By this point, we have all heard of the infamous Bitcoin, the strange online currency that skyrocketed to all-time highs of $64,804.72 and in just weeks fell to the $30,000 range. The cryptocurrency domain is a mystical space where we are always watching the unexpected unfold. Many people see cryptocurrencies from the lens of how it can make money for them, but they don’t think about the impact this new industry can have on the world, whether positive or negative.
For example, individuals don’t think about how it could help bring transparency to the fashion supply chain or how Bitcoin’s energy consumption is absurdly high and harmful to the environment. All that is seen are dollar signs. Without reflection, we are unable to see how blockchain impacts the world outside of currency. It is an industry that allows for a cosmic change in how we use the internet and how it impacts our environment. Before we can look at the sustainability behind some of the use cases in blockchain, it is essential to summarize what blockchain is as a framework for understanding.
First, it is NOT just Bitcoin. Many have come to correlate that blockchain = bitcoin; this is not true. Bitcoin is just one type of blockchain. So, what is blockchain? It is a decentralized ledger technology that helps to eliminate the middleman from any service and puts the control in the hands of the user. The Bitcoin Blockchain eliminates the need for a bank. The Ethereum Blockchain changes the way we use the internet. These different blockchains even have the potential to connect with one another to create one huge ecosystem that works together in sync. We could nerd out all day about the potential of blockchain alone, but today we are talking about the sustainability aspects and real-world implications.
While there are many ways that blockchain can help bring sustainability, these are just a few we found interesting, specifically supply chain. Many industries have a closed-off supply chain that makes moving products worldwide difficult. Blockchain changes this by storing all the data on a secure drive that isn't accessible by any of the corporations using the service. This is done to prevent data manipulation and guarantee compliance controls are followed
There are three main benefits to using blockchain technologies:
Waste management tracking is a big problem that should be focused on. Let’s take the fashion industry, for example. In the 2019 Pulse of The Fashion Industry, it is stated that 60% of companies are struggling to find the technologies necessary to make a change. With blockchain technology, companies can keep a close eye on waste, which, if done correctly, will save the industry an estimated 4.8 billion dollars. This is possible because 47% of all fibre entering the fashion value chain becomes waste.
Unfortunately, it is hard for companies to actively track this information until it is too late, and the waste has already occurred. By making data real-time, the companies can quickly pivot and run a leaner supply chain that allows for materials to be re-used for other garments and reduce the waste happening. One company in this specific department is Textile Genesis. They use blockchain to counteract this problem and improve environmental practices through the supply chain to create waste reduction. Companies that aid the fashion industry in being more eco-conscious lead to a cleaner Earth and a more cost-efficient industry.
Blockchain can create a more circular economy and reduce waste; it can also monitor water conservation. This is critical because the amount of water used to create jeans alone is insane. It takes 1800 gallons of water to produce one pair of jeans. That’s just for one person. This adds up quite quickly and creates a problem. Recording the use of water and making sure that water is not wasted creates eco-friendly water usage. Overall, the jean industry needs to change and significantly reduce water consumption because it is just too damaging.
The final way that blockchain can create a positive impact is by improving the circular economy efficiency. This means tracking the cycle of a product: when the material was obtained, what was fabricated, what excess material was recycled, etc. Having it transferred to the blockchain allows companies to move away from fragmented and inefficient manual systems to an interconnected ecosystem that makes it easier to transfer information. This is possible because the blockchain is secure and has strong privacy, so various suppliers within the supply chain can share data safely with minimal worry of cyber-attacks. Some of the direct impacts of creating a more circular economy include better product design from companies, strategic planning to better streamline the supply chain, and public policymaking based on the robust data reported to the government from the companies.
This is only possible because the companies can see exactly where the product has been from acquiring materials to the shipment of the shirt.
With all these wonderful aspects there is one main problem that comes with it. Like most industries, there is always a catch. The energy consumption needed to run blockchain technology tends to be high if the company runs on a proof-of-work mechanism. Proof-of-work meaning that every transaction must be verified by computers all over the world before being added to the blockchain instead of a centralized company. This is the same problem that can found with the Bitcoin blockchain. Because it is based on a proof-of-work model that requires excessive amounts of computational energy to run, the surplus electricity utilized negatively affects the environment. Therefore, it is important to check for what type of security is being run on the blockchain.
If it is proof-of-work, the energy used will be high. A workaround to this is to use proof-of-stake instead. If used, the power needed will be minimal compared to proof-of-work. To go a little bit more in-depth, proof-of–work is how transactions on the blockchain are verified. Every block contains transactions and to make it independent of third parties such as a bank people using the network must use their computes to solve a cryptographic algorithm for it to be verified. With the use of computers to verify every transaction the energy used becomes exorbitant as more people use the network. While proof-of-work has a high energy usage proof-of-stake is much more environmentally friendly.
For people to validate transactions in this system instead of using computational energy you have to stake crypto. Most blockchains that use this model create a minimum amount of crypto that one must stake to be a validator for the blockchain. In this version to earn rewards, one must invest in the network for a chance to be chosen as a validator. This mechanism uses investments in the network as a way to validate transactions rather than computational power making the energy usage minimal.
There will always be pros and cons to industries, but it is important to weigh the options and proactively think outside the box to produce solutions to address these underlying issues. For example, blockchains opting to use proof-of-stake must prioritize using clean energy to generate the necessary computational power, e.g., hydroelectricity instead of coal which releases a high amount of toxins into the air. Blockchain can bring a lot of good things to the fashion industry which is needed with the amount of waste that happens throughout the fashion supply chain. The future is bright and with this technology change is on the horizon.