The Price of Trust: Blockchain and the Problem

Today, digitalization is reaching epochal proportions. Specific environmental impacts have already been calculated for some applications in the digital world:

• A Google query consumes 0.3 watt-hours,
• At the eBay auction, 18 g of CO2 is released,
• An e-book reader acquires ecological meaning only after reading more than 23 books.

The positive consequences of improving the efficiency of using services have been studied, in particular, on the example of Uber. It turned out that after the introduction of Uber Poo, the level of solid particles decreased in some tested areas, as well as the waiting time in traffic jams.

It can be assumed that digital platforms, if further studied, will turn out to be generally sustainable and positive for our environment.

Opponents of sustainable digitalization put forward two main counterarguments:

1. First of all, our digital world is based on our smartphones. Thanks to the huge technological progress that puts new devices on the market every day, we use them only for a very short period – from one to three years before disposing of them. The ecological footprint of our smartphones is extremely negative in terms of the use of resources and, accordingly, material flows.
2. We, consumers, react to this with the so-called rebound effect: the automotive industry is doing everything possible to make our cars more energy efficient and energy-saving. And what do we, the consumers, do? The next time we buy a car, we will choose a larger model because of the higher technical efficiency. Thus, such a rebound effect destroys a significant part of the positive effect of the use of digital technologies.

Since the mechanisms of action converge, there is a good feeling about the savings in the volume of material flow that can be achieved through digitalization, and the positive sustainability factors that can be achieved as a result.

A different situation is developing in one of the areas of digitalization – blockchain, which is currently causing a stir. Depending on the source, it is claimed that currently one transaction consumes 15 kWh, which is more than the entire household consumes in a day.

Of course, the information is criticized because, for example, it only distributes relatively low transaction rates for total electricity consumption, and this ratio will improve in the future due to an increase in transaction rates. But even this reasoning cannot hide the fact that booking a credit card (also not very well known for the efficiency of the process) requires only 1/5000 of this electricity consumption per transaction.

Trust needs energy

This gigantic amount of electricity is necessary for the so-called Proof of Work (POW) consensus, which you can learn about in detail at Coinmarketrate.com . In this system, the blockchain displays the decentralization of trust. To do this, many miners around the world solve cryptographic problems and thereby provide high energy consumption. As long as no miner takes control of more than 50 percent of the mining process, the blockchain is considered safe. And since the amount of Bitcoin is currently sufficient for these miners, there is also sufficient competition, which, in turn, ensures the security of the system.

Thus, it is obvious that in the nature of things, this POW approach requires a large consumption of resources, and at the same time is attractive enough to cause the desired decentralized trust. Attempts to solve this dilemma in other ways, such as the Proof of Stake (PoS) approach, have not yet been crowned with the same success, due to the insufficient reliability of the cryptocurrency.

To some extent, it is tragic that blockchain, the great hope of the digital world, has an inherent web flaw. Establishing trust requires energy. Until now, we have not been able to measure the trust of governments, banks, companies, organizations and individuals in terms of energy. But it is the digital alternative to this measure of all our human actions that can now be evaluated from an environmental point of view. And it is the blockchain that plays an important role in this.

Security in digital circuits

What else can blockchain do besides cryptocurrencies? For example, when buying a car: you determine the desired car on the Internet and request a price offer. An authorized dealer contacts you, calls the price and a vague delivery date: autumn. You’re minding your own business. You have to hope and worry that your car will be ready on time, and with all the additional options that you wanted. While the world is semi-digital.

How would you like it if you didn’t have to rely on the dealer at all, if the delivery date was accurate, up to the time of day, and if you could be absolutely sure that instead of “blue patterned fabric”, you wouldn’t be delivered “anthracite sports seat leather”?

This is possible, but with a fully digitalized supply chain. Every step is recorded digitally, every action of every supplier and subcontractor, every stage of production at the factory. In the Internet of Things (IoT) and the Industrial World 4.0, this will happen automatically in the future, using blockchain technology. Each transaction leaves its own digital footprint and, thus, is transparent, secure and traceable for everyone. Just as it is necessary for electronic currency systems, as well as for dozens of promising application ideas.

Everything that is stored in the blockchain is recorded there forever. You can imagine it simplified, like Google Docs: anyone can look at the contents of the blockchain and add something, but not change what is already there.

How does it work? As a database, the blockchain is not stored centrally in a data center, but is distributed among users. All data is in nodes, and almost anyone can open a node. Each node contains the same data and is a duplicate of the other. The database consists of a list of block chains. Individual blocks are cryptographically securely linked to their predecessors and successors. At each startup, the nodes update themselves. At the same time, they check whether they themselves have the correct copy, and whether they have the same information status as other nodes.

If a new block is added, it is always checked for correctness and inserted into its copy if the synchronization state is appropriate. Thus, the chain continues to grow, and fully digitized processes become unchanged. Nothing happens that shouldn’t happen. Thus, machines in the 4.0 production process, for example, exchange their data without the intervention of third parties.

Digital value system for machines

Quite a lot of citizens are concerned about the loss of control, since the process works without human intervention and intermediaries. The digital world is rapidly being updated, and many are afraid of it, and the blockchain is considered too obsessive. But let’s not forget: we create these machines. We program them, endow them with the ability to interact with each other in a self-organized and negotiated manner. And in the same way, with the help of blockchain technology, we can give them a certain, unchangeable, understandable scope of action, and thereby reduce many fears about digital technologies.

Over time, this may even lead to the creation of a digital system of values, accepted norms that machines must follow.

This is possible if you link the function of the tamper-proof blockchain storage with executable program code. Thus, we get “smart contracts” that determine which conditions lead to a particular decision or action.

The blockchain itself does not have an “if-then” function, it can only document. But smart contracts can, and if they are also programmed on the blockchain, then the scope for machine-to-machine communication is defined. The thought that perhaps the actions of future “AI personalities” can also be documented and ordered in a similar way calms me down.

Trust can be digitized

As a “building block of the next wave of digitalization,” according to the Bitkom digital association, the blockchain thus has great development potential. Many open questions of digitalization are answered here. Blockchain acts as a connection technology without central elements or intermediaries. This radically and sustainably changes business models and products.

Thanks to direct transactions, verified, reliable information with unique identification can be transmitted safely and clearly for everyone. Thus, the trust between the partners in the transaction is transferred to a digital format, which is an important component of digital responsibility.

Will we be able to significantly reduce the environmental footprint for a technical decentralized trust – in much the same way that engineers reduce fuel consumption in an engine? Or will it turn out in this process that human trust is best developed by people: through the harmony of communication and action?

In any case, it is very interesting to observe the further development of the blockchain and this direction of digitalization.