It seems 2017 is the year the world has finally woken up to the potential of cyptocurrencies and its underpinning technology, the blockchain.
Popular digital currencies like Bitcoin and Ether have grown over 500% and 250% respectively in the last year! And there appears to be no end to speculation and interest on where the technology is heading and it’s implications for governments and society in general.
One area that has recently been getting a lot of attention is how blockchain technology could help solve major environmental crises, like climate change.
Now, you can be assured that things are getting a little over-hyped when commentators make such sweeping claims.
But at closer inspection there is some credence to the idea.
To understand why, you need to first appreciate what makes blockchain technology so revolutionary.
What The… Blockchain?
Blockchains are continuously growing records of data, also called blocks, which are linked and secured using cyptography. The first commercially viable and distributed blockchain was developed by Santoshi Nakamoto, a moniker for a person or group of people, who in 2008 used blockchain technology as a public ledger for all transactions of Bitcoin.
Blockchain technology is complicated to get ones head around at first, but the fundamental idea behind it is that it solves the issue of mistrust.
Data in a blockchain contains a unique signature that is inextricably linked to previous data in an immutable chain that is totally transparent and constantly verified by users to maintain its integrity.
Because of its ingenious design a blockchain cannot be manipulated without other users knowing something wrong is afoot. And because the correct ledger of data is irreversible and self-regulating, users don’t need third party oversight to trust each other.
Moreover, baked into the system is a process called mining, where incentives are rewarded to users for keeping the blockchain in check. Nowadays, miners like Genesis Mining operate enormous data facilities that form the backbone for many cryptocurrencies.
Blockchain technology is a major breakthrough that will have far reaching impacts on economic, social and governmental domains. And the environment may just be one of the first to benefit.
Tragedy of the Commons
In the late 1960s an ecologist called Garrett Hardin wrote a paper on the failure of an economic system of individuals acting independently and in their own self-interest to maintain and conserve a shared-resource.
Instead, due to their own self-interest and contrary to the common good, they would behave in a way that destroyed the commons for the collective.
The theory is powerful, as it appears to accurately describe the failure of most shared-resource systems that don’t have an overarching governing body to regulate its failure.
Think of shared resources like our oceans, waterways, arable land and the atmosphere. And now then think of the failures associated with each due to the Tragedy of the Commons: overfishing, water pollution, deforestation, air pollution, and of course, climate change.
The fundamental reason for their failure is lack of trust amongst independently acting self-interested parties, and the lack of incentives to maintain the commons.
Enter the Blockchain and Tokens!
Blockchain technology intermediates the issue of trust through data integrity and incentivises collective action through tokens, or cryptocurrencies.
In theory this means it has the potential to solve many Tragedy of the Commons issues without costly government intervention and regulation.
A team of researchers from Coin Circle, UCLA and the World Economic Forum have been exploring this idea through a token they call the ‘Climate Coin’.
The idea behind the coin is that it would increase in value as tokens are ‘burned’ in response to environmental improvements, like a reduction in carbon emissions.
If users were to buy into the idea of a ‘Climate Coin’, a blockchain could be used to track, verify and maintain the integrity of data in terms of environmental performance metrics, and incentives via the token would ensure the system stays in check as the value would only increase when an environmental improvement is verified, agreed and recorded in the blockchain.
One can easily imagine how such a system could be used to price externalities in the market and incentivize collective action to make environmental improvements.
It’s a revolutionary idea for a revolutionary technology, but it may just be that tokens and the blockchain hold the key to solving capitalism’s Achilles heel.
Through digitalisation of data and shared-interest tokens, failures like the efficient use of resources, conservation, pollution, climate change and many others, may be resolved.