Cryptocurrency And Social Impact

From a bumpy beginning in 1993, the internet evolved and morphed into technology that changed modern life. From a bumpy introduction to the public in 1993, the internet evolved and morphed into technology that changed modern life.

In 2009, Bitcoin and therefore blockchain slipped into existence with relatively quiet fanfare. Blockchain technology is now one of the watchwords of the 2020s, alongside cryptocurrencies. The chatter is reaching a crescendo.

What’s behind the hype? Many fans claim blockchain’s potential could reshape financial systems and alter global power structures. Others think it could hasten climate change. Let’s consider blockchain for social impact, from its ability to reforest to financial inclusion.

What Is Blockchain Technology, and How Does It Work?

In its simplest form, blockchain is an enormous database. It is a decentralized, peer-to-peer (P2P) network, which means no one person or entity controls it. All users help manage information flow, and once new data has been added to the blockchain, no one can alter it.

Blockchain systems can be public or private. Data is added in blocks. Once complete, users’ computers check (via math equations called mining) that all the data corresponds, and verified blocks are chained to the previous data block. This method establishes a tamper-proof, chronological block order. In most circumstances, miners earn cryptocurrency for their work.

Blockchain is what is called a distributed ledger. Transaction validation occurs only when every user “agrees” that the added data is correct, creating an immutable record.

Imagine a street with 10 houses where all the homeowners know each other. Dave at house number five claims Crystal’s home, number three, is his alone. All the neighbors disagree with Dave, and Crystal keeps her house. This is an example of a decentralized system where the people, or users, retain control. Like blockchain, the information is transparent, reliable, shared, and in this scenario, used for good.

Now imagine the same street where Dave was a bank manager or the local council. He stores all the ownership records in what is called a centralized system. Dave could change the deeds, so Crystal’s house was in his name. The system would agree, and no one could prevent Dave from taking house number three for himself. Many of our day-to-day systems are centralized, from banks to social media to governments. The power, and the power for abuse, resides with the person or entity that controls the centralized system.

The attraction of user-controlled systems is clear, with the ability to empower people who have internet connectivity. Everyone signed up is a stakeholder. This is one of the main reasons the blockchain ecosystem has grown exponentially, with thousands of new blockchain projects and start-ups every month.

Are Blockchain and Cryptocurrencies the Same?

Cryptocurrencies may play a vital role in the expansion of blockchain adoption.

Digital currencies, or cryptocurrencies, use blockchain to operate. They are intrinsically linked because of cryptocurrency’s dependency on blockchain technology.

It’s big business. (October 22, 2021) states that more than 6,500 cryptocurrencies have over $2.5 trillion market capitalization. El Salvador recently became the first country in the world to adopt Bitcoin as legal tender.

Blockchain is the technology that cryptocurrencies use.

Why Does Social Impact Play an Important Role Today?

Social impact has various definitions but generally deals with how actions and activities affect individuals, families, and communities. Often, social impact is framed within meeting a social challenge or the positive effects something has on people.

Blockchain can not only help track social impact but help to shape it. There is much discourse about public and private bodies announcing what they will do, but it’s hard to prove if it happens.

Telling us is one thing; but, showing us is another. In a fast-paced, globalized, digitized world, accountability is a slippery eel, be it applied to government, charity, or business. Public transparency is high on the agenda in the war against misinformation.

Earlier this year, Ethereum co-founder Vitalik Buterin donated $1 billion of cryptocurrency to support India’s Covid-Crypto Relief Fund. We know because his public, blockchain-backed digital wallet showed the transaction. Imagine holding governments to spending pledges and tracking charity’s disaster relief and aid distribution work.

With its tracked, audited, and publicly communicated information, blockchain may be able to rebuild those bridges between centralized systems and the people they serve. Verifiable timestamps, geolocations, and supply-chain records can help citizens decipher the truth.

Can Blockchain Have an Influence on Social Impact?

Blockchain Influence on Social Impact Illustrationsource

The use of blockchain offers far-reaching possibilities for social impact, including:

  • Transparency
  • Supply chain management
  • Digital identity
  • Personal data protection
  • Legitimacy
  • Compliance
  • Trust

Big tech companies keep their algorithms secret, whereas blockchain’s selling point is openness and irrefutable record keeping. Some technologists claim blockchain and cryptocurrencies can realign capitalism thanks to blockchain’s alternative trust-based, peer-to-peer systems.

Let’s look at how blockchain is already helping reduce costs, realigning the idea of borders, and disrupting the world as we know it.

Are There Positive Examples of Blockchain for Social Impact?

Many private enterprises, governments, and non-governmental organizations (NGOs) are already using blockchain to effect social impact. Let’s look at some case studies and the potentially far-reaching implications of blockchain.

For example, a recent report found 40% of fish bought in restaurants, markets, and from fishmongers around the world were mislabeled and, in some cases, contained traces of pig. There was no transparent supply chain. Imagine if blockchain tracked boats, catches, markets, and delivery?

IBM has partnered up with several big players in the food industry, using blockchain to provide a transparent supply chain for produce. This builds brand trust, and people can check if labeling and packaging are truthful. People can track every step of the supply chain and check, for instance, what pesticides were used, if it’s local food, and where it grew. For example, Agridigital is streamlining grain supply chains between farmers and markets, incorporating real-time information on delivery and payments.

Proof Points has developed blockchain to translate data from traceability tools across supply chains so shoppers can check product claims of sustainability or origin. Blockchain means brands need to back up their positive impact claims. Customers can choose honest and worthy suppliers with their cash based on real information.

Using blockchain, the charity and NGO sector may save on bank fees while unlocking cash to distribute financial aid to people in disaster areas. Consensys, a blockchain technology company, developed a cash and voucher program using the Ethereum blockchain for Oxfam on the Pacific island of Vanuatu. Recipients of aid, shopkeepers, and Oxfam used blockchain and cryptocurrencies to create an open, fast, transparent system that was cheaper than banks.

There are many potential uses for blockchain. Government spending could be trackable and transparent, as would financial transactions for everything from paying taxes to taxes on profits. Looking at healthcare, your medical records and treatments could be safely stored and instantly available to doctors in case of emergency.

Will Blockchain Make Banking More Accessible?

Accessibility is a critical element of blockchain.

On a macro level, more than 1 billion people worldwide do not have access to a bank account because centralized systems at banks exclude them. Cryptocurrencies have allowed the unbanked to pay for items digitally and to become more connected members of society. There are many new potential customers for businesses or people to be paid or taxed digitally.

On a micro level, PoolTogether is a blockchain-based lottery and savings protocol based on the premium bonds model. People deposit money and are entered into a weekly prize drawing. More importantly, anyone can quickly check who won and easily withdraw their deposit at any time.

Cryptocurrencies make it easier for people in different countries to pay each other, negating financial borders currently controlled by banks and governments. Emergency aid, welfare, fines, and many more financial areas are open for development.

Added flexibility is being built into blockchain, too. Smart contracts interact with blockchain to allow for complex transactions. A smart contract executes an action once certain conditions are met by reading external information. Uses include paying out a winning bet, voting, or monitoring supply chains.

Is Blockchain Technology Good for the Environment?

Blockchain Technology and Environment Image of Treesource

Unsurprisingly, given the callow nature of the technology, blockchain is not a technological panacea yet. But it does have the potential to revolutionize our relationship with energy.

There are a multitude of blockchain technology-based programs fighting to save the planet from climate change. Terrapass Coins are digital coins that give people control over carbon offsets. Each coin is equivalent to avoiding more than 2,500 miles of driving. The ability to gift and track carbon offsets puts environmental power into the hands of users.

The DAI cryptocurrency is a stablecoin pegged to the USD, so one DAI is almost always worth one USD, with minute fluctuations happening thousands of times a day. People holding DAI can use the rTrees project to donate any interest earned from these price variations to plant trees; effectively, people can reforest the globe without doing anything at all.

Many cryptocurrencies have signed up to be 100% powered by renewable energy by 2030. Cryptocurrency Candela insists all its mining is solar-powered. They plan to encourage people to sell their home’s excess solar power to neighbors. Plastic Bank allows people to track plastic as it moves from recycling to being repurposed as banknotes.

Blockchain’s indirect influence, such as holding governments and businesses to green pledges, means that greenwashing could become a thing of the past, boosting the environment because aid reaches its destination.

Is Blockchain Technology Bad for the Environment?

Most cryptocurrencies and blockchain systems involve mining to confirm transactions. This mining process is called proof of work. The concept underpins blockchain because it means transactions are validated and can be added to the blockchain. However, mining can involve vast amounts of energy.

Bitcoin, the most famous cryptocurrency, comes into existence as digital coins “mined” by computers. Transactions in blocks are added to its blockchain by computers solving complex math problems. It’s a race to solve math, and the successful computer wins a valuable Bitcoin as a reward. All the other computers’ work was in vain, resulting in a lot of wasted energy.

Bitcoin’s miners’ consumption has been estimated at about 110 Terawatt hours a year — around 0.5% of total global electricity production. If it were a country, Bitcoin would be ahead of Argentina for electricity consumption. Bitcoin’s annual e-waste level is 30.7 kilotons — comparable to the small IT equipment waste of the Netherlands. The United States is now the leading Bitcoin mining country.

But miners say they use lots of renewable energy that may otherwise be lost, such as wind power surpluses or hydropower. Estimates range Bitcoin mining energy being from 39% up to 74% renewably sourced. There are signs more miners and investors are more aware of the environmental cost of Bitcoin; for example, Terrapass offers carbon offsetting plans for Bitcoin mining.

Some companies now use waste like flared natural gas to power mining rigs. This squeezes the maximum benefit from fossil fuel energy yet doesn’t address the overall damage caused by burning them. Similarly, North Vancouver plans to trial heating homes with energy from Bitcoin mining, turning an energy waste negative into a positive.

There will undoubtedly be more debates about blockchain’s benefits against energy use. But the blockchain community is working hard on a multitude of solutions to make the industry more sustainable.

Could Proof of Stake Save Energy and Blockchain?

Proof of Stake Save Energy and Blockchain Illustrationsource

Ethereum, the world’s most popular blockchain program, is close to adopting proof of stake for transactions. Proof of stake is regarded by many as blockchain’s answer to its energy-intensive processes, ditching mining to approve transactions.

Instead, interested users who hold a lot of Ethereum’s cryptocurrency, called Ether, stake their Ether to have a chance to be randomly chosen to validate transactions. If selected, they validate the transactions, then add the block to the blockchain. They are rewarded for their work with more Ether. Still, they can lose money for going offline and lose their stake if they validate suspicious or malicious transactions. The thinking is that Ether holders will do honest validation because they want to earn and not lose Ether.

Proof of stake uses a lot less energy to process payments, with just one computer adding a block rather than many competing and all but one failing to mine a block, as with proof of work.

Ethereum’s proof of stake is due to come on stream in February 2022. The blockchain world will be watching intently; success will change blockchain’s energy demands. A Bloomberg report estimates proof of stake could reduce Ethereum’s energy footprint by 99%.

Where Could Blockchain Lead Us in the Future?

Work has already started at the top levels of power. The Blockchain for Social Impact Coalition non-profit is helping the United Nations examine the use cases for blockchain solutions. The coalition wants to mesh together government agencies, NGOs, and more in a bid to fulfill the United Nations Sustainable Development Goals (SDGs)

Fintech and financial services could support current systems or replace them with blockchain technology.

Tech start-up Worldcoin wants to scan people’s eyes in return for cryptocurrency. Iris recognition backed by blockchain could provide a globally secure, irrefutable online digital identity.

Blockchain can reduce costs and abolish traditional financial services barriers with borderless payment systems quicker than the current systems. People are also studying how artificial intelligence and the internet of things (IoT) blend in with blockchain. The truth is that, as with the internet, humans don’t truly understand where blockchain technology may lead.

What Other Issues May Stop Blockchain’s Road to Success?

We’ve seen how blockchain can help the unbanked connect and negate borders and facilitate many types of supply chains. For information to rule the roost, any physical data in books and records would all need to be digitized, which would be an enormous task.

Other questions include those over identity proof. Many people would be happy to ditch passwords for a blockchain-backed, 100% secure digital identity to authorize transactions. But who holds that information, and could identities be stolen or exploited?

Figures show around 4.7 billion people, some 60% of the world’s population, are online citizens. That’s great news for blockchain and cryptocurrencies, but not so much for the 40% who are offline. There is a risk of creating imbalanced societies based on internet connectivity.

Much thought needs to go into whether societies can operate under 100% transparency conditions. Artificial intelligence and the internet of things (IoT) are developing rapidly, too. One or a blend of these technologies may become the building blocks for the future.

Lastly, there could be trade-offs, such as privacy versus accountability and blockchain’s permanency vs. flexibility. What happens if someone innocently confirms an error? Human behaviors and cultures may not stand up to the intense mathematical microscope of blockchain.

Blockchain for Social Impact: The Future

Blockchain is not all radical, no-limits transparency; it’s pretty mainstream. There are even starter courses on websites like LinkedIn.

The potential of blockchain for social impact is immense. And just as with the internet, we won’t know its final destination until we arrive.

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