable of turning waste into money. Cleaning up the planet and earning money in the process looks like the new frontier of sustainability.
Peer-to-peer energy exchanges to protect the environment
Thanks to peer-to-peer technology, we’ve shared music, films, books and videogames. So why not consider sharing energy in order to help the environment?
There would be plenty of benefits. First up, we would reduce inefficiencies deriving from distribution, eliminating the need to transport electricity across large distances and replacing this with the concept of proximity-based allocation. This would mean saying goodbye to energy losses incurred during distribution and hello to local energy sharing among houses, districts and neighbouring towns.
Sound like science-fiction? Well, it’s not – just take a look at some of the projects already underway in this area. Many companies are already developing innovative solutions to solve the problem of energy loss. For example, a joint venture between ConsenSys and LO3 Energy – Transative Grid – is developing a blockchain platform to encourage local electricity trading. Similarly, SunContract is aiming to use a peer-to-peer approach to share solar energy and other renewable energy forms.
These are all ethical, environmentally conscious solutions that could have big advantages for communities. The big players in the energy sector are currently unwilling to invest large sums of money in infrastructure that is costly to build and maintain, instead preferring to back leaner, more flexible incentive-based programmes designed for individual citizens.
For this reason, an energy sharing platform based around blockchain could allow companies and families to achieve great results by investing in renewable energy facilities and subsequently making the energy produced available to all. EcoChain, a super-innovative DApp, is already working on making this a reality: its aim is to create a tracking and exchange system for renewable energy whereby private citizens can earn money from their investments in green energy.
Carbon tax? Possible with blockchain
When we think about protecting the environment, we also end up questioning the use of pesticides in farming, toxic substances in livestock rearing and chemical products in the production of consumer goods.
However, it’s difficult for us to get an idea of the volume of carbon emissions released throughout the entire lifecycle of a product – these can have devastating consequences for the environment both in the production and transportation phases.
This is why a carbon tax could lead to a decrease in harmful emissions. Yet to calculate these emissions with certainty, we require a secure, impenetrable control system that can faithfully monitor the carbon consumption of every company. Once again, blockchain could be used to supply the necessary guarantees: its unchangeable structure means it could be the key tool in tracking consumption and setting the level of carbon tax that needs to be paid.
The aim? If lots of carbon is released into the atmosphere during the production of a product, the tax will be higher and the shelf price will rise as a result. Consequently, consumers faced with higher prices will be pushed to purchase products that are kinder to the environment – and more convenient at the same time.
Once launched, this virtuous cycle would encourage less responsible companies to restructure their supply chains, creating a potentially infinite process of sustainability.
But there’s more: as well as a carbon tax, blockchain could be used to create a crucial rating system. Every company and product would be given a rating that would get higher and higher based on how low its carbon emissions become. It’s a way of guaranteeing maximum transparency for the end customer, who will be able to make informed choices and prioritise companies who go the extra mile to protect the environment.