While the buzzword of the last 10 years has been "Bitcoin" or "Cryptocurrency", many news outlets forget to mention the technology that made this all possible: the blockchain. Cryptocurrency gets a lot of attention for the very reason that most investments do. It has had the opportunity (and still may) to make investors that purchase the coins rich, depending on the growth of that demand. This not only provides a store of value for a potential increase but a way to decentralize your currency in a way that the government does not affect the increase and decrease of its supply, allowing peers to trade with each other in an ideal world.
In this article, we will aim to define the blockchain as a standalone system, and analyze its impact on the environment. We will also take a look at the sustainability and potential sustainability that it can provide the world on a global scale.
Blockchain is the reason behind cryptocurrency. The inventor of bitcoin's current genius wasn't the coin itself, but the blockchain system that allowed it to be the very thing it is. To first understand blockchain, we must understand what cryptocurrency is, which will give us an insight into the platform it was built upon and how it can be used for various other things.
How Does Cryptocurrency Interact with the Blockchain?
Cryptocurrency is a decentralized currency. It doesn't function like our current centralized fiat system. The current money supply is decided by governments, and we trade between ourselves within the foreign exchange markets if we'd like another country's currency. In an internal system (usually domestic), the federal government increases or decreases the money supply by either printing more money or writing extra "numbers" in their ledger - simulating a paper cash increase in a digital economy. Naturally, this causes inflation (which is healthy in a capitalistic environment). The agreed-upon annual sustainable inflation rate is 2%.
When inflation reaches a level past 2 percent, interest rates are usually increased in order to make people save, and slow down the speed of transfers. The velocity of money (speed between transfers) is the number one way that money loses its value - as printing more money and exchanging hands would make each dollar worth less and less.
Cryptocurrency moves much quicker but is capped at a certain number of coins.
They are able to move this quickly because transactions are recorded in the ledger between peers, increasing the movement and reducing the friction of transactions by not involving the payment system, banks, or governments. The system that makes this all possible is the Blockchain.
Simply put, blockchain technology allows us to trade amongst ourselves. We just need a currency - which is crypto. Crypto is still in its infancy, and the global market still uses the USD as the default currency of choice for trade.
In its current form, blockchain only services the transactions between cryptocurrency trades, purchases, and sales. This means that the sustainability of blockchain is completely dependent on the kilowatt usage of the coin itself. If we take bitcoin, for example, this is completely unstainable, as the power needed to conduct bitcoin mining and transactions can power the entire country of Argentina forever.
Cardano for example is one such coin that has decided to use the blockchain for good rather than disregard the transactions within the system. It is not that the other coins are bad, particularly the ones that were early (Bitcoin, Ethereum), but Cardano specifically focuses on its power usage relative to its transaction speed.
Cardano, fascinatingly enough, moves at a speed that is more than 120x that of Bitcoin, allowing its users to transact with one another quickly. This means that if such a coin was adopted by enough users as a store of value to trade with one another for goods or services, they would be able to instantly pay each other, all without fees. Cardano is a true peer-to-peer system, where users can record their own transactions with digital time stamps rather than let the system administrator get between them. This is the reason behind the speed and accuracy of the transactions.
Are There Sustainable Uses for Blockchain Beyond Cryptocurrency?
Blockchain can go beyond the cryptocurrency environment to really ensure payment systems are sustainable. One project is looking at using the blockchain to "stream" pay, meaning those with a salary, contract or even hourly pay could receive money "streamed" into their account by the hour, minute, or even second.
The blockchain environment is similar to the stock market, as it currently sits. Its value is decided on the secondary market, so prices fluctuate between the supply and demand of sellers and buyers. This is why it is important to pick sustainable stocks and coins that have a clear and direct mission statement, such as caring for the environment, maximizing natural resource use, and providing alternatively healthy options to its investors and customer base.
Is blockchain bad for the environment?
As it currently stands, blockchain cannot be considered good or bad for the environment. It is a tool that is useful for communicating between peers. If it is used to transact in high-friction situations that require a tremendous amount of energy output, then it can be considered "bad" for the environment. If it reduces energy use or promotes sustainable investing, it can be considered environmentally friendly.
What is the difference between blockchain and bitcoin?
Bitcoin is the first type of cryptocurrency created. Cryptocurrency functions much like a currency, in that it is a store of value that is used to trade for other goods and services. If we didn't have currency, we would resort to a barter system that was implemented tens of thousands of years ago, which is extremely ineffective for salaries, trade, and getting the goods you need for what the other person needs. Blockchain is the system where transactions take place.
Can blockchain be hacked?
In its current form, blockchain is tremendously difficult to be hacked, rather it is impossible. Blockchain is a transaction system that is recorded digitally the moment someone executes a transaction and can be traced easily. The only foreseeable way to "hack" someone is through social engineering, and gaining access to their digital thumbprint.