Cryptocurrencies have been around for over a decade now, but despite the hype and the interest in this new concept, it has taken some time to find its place in the market as one of the most popular financial tools out there.
While the technology behind these currencies is extremely interesting, the debate about whether or not crypto is actually worth all the hype it gets never ends.
In fact, some people even argue that blockchain could be used to make things work better for the environment, and I agree with them.
There are many arguments regarding cryptocurrencies and their bad impact on the environment.
However, the truth is that blockchain can also offer a solution to many environmental problems.
Today we will try to answer the question: what can blockchain do for the environment?
Here’s our analysis of how impactful cryptocurrencies are, why they need to change, and which technologies can help us improve the situation.
Cryptocurrencies And Their Impacts
Crypto is a tool that allows users to exchange money without the involvement of a third party. In other words, instead of using banks or credit card companies, you can use an algorithm-based blockchain protocol to transfer money directly between two parties. This makes it easier than ever before to move funds across borders and also helps reduce the risk of fraud and chargebacks.
However, if you think about it, this type of system is also very resource-intensive. The whole process takes time, and it is not always easy to track where the money went. Due to the usage of a decentralized ledger, that means every validator needs to download the same copy of all records.
Instead of just one computer that takes care of everything, we will have to use hundreds or even thousands of computers to do the same thing. This clearly will use tons of energy, and will have a huge impact on the environment.
However, we can also talk about blockchain applications that are good for the environment. We can refer to projects that use a decentralized ledger to create a secure and transparent way to transfer assets in real life. For instance, imagine that you want to sell an electric car.
Instead of giving your car to a dealer and waiting for him to sell it (which usually takes a couple of weeks), you give him the keys and let him keep the car while you get paid directly. You save time, money, and risk.
As you can see, this idea seems like a great application for blockchain, doesn’t it? However, there are downsides to this approach, too. Let me explain more.
If you go this route, you will need to create a smart contract that defines rules and conditions for transferring ownership of the vehicle. To start the deal, you will need to pay the dealer the amount agreed upon upfront (or pay with cryptocurrency). Once the payment is transferred, the dealer becomes the owner of the car.
To prevent fraud and theft, you should add a code that verifies the identity of both parties. The transaction should be recorded in a public ledger so everyone can see what took place. It is important to note that blockchain is immune to censorship.
Even though blockchain offers many benefits when it comes to environmental protection, it is still far from perfect. There are two main reasons why this is the case. The first is that, although the transactions are permanent, they remain unencrypted. This means that they are vulnerable to attacks and manipulation.
Second, the current version of Ethereum does not provide an option for private transactions. This means that if your company wants to trade privately, it will need to build its own blockchain network, which will take a lot of time and effort.
How to solve cryptocurrencies’ issues
One of the biggest problems with the current model is that it is incredibly inefficient. If a company wants to accept payments, they need to wait until the buyer sends cash to them, after which the seller deposits the funds into his bank account. It might seem straightforward, but this process is much slower than it should be. And once again, this is not limited to just cryptocurrencies.
Take a look at the following example. Imagine that we have two different businesses. Business A needs $100 to purchase a product from business B, and vice versa. They decide to exchange money directly with each other.
Business A will transfer $100 to B via blockchain and B will receive $100 from A when he sells the product. Both parties are happy, and the transaction takes less than 24 hours. Sounds easy enough, right?
Well, here’s the catch. The person buying the product must transfer the money to B’s account and deposit the funds into his bank account. Then, once B sells the product, he must transfer that money to A’s account.
It sounds simple, but this whole process takes up to five days. That’s a long time.
Now imagine that you are working at business A and you need to transfer money to business B. First, you need to deposit the money into your bank account, and then you have to wait six days until the money reaches B.
That’s a lot of time wasted, isn’t it? This is why many experts believe that blockchain technology can be used to resolve this issue.
For example, blockchain can be used to create a secure platform that allows buyers and sellers to make direct transactions with no intermediaries involved. When a customer buys a product, the money instantly leaves her wallet and immediately enters the seller’s wallet. No middleman is involved, and the process is completely trustless.
This is, of course, a huge benefit for both parties involved, but it also eliminates a lot of headaches. Since there is no middleman, the buyer and the seller don’t need to worry about the details of the transaction. As soon as the money hits the seller’s wallet, the product is shipped and delivered to the buyer.
And, since everything happens automatically, there is no need for paperwork or contracts. The same thing happens when a seller ships the goods. All the buyer has to do is sign a receipt, which will appear in the blockchain.
Now, obviously, this is a pretty simplistic explanation of how blockchain works, but it shows you why this technology is such a game changer.
Are There Good Blockchain Use Cases Out There?
I have already explained a few ways in which blockchain can contribute to solving many environmental problems. However, it is clear that this is not the only way it can help.
A common argument against blockchain involves the fact that it is expensive to run, which means that it is going to require a large initial investment.
In addition, it is not possible to scale it as fast as centralized networks. This is another reason why people are skeptical about investing millions of dollars into this technology.
Luckily, there are some blockchain platforms that focus on improving the environment, making them a great option for those looking to invest and implement sustainable solutions.
For example, there is Carbon Credit Blockchain (CCB) that uses tokenized carbon credits to incentivize environmentally friendly activities. This project focuses on reducing emissions in developing countries, and it is currently undergoing testing.
There are upcoming blockchain projects that will try to address environmental issues as well. Many of them are ecosystems based on a permissioned blockchain that is designed to fight deforestation and preserve biodiversity. The platform aims to provide farmers and developers with access to affordable and reliable data about forest health.
All of these projects are focused on helping communities across the world become more eco-friendly. In short, they want to ensure that our planet remains healthy for generations to come. This is a noble goal, and we would love to see more projects like these emerge.