{"id":6742,"date":"2022-09-29T17:50:00","date_gmt":"2022-09-29T16:50:00","guid":{"rendered":"https:\/\/affidaty.io\/blog\/?p=6742"},"modified":"2023-05-12T16:35:14","modified_gmt":"2023-05-12T14:35:14","slug":"blockchain-social-impact","status":"publish","type":"post","link":"https:\/\/affidaty.io\/blog\/en\/2022\/09\/blockchain-social-impact\/","title":{"rendered":"Blockchain and Social Impact: Trade-Off between Technology and Concrete Applications."},"content":{"rendered":"\n

<\/p>\n\n\n\n

Introduction.<\/h2>\n\n\n\n

Blockchain<\/strong>, or rather Bitcoin<\/strong>, emerged by chance (but not too much!) in the context of the 2008 financial crisis that brought with it a natural mass distrust towards the centralized Financial and Monetary system that, until then, had not known concrete alternatives.<\/p>\n\n\n\n

As a result, it is easy to understand how Bitcoin<\/strong> and the underlying decentralized technology that allows its operation, gave people the feeling (but also the real perception) that there was a way to create, exchange and store value outside the typical centralization of traditional financial institutions. This has contributed and still contributes today to almost exclusively linking Blockchain<\/strong> to DeFi (Decentralized Finance) applications.<\/p>\n\n\n\n

But let’s ask ourselves: where have we arrived in terms of social impact<\/strong> 14 years after Satoshi Nakatomo’s paper?<\/p>\n\n\n\n

<\/p>\n\n\n\n

Bitcoin<\/strong> and energy consumption.<\/h2>\n\n\n\n

First of all, to talk about blockchain<\/strong> with social impact<\/strong>, we need to debunk the myth that, operationally, the sequential validation of Bitcoin<\/strong> transactions has such an energy consumption that its application itself would not be sustainable. This concept is related to the consensus algorithm used by Bitcoin<\/strong> to validate transactions within the Network, the Proof of Work.<\/p>\n\n\n\n

The latter consists of using the computing power of nodes (computers) connected to the network to solve complex mathematical problems in order to validate Peer-To-Peer transactions in a completely decentralized manner. It is clear that the more computers are connected and the greater their computing power, the higher the energy expenditure needed to validate a number N of transactions. In general, this problem can be bypassed by applying new consensus algorithms not based solely on computational capacity. The most common, for example, is Proof of Stake. In a nutshell, PoS differs from PoW in that it does not require the use of a large amount of computational power, but the transaction blocks to be validated are immediately assigned to the nodes that hold the greatest interest (stake) within the network. Interest in this sense is represented by the amount of the same network’s cryptocurrency that the node holds. In the example of Ethereum (whose network will fully switch to PoS from September 19 with the so-called merge), the more ETH I hold, the greater the chance that I will be chosen as a “validator” node. This makes PoS hugely more scalable and less energy-intensive than PoW.<\/p>\n\n\n\n

However, it must also be said that PoS has several limitations in terms of security and risks of decision-making centralization, making what should be a trustless technology trusted again. Moreover, the general problem of Bitcoin<\/strong>‘s energy consumption lies in the fact that, in the absence of renewable and sustainable energy sources (wind, solar, geothermal, etc.), the massive use of electricity contributes to global pollution. Therefore, Bitcoin<\/strong> mining powered by renewable sources would be absolutely sustainable over time.<\/p>\n\n\n\n

However, it should be emphasized that the issue of Bitcoin<\/strong>‘s energy consumption is less straightforward than it may seem: the University of Cambridge has created the CBECI (Cambridge Bitcoin<\/strong> Estimate Index), which is a tool capable of calculating in real-time an estimate of the lower and upper limit of the electricity absorbed annually by mining operations. From their study, it emerged that the energy consumption of the Bitcoin<\/strong> network would be equal to 0.25% of the world’s consumption. It is clear that in absolute terms, the energy expenditure related to Bitcoin<\/strong> is a “non-issue” as it represents a really negligible slice of the cake.<\/p>\n\n\n\n

However, it is interesting to see how the perception of the above data can change in relative terms when considering that, according to the same study, the constant average consumption of Bitcoin<\/strong> would be equivalent to 7 GW (gigawatts), corresponding to an annual consumption of approximately 64.15 terawatt hours of energy.<\/p>\n\n\n\n

This consumption figure is higher than that of countries such as Switzerland and the Czech Republic (58.46 and 62.34 terawatt hours respectively). The above leads us to conclude that, in absolute terms, the energy consumption of Bitcoin<\/strong> represents a very small part of global consumption and is not the main contributor to global pollution.<\/p>\n\n\n\n

However, in relative terms and with the perspective of a wider use of Bitcoin<\/strong> transactions, it is necessary to begin using renewable energies also in this field if we want Bitcoin<\/strong> energy consumption to remain a non-issue.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Blockchain<\/strong> for social purposes \u2013 SDGs<\/strong>.<\/h2>\n\n\n\n

In 2015, the United Nations member states established a plan of 17 Objectives to be pursued and achieved by 2030, in order to promote the sustainable development of the planet, the so-called Sustainable Development Goals (SDGs<\/strong>).<\/p>\n\n\n\n

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