Cleantech
New Coalition Hailing Blockchain as Linchpin of Successful Climate Action

A lot was discussed at the World Economic Forum in Davos last month — where the who’s who of government, business and civil society convened to discuss collective solutions for the multiple crises facing the planet.

What went a bit unnoticed was the presence of blockchain companies making space for themselves on the promenade outside the Forum center. After a year of catastrophic crashes, the crypto and blockchain sector was in Davos to prove it should still have a seat at the table — keen to gain the ear of the prestigious global body that’s recently acknowledged the future importance of blockchain and crypto.

One such voice at Davos was the recently announced Blockchain x Climate Leadership Network (BxC) — an activist-to-industry coalition of international stakeholders collaborating to define and create principles for meaningful blockchain initiatives to address the climate crisis. The Network has high ambitions: Become the world’s go-to hub for all climate-related blockchain efforts. Instead of reinventing the wheel, BxC will act as a superstructure supporting existing coalitions and working groups in the blockchain space to build use cases for blockchain-climate projects.

The partnership was founded by the Solana Foundation and Ripple in the crypto space, with carbon-offset marketplace Regen Network and solutions accelerator Climate Collective as supporting partners. The Global Blockchain Business Council (GBBC), BxCi (formerly the Blockchain Infrastructure Carbon Offset Working Group), and Eqo Networks — parent company of the Ocean Plastics Leadership Network (OPLN) — will lead BxC.

BxC is modeled after Eqo Networks’ industry-to-activist networking strategy, which serves as the backbone for both BxC and OPLN.

BxC was conceived in Greenland in 2022. After the inception, BxCi convened a group of stakeholders representing major crypto and environmental organizations in Colombia. They created several working groups to develop best practices for crypto engagement in carbon market registries, standards, transparency, policy, regenerative finance and emergent markets. These working groups formed the backbone of BxC.

“BxC is designing and supporting a range of blockchain and climate-related working groups with the intention of driving tangible, on-chain innovations that address core needs across web2 and web3 actors,” said Chris Krohn, co-founder and Executive Director of BxC.

BxC-convened working groups explore climate-related use cases for blockchain technology and unite separate groups to address the climate crisis, with the end goal of connecting web3 technologists and Fortune 500 companies.

Working groups cover a range of topics — including decentralized accountability frameworks, NGO capacity-building, forward contracts, web3 carbon accounting and climate data. Additionally, BxC is investing in industry labs focused on ecosystem services, markets, ESG reporting, supply chain, and scope 3 transparency.

“These groups go well beyond discussion and broad exploration, and are instead designed to foster tangible developments, testing, and large-scale industry pilots with real-world applications,” Krohn says.

Proof of work vs proof of stake: A tale of two codes

“Proof of work, which is how Bitcoin operates, relies on really massive computers that basically compete with other massive computers to solve algorithms to produce Bitcoin,” said Dave Ford, founder of OPLN and co-founder and Board Director at BxC.

Assets created on blockchain (such as cryptocurrency) rely on consensus mechanisms to prove the unit has value. For proof of work-minted crypto, this consensus currently comes at the price of a disproportionately high carbon footprint that only benefits a select few.

Blockchain has an image problem due to its association with cryptocurrency — much of which famously and catastrophically collapsed throughout 2022. Crypto mining is responsible for about 0.3 percent of global greenhouse gas emissions, largely resulting from fossil-powered energy and the resurrection of fossil fuel assets to power the sector. The Ethereum platform recently switched to a less energy-intensive consensus mechanism. Greenpeace is now pushing Bitcoin to “Change the code, not the climate” and switch to a less energy-intensive consensus mechanism called proof of stake.

Proof of stake doesn't rely on competitive supercomputers and dirty energy but decentralized and distributed computing that’s less energy-intensive than proof of work. BxC’s current and most pressing dilemma is distinguishing between these two fundamental blockchain mechanisms and championing proof of stake as a potential climate boon.

“The biggest macro challenge with anything blockchain related is overcoming these negative crypto narratives,” Ford said. “You have this general misunderstanding that anything crypto and therefore, blockchain, is bad for the environment; and that just isn't true.”

Cryptocurrency aside, there’s a myriad of possible cleantech-related applications for blockchain — applications that BxC is convinced will fundamentally shift supply chain and carbon emissions reporting.

Proof of stake as a climate solution

Ford believes proof of stake will enable blockchain to move beyond its most pernicious environmental impact and become a driver for pro-climate solutions. He also believes that all of environmental, social and governance (ESG) metrics will live on web3 technology in the next 5-10 years because blockchain allows everyone to view material history — from point of origin to shelf.

Right now, proof of stake use cases are largely about verification and trust in carbon markets, such as BxC partner Regen Network. Supply chain transparency is another established space for blockchain to shine.

Transparency and trust are pain points in the ESG space, and BxC believes that open-ledger model blockchain platforms are the secret sauce.

“Eventually, every part in the supply chain will be trackable and transparent [with blockchain],” Ford said. “The world needs blockchain now to solve scope 3. Blockchain offers transparent carbon tracking that takes the smoke and mirrors out of it; so, instead of voluntary reporting, blockchain has the opportunity to solve greenwashing long term.”

Ford sees a world where it’s no longer a choice between voluntary and mandatory reporting, but that everything will be transparent by default because the supply chain will live on web3. The transition to web3 solutions will take buy-in from large actors at scale to begin the ripple effects after key stakeholder adoption; and this is where BxC comes in.

“We need a holistic understanding to move at breakneck speed if we’re going to have any chance of hitting Paris Agreement goals,” Ford said.

As the smog of energy-intensive crypto mining settles, the possibilities for blockchain as a climate solution are becoming clearer. While BxC and the sector strategize on use cases for saving the planet, Ford suggested to corporations:

“Get educated as soon as humanly possible. This wave is coming, and crypto and blockchain are not the same thing.”