Applications of Blockchain for Sustainability

  
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This section reviews some of the applications of blockchain technology in the energy sector, environment, and e-governance.

I. Energy Sector

The energy sector worldwide is undergoing structural as well as functional changes. The decentralized network of renewable energy generators has been gradually expanding, currently dominated by the conventional centralized grid structure. The conventional power grid's functionalities are also limited to the functions of power generation and distribution but provide additional services such as analyzing the data generated through the deployment of smart devices and offering intelligent services to consumers.

Blockchain technology is the driving force behind all these changes. The features of blockchain, namely distributed ledger and smart contracts, are increasingly used to provide additional services. Some of these services are:

  1. Wholesale Energy Trading and Supply, The technologies such as distributed ledgers and smart contracts simplify the business processes involved in energy trading and supply. In this context, developers use blockchain technology primarily for record-keeping, autonomous agents executing business logic, and payment and transfers. Elimination of intermediaries and reduced transaction times are the benefits gained by adopting the blockchain-based approach.

  2. Imbalance Settlement It is a process executed by grid operators. It aims to remove discrepancies between energy units sold by energy suppliers and the energy sold by distributors to the consumers. Blockchain technology provides an efficient solution to this problem which normally takes months for settlement. Here also, distributed ledgers are used to keep track of energy generation and consumption.

  3. P2P Trading Peer-to-Peer (P2P) trading is a form of trading in which energy providers or generators directly sell the energy units to consumers. Thus eliminating the role of energy distributors. Here blockchain technology is used as a platform that facilitates energy trading in exchange for digital currencies.

Providing affordable access to reliable and modern energy (SDG 7) is one of the sustainable goals that blockchain technology realizes through the use-cases, as mentioned above. Further, blockchain technology is providing an effective platform for energy trading in micro-grids and community-owned energy systems.

II. Environment and Climate Change

Developers have started thinking about innovative applications of blockchain technology in environmental protection and climate change. Some of these novel applications include:

  1. Incentive Mechanism for Recycling Project blockchain technology is useful in rewarding digitized tokens or crypto-currencies for joining the recycling project. A digital token can be exchanged for the deposit of plastic wastage.

  2. Enforcing Environmental Treaties Government agencies face the challenge of enforcing environmental obligations while sanctioning the developmental project. Developers have started applying the feature of the smart contract embedded in various blockchain platforms for this purpose.

  3. To implement Carbon Tax The carbon footprint is a measure used for assessing carbon dioxide emission caused by an individual, event or organization. Blockchain technology is useful to track and record the carbon footprint. Further, it can levy a tax based on carbon footprint or build a reputation system to provide incentives for low carbon footprint products and services.

These applications illustrate the potential of blockchain technology in protecting the environment and ensure responsible consumption and production (SDG 12 and SDG 13).

III. E-Governance

Government agencies face the challenge of providing transparent and citizen-centric services. These agencies are looking at blockchain technology as a medium to improve the quality of their service. These agencies have been adopting blockchain for multiple application areas. Some of which are listed below:

  1. A Platform for offering integrated services The government of Estonia has been using blockchain as a platform to provide more than a thousand services to its citizen. Here, the distributed ledgers are used for logging and auditing each transaction of citizens with the government. The government of Estonia has issued digital ID and signatures to all citizens for this purpose. The use of blockchain has brought transparency and trust to the services offered by the Estonian government.

  2. E-voting Democratic societies face the challenge of conducting free and fair elections. Conventional ballot-paper based elections are prone to be rigged and manipulated. Blockchain technology is currently being explored as an alternative to address this challenge. The $Votem$ is a cloud service that uses blockchain to cast votes by mobile or remote users securely. The system uses distributed ledger technology to record and verify the votes.

  3. Land Records Recording the information of landholding and ownership is one of the obvious usages of blockchain technology. Recording such information in the immutable registry and archival purpose is essential to avoid land-related fraud. Some countries, such as India and Sweden, have initiated blockchain technology for land records. In cities such as Chicago, civic administrators have been using blockchain technology to automate the complete workflow involved in the land registry.

Blockchain technology, in some cases, have been directly realizing the goal of Peace, Justice, and Strong Institutions (SDG 16). While in other cases, it has indirectly supported the goal of equitable development (SDG 5).

A Cost-Benefit Analysis of Adopting Technology

Blockchain technology is an emerging technology. It is yet to reach the maturity of many internet-based technologies such as web applications and mobile applications. In this scenario, it becomes essential to know the costs and benefits associated with the deployment of blockchain-based solutions. From the development engineering point of view, it becomes more vital because it offers numerous opportunities to realize SDGs and impact all aspects of development. The strengths of blockchain technologies include:

  1. It provides a platform to build trustworthy services. Many government and development agencies face the challenge of creating trust offered by their services, including aid transfer. Blockchain technology addresses this challenge and enables the strengthening of institutes and services.

  2. It provides a platform for an open market. As observed earlier, blockchain technology is creating an open platform to sell and buy products without any mediators. Thus, it can bring small producers into the mainstream global market, leading to multiple avenues for prosperity and growth.

  3. It simplifies business processes and transactions. The feature of smart-contract} in blockchain technology allows to code the business logic and execute it upon the occurrence of a specific event—for example, the release of payment upon successful delivery of goods. Smart contracts are an effective mechanism to implement business logic when business processes are well defined, and it involves multiple business operators crossing the organizational boundaries.

The following risks associated with the blockchain-based services need to be considered while implementing services on top of it.

  1. No Central Authority means greater responsibility on users A blockchain system, by its design, is a decentralized system. It means there is no central authority to contact in case of loss of public keys or loss of passwords. Hence restoring users credentials becomes impossible in such events. Also, the data entered in a system is immutable and needs to be entered carefully. The implications of all these architectural elements put a greater responsibility on users to be careful.

  2. High Energy Requirement of Consensus Protocols Blockchain-based systems use a consensus protocol to validate a business transaction. Some consensus protocols such as Proof-of-Work (PoW) used in Bitcoin have been found ineffective in energy consumption. It needs a high amount of electric power to validate a business transaction. Hence this cost needs to be considered when one selects a public blockchain for implementation.

  3. Maturity of code to replace business logic Blockchain-based systems use smart contracts to encode business logic and well-defined business rules. These contracts are automatically executed, and it replaces the need for human interventions. However, the smart contracts thus implemented need to be tested rigorously and formally verified. Otherwise, it will lead to a situation called {\em hard-fork} of blockchain, i.e., replacing older code with newer code for the smart contract, which is a costly affair.

  4. Legislation related to data privacy In most countries, the use of public blockchain such as Bitcoin is legally prohibited for payments systems because of the lack of provision to trace the identity of transacting parties. Also, blockchain-based systems use immutable distributed ledgers, which means they are {\em write-once- never-forget} systems. Such systems violate the privacy principle of right-to-forget. Such legal and ethical concerns need to be considered before adopting a blockchain-based approach.