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What is the blockchain exactly? A big ponzi scheme or an opportunity and a new technology that we can all use to transform society? Depends on who you’re asking, but a good starting point is to disassociate crypto-currencies such as Bitcoin from blockchain, the underlying data structure and related protocols.
One thing to note for crypto-currencies is that they implement what is called Distributed Ledger Technology (DLT). DLT is essentially a distributed database where records of transactions are kept. However the difference with traditional distributed databases that have been around for years is that DLTs are open networks in which nodes are not controlled by a single entity.
The way this typically works for blockchain-based DLTs is through what is called mining. Mining is a process through which transactions are verified, and also new coins are added to the coin deposit. In Bitcoin for example this is achieved by solving a cryptographic challenge which requires intense computational resources.
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Miners are nodes of the network that do the verification. Since they have to spend resources for this, they are incentivized by being rewarded with coins for their effort. In addition, solving similar types of cryptographic challenges independently of verification is the way to mint new coins.
On the one hand, this safeguards the DLT from collusion and allows it to work in an open environment by imposing trust, which arguably is the most valuable aspect of the blockchain. On the other hand, this is incredibly inefficient. Not only does new coin creation not correspond to any real-world value, transaction verification also needs a lot of work that is essentially wasted.
This is exacerbated by the fact that miners compete, which means that many of them are working on verifying the same transaction at the same time. The first one to finish is awarded, for the rest the work is simply wasted. What’s more, the design of Bitcoin is such that it makes mining progressively more demanding the more the network expands, meaning waste of resources is ever-increasing.
Based on the above, running a DLT is one of the most wasteful things you could possibly do, as it all comes down to generating power and processing resources. Mining, at least for Bitcoin, is at this point not something your average computer can do. There are special mining rigs dedicated to this task, and the energy required for a single transaction at this point could power a household for a week.
Blockchain for climate
How could a hackathon on climate + blockchain make sense then? What were the people at the UN thinking when they decided to host one during the COP23 in Bonn and invite 100 participants from around the world to join?
Working on themes such as Identification & Tracking of Emissions or Sustainable Transport & Land Use sounds commendable, and DLTs could have applications there, but isn’t using such a wasteful technology an oxymoron?
This is where IOTA comes in. IOTA is the platform on which participants will work on, and was chosen on the premise of removing the wasteful aspects of blockchain-based crypto-currencies. David Sønstebø, IOTA’s co-founder, says it all started from organizations such as the Center for international governance innovation, the Climate Ledger Initiative and Cleantech 21.
Distributed ledgers and energy efficiency are at odds today, but IOTA says this does not have to be that way. Image: IOTA
It was through them that the connection was made, the hack4climate event was organized and IOTA got to be the platform on which participants are asked to build. What did these organizations see in IOTA? IOTA promises to achieve the same benefits that blockchain-based DLTs bring – decentralization, distribution, immutability and trust – but remove the downsides of wasted resources associated with mining as well as transaction costs. Sønstebø elaborates:
“DLT has a role to play in efforts against climate change. It can secure data, ensuring accurate logging from sensors, it can safeguard data from oblivion should there be efforts to remove them. It can be the basis on which to build things such as self-regulating smart grids to optimize consumption, and we are excited to see what participants will come up with.