Bitcoin’s dramatic price volatility in recent years has caused an explosion of interest in blockchain. From tech conferences to dinner parties, blockchain has captured the public imagination and become a buzzword. Yet, despite all the hype and myths, the technology is relatively straightforward: a blockchain is a shared, immutable digital ledger that makes, records, and verifies transactions or agreements, allowing all participants in the network to see what data has been added or changed.
While often discussed in the context of cryptocurrencies, blockchain’s potential go far beyond finance. One critical though largely unexplored application is climate change — specifically, climate action accounting. With the gap between national government climate action and global 1.5/2°C goals widening, increasing policy attention is being placed on the potential for local governments and private actors to make up ground. For example, at the recent Climate Action Summit in New York, 87 major businesses committed to reach net-zero emissions by no later than 2050. However, our research has shown that although these commitments have been proliferating in recent years, they are unmatched with the necessary transparent data that demonstrates progress and achievement. Data is essential to understanding whether or not countries, companies, and local state and regional governments are setting and making progress on climate action targets. A blockchain-based system could collect and compile more data with greater accountability than current systems, which could help ramp up and enforce climate policy at multiple levels.
Despite its potential applications, there is not yet a clear understanding or any concrete frameworks for how blockchain technology can be applied to the challenge of establishing accountability and incentives for climate actors. At a roundtable meeting in New York City on September 24, alongside New York Climate Week, Data-Driven Lab and the Yale OpenLab convened climate experts and technologists to discuss how digital technologies could be leveraged to strengthen and build collaborative accounting networks. In the process, a number of common misunderstandings and myths around the use of blockchain to track climate action were uncovered:
Myth #1: Legacy systems will need to be replaced
Newcomers to blockchain technology often fall into two categories — those who enthusiastically seek to replace every existing system with one that’s blockchain-based (“If you have a hammer, everything looks like a nail”), and those who resist any application for fear of disrupting a functional status quo (“If it ain’t broke, don’t fix it”). Both reactions stem from the same misconception — that using blockchain necessitates a complete overhaul of whatever system currently exists. In reality, with the right coordination, a blockchain-based system can integrate smoothly with legacy systems, and it can even enable these systems to integrate more fluidly with one another.
In the world of blockchain (and software more broadly), the word for systems fitting together is “interoperability.” For most applications, there’s not one dominant blockchain system, so for any system to be useful, it needs to be interoperable with the other systems out there. That includes blockchain-based systems as well as legacy systems.
For example, consider efforts to track supply chains for food. Working with Walmart, IBM developed a blockchain-based system that was able to trace the origins of a mango in 2.2 seconds, which would take a week using traditional methods. IBM’s system, the IBM Food Trust, was fully interoperable with the barcode-based GS1 system that already existed. In fact, GS1 enhanced the IBM system by providing a pre-existing standard for data to be entered into the ledger. Without that, IBM would have needed to create a new standard from scratch.
In the case of climate action tracking, the legacy systems already include many well-established standards. For instance, the Greenhouse Gas Protocol has been the gold standard for corporate GHG accounting for almost two decades, and it has more recently expanded its guidance for local governments. CDP lists close to 40 accepted standards for verification of environmental data, across different countries and sectors.
Rather than being redundant or “reinventing the wheel”, a blockchain-based system could add value to existing efforts by being a “platform of platforms,” allowing multiple systems and standards to come together in a single place.
Myth #2: Blockchain means a loss of privacy
Because blockchain is often touted as a transparent ledger, people might think that every detail of every transaction is broadcast on the blockchain for all to see, for all eternity. This fallacy leads to the generalization that there is no user privacy on the blockchain. Transparency, however, should not be conflated with a lack of privacy. Likewise, transparency and privacy are not mutually exclusive. On the Bitcoin network, for example, one could technically generate an address — or multiple addresses — to send a transaction and track its every movement in real time on a Bitcoin block explorer without giving away any personally identifiable information.
Note that perfect anonymity cannot be achieved here — only pseudonymity, in the same way one can conceal their personal information through creating a new Twitter account insofar as they do not post material that can be used to identify them. On the blockchain ledger, transaction volumes and the links between senders and recipients could be potential identifiers.
Fortunately, new privacy technologies on the rise can resolve this issue, allowing for perfect — or near perfect — anonymity. Many of these technologies utilize zero-knowledge proofs, a cryptographic technique that essentially allows one to verify if a given set of information is true, without actually knowing what that information is. Zero-knowledge succinct non-interactive arguments of knowledge, or zk-SNARKS, are a key application of zero-knowledge proofs in the Zcash and Ethereum networks, and have led to a whole host of privacy features on the blockchain.
When it comes to climate action tracking, zero-knowledge proofs could be used to protect sensitive information while allowing for robust emissions accounting. This system could encourage more stakeholders to share data in a global blockchain-based climate portal.
Myth #3 Blockchain is not scalable
At present, the most prominent public blockchains, Bitcoin and Ethereum, can only handle around 7 and 15 transactions per second respectively. This processing capability stands in stark contrast to Visa’s ability to process 1,700 transactions per second, which remains the industry target to beat. Blockchain’s current low throughput means frequent network congestions and high transaction fees, which could undermine a global climate accounting application. Moreover, the “Blockchain Trilemma” posits that no system can be at once decentralized, secure, and scalable — any system can only have at most two out of three.
Fortunately, there are a number of promising solutions in the works that could solve the trilemma — or at least achieve a balance between all three goals. One of the most notable solutions is called sharding. It is the technique of splitting a blockchain into ‘shards’, with each ‘shard’ containing its own system information and processing transactions independently, thereby removing the need for each node to verify every single transaction going through the network. Ethereum’s sharding is slated for completion within the next two years and could bring about scalability without compromising on security and decentralization. This solution, along with a few others in development, could raise Ethereum’s transactions per second dramatically. With even more scaling solutions in the pipeline, we may soon see blockchain’s throughput rivalling that of Visa. This solution will greatly benefit a global climate action tracking platform in which a multitude of actors are constantly sending and receiving data.
Myth #4: Blockchain is always hugely energy intensive
Many discussions of blockchain focus on cryptocurrency, which does use enormous amounts of energy — on par, by one estimate, with the entire nation of Ireland. These digital ledgers rely on energy-intensive “Proof of Work” approaches, in which computers must solve a complex mathematical problem in order to add a new “block” (piece of information) to the “chain” (overall ledger) — consuming large amounts of electricity in the process.
Alternative ways of authorizing transactions, such as “Proof of Stake,” have lower carbon footprints, since they can use other, lower energy-intensive requirements (often an actor’s prior participation or “stake” in a platform) to authorize the creation of new blocks. This approach rewards the most active participants in a particular blockchain system, rather than those with the greatest access to computational power. In the “Proof of Authority” approach, participants leverage and stake their reputations to write on the ledger. This not only reduces energy usage but also cost. The approach is often used in private blockchains, where trusted “validators” award participants permission to join, transact and make changes on a platform.
Some researchers have also begun creating more energy-efficient blockchains; coupled with the use of renewable energy to power these systems, these developments could increase the viability of a blockchain-based climate tracking system. A low-emissions blockchain system for climate action reporting is more likely to be accepted by climate actors, as it reduces accusations of hypocrisy, paving the way for faster adoption.
Myth #5 Blockchain is a silver bullet
While a powerful tool, blockchain is not an all-encompassing solution to data and monitoring challenges. Building and managing a global ledger for climate action will require technical expertise and financial resources, particularly when it comes to aligning this new solution with existing databases and systems. Like any system that involves multiple powerful actors, it also carries a host of governance questions: who will design, govern, and maintain the system? How will potential participants access it? And what incentives will motivate them to do so?
A new initiative, led by Data-Driven EnviroLab and Yale OpenLab, will delve into these questions, exploring the possible benefits and pitfalls of utilizing blockchain systems to analyze and support climate action. Drawing on perspectives from researchers, policymakers, local governments, and companies, this initiative will attempt to map if and where blockchain can enhance existing efforts to track climate action. Blockchain has tremendous potential to help accelerate climate action, but building an effective system requires a clearer understanding of the technology’s capacity, including its limitations. Follow this link for more information on the proposed open climate platform and join a global collaborative hackathon to fast-track its development.