The blockchain technology, better known as the underlying protocol supporting all cryptocurrencies, is not just a revolution when it comes to transferring funds. The technology is on its way to redefine the way we will transfer all types of assets whose ownership needs to be traced. This includes financial assets, votes, intellectual property rights, certificates but also physical assets such as goods. If you are not familiar with the concept of blockchain let’s recap its founding principles before we look at how the technology can promote the production of renewable energy, prevent corruption, mitigate environmental impacts or improve the reliability of information in the supply chain.
Why do we need blockchain?
Blockchain fixes trust and accountability issues inherent to information sharing by offering a protocol where all transactions are recorded in an immutable and distributed database also called a ledger. Maybe that definition sounds a bit technical so let’s make it less abstract. Basically, the system propagates data over a network only in a way that is more secure, traceable and yet totally independent from any organization or government. The term blockchain is very appropriate because it refers to the fact that transactions are linked together to form a chain, the ledger.
That’s the basics but let’s just add that the immutable aspect of the ledger is made possible through the encryption of each operation while a consensus system ensures that transactions added to the chain have been validated by specific members of the network called nodes. These two fundamental principles are what make the blockchain unique and what guarantee that data will retain their quality, integrity, authenticity and continuity transactions after transactions.
Watch Don Tapscott explaining how blockchain works on TED
Smart contracts to promote the use of renewable energy
Building on the very principles supporting the blockchain, smart contracts can be compared to small self-executing programs that can automatically execute transactions when a set of conditions is met. Concretely, smart contracts can save a lot of time and money by automatically handling operations normally done by intermediaries.
For instance, smart contracts have the potential to seriously disrupt the energy sector. Electricchain and SolarCoin are already implementing smart contracts to encourage the installation of solar panels and to promote the production of decentralized renewable energy. Thanks to the integration of sensors and blockchain technology, electricity generation data is fed into a secured network which, thanks to smart contracts, can automatically issue SolarCoins to owners for each MWh of electricity produced. Thanks to this solution, there is no need to rely on a certification body to verify electricity generation data before releasing the SolarCoins because the validation phase is embedded in the smart contract. And since the system monitors the exact production of each installation at any given time, it also allows for real-time grid management to distribute electricity exactly where and when it is needed.
Greenhouse gas emissions and environmental protection
In a similar way, the GHG Management Institute predicts that blockchain and smart contracts will also improve transparent documentation in carbon emission trading, in climate finance flows, or in greenhouse gas emission reporting. Imagine a system that would improve the transparency and traceability of renewable energy certificates (RECs) and carbon credits or allow the development of new applications in the measurement, reporting and verification framework (MRV). Yes, smart contracts are knocking on these doors too.
For example, one of the many projects presented by the Climate Ledger Initiative promises to increase the accountability of GHG emitters under the Paris Agreement by allowing the tracking of GHG emissions of its participants.
The DAO IPCI is even more ambitious. The initiative is currently working on an ecosystem to allow environmental assets and liabilities to be managed through smart contracts as well, letting “stakeholders register quantified impacts and pledges, invest mitigation projects, offset carbon footprint or acquire and trade mitigation outcomes”.
Corruption, funds mismanagement and the unreliability of banking systems in developing countries are some of the challenges facing the humanitarian and aid sectors. Fortunately, here too new blockchain based solutions could well change the way non-profits manage donations and transfer funds internationally. Aid:Tech and Disberse are two new players who run dedicated fund management platforms where money is turned into tokens (a cryptocurrency for specific types of transactions). Once tokenized, funds can be easily moved by their clients, giving them the possibility to bypass slow and costly bank transfers, to access best exchange rates and, most importantly, to minimize risks of fraud as money flows down the chain. And of course, since all transactions are fully traceable from donors to beneficiaries, the system makes the reporting process a breeze.
Supply Chain Management
Finally, our list would not be complete without a look at blockchain solutions for a sector whose raison d’être is the traceability of goods, the Supply Chain Management sector. In this area, a good example of blockchain implementation is provided by a company called Provenance.
A case study demonstrates how their tracking application allows customer to track the origin of yellowfin tuna from catch to supermarket all thanks to smart tagging and sensors all connected via a blockchain based application. And if you combine Provenance solution with the supply chain mapping solution of Sourcemap, you get an integrated ecosystem where it becomes possible to visualize the journey of physical products and access trusted information about suppliers as the goods moves along the supply chain.
Blockchain and smart contracts are currently supporting very exciting developments across all sectors which explains why experts predicts a communication, societal and economic revolution comparable to the one launched by internet.
However as promising as the technology looks, many projects using blockchain as a solution still focus on very specific areas. Solutions to fight corruption and to automatically issue renewable energy certificates can revolutionized practices in a variety of fields but the true revolution will only happen if the technology is used to tackle concrete every-day situations faced by you and me. Being able to track goods and monitor electricity generation are concrete applications and that is where the future is for blockchain and smart contracts. Just as with the internet, a large-scale revolution will only happen once the technology becomes accessible by everyone not only by researchers and experts.
Finally, I invite you to watch a couple of videos prepared by the Climate Ledger initiative to see what we can expect in other fields.