The Application of Blockchain Technology: Environmental Sustainability, Government Management, and Ethical Considerations

A Debate Documentary

Disclaimer: this article is a final deliverable from the course activities in Econ 101: Economics Principal instructed by Prof. Luyao Zhang at Duke Kunshan University (DKU)[1], Autumn 2021. Prof. Campbell Harvey at Fuqua School of Business, Duke University[2] gave a guest lecture entitled “DeFi and the Future of Finance” as a distinguished guest speaker for this course. Xinyu Tian, majoring in Data Science, and Tianyu Wu, majoring in Applied Mathematics and Computational Sciences/Math from the class of 2023 were the Teaching Assistants for this course.

Instructor highlights: Zhiyi Chen provides a distinct view of blockchain for social good. The current major application of blockchain is for the private sector. However, the application to the public sector is still in its infancy. Zhiyi brought our attention to the important global issues of environmental sustainability, government management, and ethical considerations, which are path-breaking and thought-provoking.

Figure 1: Overview of Flowchart (created by Whimsical)

Opening Remarks

Blockchain technology, first proposed by Satoshi Nakamoto in 2008, is a “distributed append-only time-stamped data structure” (Casino, Dasaklis, and Patsakis 2019, 56) with a distributed peer-to-peer network to record transaction history for non-trusting members (Nakamoto 2008). Blockchain technology is the key to decentralized finance (Harvey, Ramachandran, and Santoro 2021, 13), which enables cryptocurrencies such as Bitcoin and Ether, and applications such as Smart Contracts. The application of blockchain technology appears in various fields, as shown in Figure 2, and offers efficient and transparent solutions to emerging problems in those fields. Various scholars and researchers analyze its limitations, such as governance and regulation risks, and its strengths, such as privacy and safety. Fulfilling gaps between theory and application, overcoming application limitations, and exploring new application directions are important goals of applying blockchain technology, motivating people to study further.

Figure 2: Mind Map of Different Blockchain Technology Applications (Casino, Dasaklis, and Patsakis 2019, 62)

This debate documentary will focus on three perspectives of the blockchain technology application, which are the relationship between blockchain technology and achieving environmental sustainability, the application of blockchain technology in government management, and ethical considerations in the application process. Starting with the first perspective, this debate explores how the blockchain technology application can contribute to environmental sustainability by offering a transparent and trusted monitoring system and finding low-energy solutions. Then this debate points out the problems of energy consumption by mining and producing environmental pollution. Continuing with applying blockchain technology in government management, this debate illustrates its strength of avoiding corruption and improving efficiency and its limitations of unreliable data inputs and regulatory uncertainty. Finally, this debate discusses the ethical considerations in the blockchain technology application concerning equality as well as whether blockchain technology is beneficial to human beings.

Thesis

Perspective 1: Achieving environmental sustainability: Can the blockchain technology application contribute to environmental sustainability?

Pro: Taemin Lee

In my opinion, the application of blockchain technology plays an important role in achieving environmental sustainability by establishing a transparent and trusted monitoring system to record the transaction history of cash flow in environmental governance. Due to the decentralized nature of blockchain technology, all transactions could be transparently observed in this monitoring system “by either having a personal node or by using blockchain explorers” (Conway n.d.). This monitoring system is trusted, as new “blocks” (referring to new transaction history here) are added to the end of the blockchain chronologically and it will be difficult to alter previous transaction history without a majority consensus (Conway n.d.). Consequently, for both governmental organizations and non-governmental organizations, this transparent and trusted system, which is free of fraud and tampering, can ensure the cash and donations get to beneficiaries who need the money most and solve environmental problems, such as managing climate change, with clean hands. The United Nations has just illustrated the successful pilot program of this monitoring system in Pakistan and identified applying blockchain technology as a sustainable solution to the environmental crisis (Sustainability Solution or Climate Calamity 2021). So, I think the application of blockchain technology will contribute to environmental sustainability.

Con: Seulgi Kang

Although blockchain technology can contribute to environmental sustainability by establishing a monitoring system to record transaction history, the blockchain-backed cryptocurrency, such as Bitcoin and Ether, consumes a staggering amount of energy for mining. By the nature of the proof-of-work system, the mining process is like a computational race, which can only be achieved by solving complex mathematical problems with high-powered computers (Frankenfield n.d.). BBC has reported that Bitcoin uses around 121.36 Terawatt-hours of electricity per year, consuming more energy than Argentina (Criddle 2021). According to Digiconomist, the annualized total Ethereum footprint is comparable to the power consumption of Chile and the carbon footprint of Trinidad and Tobago (Ethereum Energy Consumption Index n.d.). Also, because the major portion of the global energy is powered by fossil-fueled power plants, this staggering energy consumption will be responsible for greenhouse gas emissions and global climate change, which is not conducive for environmental sustainability.

Perspective 2: Government Management: Should we apply blockchain technology to government management?

Pro: Mina Sharon Myoi

From my perspective, I think that we should apply blockchain technology to government management for fighting against corruption. Blockchain technology guarantees the authenticity of stored information by providing the traceable transaction history and eliminating falsification due to the tamper-resistant nature (as Taemin discussed previously, it will be difficult to alter previous information without a majority consensus). According to Santiso (2018), the blockchain technology applied in government management can fight against corruption by registering assets and tracking transactions such as cash transfers and aid funds. Also, in China, the Shenzhen government has issued the blockchain electronic invoice to fight against corruption and ensure taxation for its accountability and safety (China’s first blockchain electronic invoice 2018). In contrast with only monitoring environmental governance, applying blockchain technology in the government management means it participates in the governance by becoming certifications of taxes and assets. Consequently, this technology will be a powerful tool for government management to establish a clean-fingered government.

Con: Yeji Hwang

Although the application of blockchain technology in government management may fight against corruption with transparency and authenticity, applying it cannot eliminate corruption and may cause the problem of unreliable first data entries. As Pisa and Juden (2017) argued, “blockchain is a ‘garbage-in-garbage-out’ system” and the reliability of information stored on blockchains depends entirely on first data entries. For most socio-economic data, they are input by human beings rather than robots, and there is a high possibility that the corrupted person inputs the falsified data into blocks, which still causes corruption. Without supportive institutions and supervisory policies, the goal of dismantling corruption cannot be achieved. Therefore, I don’t think disrupting corruption is a persuasive reason to apply blockchain technology in government management.

Perspective 3: Ethical Considerations: Are there any ethical considerations when applying blockchain technology?

Pro: Taehyung Kim

As far as I am concerned, applying blockchain technology will contribute to equality by solving the problem of limited access and ensuring an equal share of economic goods. As the key to decentralized finance, blockchain technology solves the problem of limited access by allowing any user, regardless of wealth or geographic location, access to the financial infrastructure (Harvey, Ramachandran, and Santoro 2021, 35). By applying blockchain technology, people may have an equal chance to get access to financial services “with the most competitive pricing and most favorable terms” as large institutions (Harvey, Ramachandran, and Santoro 2021, 35). And blockchain technology can lower the hurdle for SMEs and startups to get loans and financial support from banks (SciEcon 2021). Also, by using the distributed blockchain-backed ownership system, people can own the share of economic goods from the production side and narrow the unequal gap (Berggruen 2018). Consequently, the application of blockchain technology contributes to equality.

Con: Zhiyi Chen

Even if applying blockchain technology can offer more equal opportunities in various fields, the application of blockchain technology widens the inequalities in areas of education, digitality, and language. I am a junior student in the university who has learned the topic of blockchain technology in my courses and explored this topic for assignments, but I still have plenty of inquiries about this technology and cannot apply it in reality. In the world, many people receive less education than me and live in developing countries, never hearing about blockchain technology before. According to the United Nations (2020), there are “about 260 million children still out of school in 2018”. The different educational level prevents the less educated people from applying this technology, which increases inequality in blockchain applications. Also, due to the socio-economic differences, many people in the world cannot have access to modern technology, such as phones and computers, which refers to the digital divide. The inability of getting access to computers will prevent people from applying blockchain technology, which widens the unequal gap in its application. In addition, the developers of blockchain technology use English as their primary language, which blocks users speaking a minority language from using this technology and widens the gap of inequality. Overall, the education, digital, and language gap select a certain group of people to apply blockchain technology, which is not conducive to equality.

Antithesis

Perspective 1: Achieving environmental sustainability: Can the blockchain technology application contribute to environmental sustainability?

Pro: Seulgi Kang

Although the mining process consumes a staggering amount of energy, the shift to a less energy-intensive standard of verifying transactions can be an environmentally friendly way to achieve environmental sustainability when applying blockchain technology. For example, the proof-of-stake system requires users to show their ownership of the cryptocurrency instead of mining, which theoretically lowers the energy consumption for each transaction (Li 2021). Particularly, proof-of-stake blockchains such as EOS and Cardano can “allow transactions to be processed with the same energy requirements as an ordinary computer network” (Reiff n.d.). According to the Ethereum Foundation, switching to this proof-of-stake system will cut the energy cost of each transaction by 99.95 percent (Sustainability Solution or Climate Calamity 2021). Consequently, using an environmentally-friendly proofing method for blockchain technology can contribute to environmental sustainability.

Con: Taemin Lee

I agree that the proof-of-stake system can be beneficial to environmental sustainability by reducing energy consumption, but this proofing method is used in limited digital platforms and Bitcoin still takes the major proportion of global cryptocurrencies, as shown in Figure 3. Under this circumstance, the environmental problems that Bitcoin mining brings, such as generating electronic wastes and causing thermal water pollution, will exert a larger impact on environmental sustainability than the influence of energy reduction by using the proof-of-stake system. These environmental problems pose great threats to environmental sustainability. The blockchain sector (especially Bitcoin) is considered as one of the biggest contributors to electronic waste, as old miners are discarded after becoming obsolete (Stevens 2020). A single Bitcoin transaction produces “over double the electronic waste produced by 10,000 VISA transactions” (Stevens 2020). Also, Bitcoin mining needs large amounts of water as coolants. The heated water will be directly released to lakes or rivers nearby, causing thermal water pollution, which decreases the oxygen supply and affects the ecosystem. A recent example is that the Greenidge Bitcoin company warms the glacial Seneca lake by releasing the heated water, which results in harmful algal blooms and fish deaths (Chant 2021). Consequently, the application of blockchain technology, which produces environmental pollution, is not conducive to environmental sustainability.

Figure 3: Global Cryptocurrencies Proportion (Best 2021)

Perspective 2: Government Management: Should we apply blockchain technology to government management?

Pro: Yeji Hwang

Although applying blockchain technology cannot eliminate corruption, blockchain governance can provide public services more efficiently. In government management, blockchain can serve as an “online ledger” where data can be verified and reconciled, solving the problem of redundancy and disorganization (Disini & Disini Law Office 2018). For example, a blockchain-based payment and accounting system can offer “a permanent audit trail and facilitate faster reconciliation” for intragovernmental transfers in the US, which increases efficiency in government management (Boeding and McConkie n.d.). Additionally, blockchain technology can be used in a wide range of public services to achieve efficiencies, such as marriage registration and voting (Casino, Dasaklis, and Patsakis 2019, 63). This safe, accessible, and decentralized blockchain platform can reduce costs and bureaucracy, which increases efficiency for marriage registration. Also, the blockchain-based voting system will accelerate the voting process by establishing a decentralized voting platform, reduce election costs and increase democracy by offering an open-source voting system for more accessible voters. In summary, we should apply blockchain technology in government management.

Con: Mina Sharon Myoi

However, when applying blockchain technology in government management, the regulatory uncertainty remains to be worked out and poses great risks in blockchain governance. The regulatory uncertainty in blockchain governance here contains two perspectives: the first is lacking relevant laws and regulations, and the second is “lack of precedent illustrating how existing laws will apply to blockchain applications” (Navigating Regulatory Uncertainty 2018). When applying blockchain technology in governmental public services, there will be difficulties in designing supporting policies for this complicated technology and uncertain distributions of responsibility for failures. As a decentralized and self-governing system, blockchain technology has the possibility of running out of control in government management. Pisa and Juden (2017) have warned that the application of blockchain technology in public sectors will “have virtually no control over how that system is governed”. In contrast with the limited costs reduced by applying blockchain technology in governance, the costs of the potential failure and compensation for the failure will be more. So, I don’t think we should apply blockchain technology in government management for regulatory uncertainty.

Perspective 3: Ethical Considerations: Are there any ethical considerations when applying blockchain technology?

Pro: Zhiyi Chen

The core question related to ethical considerations is whether applying blockchain technology is good for human beings. Except for the benefits that the blockchain technology directly brings, such as efficient government services and transparent monitoring system, I think the blockchain application has deep values of propelling society progress and making people think critically on the relationship between human and technology. With the development of technology and the application of blockchain, the original social institutions and structures will be transformed to a distributed and decentralized fashion, which compels people to reform the social superstructure, such as reducing unnecessary bureaucracy and making supportive policies. This transforming process makes people reflect on the limitations and strengths of blockchain technology and reconstruct social systems to perfect society. More importantly, the application of blockchain technology makes people reconsider the relationship between human beings and technology. With critical thoughts, people explore how to use blockchain technology to serve people with fewer risks and how humans control and govern this technology. In conclusion, the application of blockchain technology perfects society and inspires deep thoughts on the human-technology relationship, which has a deeper value for human beings.

Con: Taehyung Kim

In contrast with your opinion, I think the application of blockchain technology is bad for human beings, as this self-governing system facilitates unconscionable conduct, such as facilitating crime and increasing biases. Because the IP addresses of Bitcoin are only accessible by owners who have login details, criminals can launder money so that authorities will find it difficult to trace the money back (What Is Bitcoin Laundering 2018). By nature of anonymity, ease of use, and ability of circulation, criminals use blockchain-based Bitcoin to purchase illicit goods and ransomware attacks (What Is Bitcoin Laundering 2018). Also, the developers of Blockchain technology are in a higher position of power and there will be implicit biases when conflicts of interests exist. For example, there is simply no way to know whether the developers of blockchain technology truly have the best interest of the users at heart, just as Facebook’s Libra (Neitz 2020). Considering the emerging crimes and increasing biases, I don’t think blockchain technology is good for humans and this application causes new problems.

Synthesis

Perspective 1: Achieving environmental sustainability: Can the blockchain technology application contribute to environmental sustainability?

Taemin Lee

I believe establishing the blockchain-backed monitoring system helps achieve environmental sustainability by using a transparent and safe transaction record in environmental governance. The transaction of cash flow and donation will be free of corruption and be used to solve environmental problems directly. But the premise of this monitoring system is to narrow the digital gap and education gap by making equipment accessible and educate people on how to use this monitoring system (the detailed solution will be shared by Zhiyi) so that people can get access to this monitoring system with equal chances for environmental governance.

For the problem of generating electronic waste and causing thermal water pollution, I think the shift from the proof-of-work system to the proof-of-stake system is an effective solution. Without the mining mechanism, this blockchain-backed process will be sustainable (Stevens 2020). And it’s necessary to use more environmentally-friendly cryptocurrencies, such as EOS and Cardano, in the global market. Also, governments should make specific environmental policies to manage electronic waste generated by Bitcoin, such as recycling and disposing of properly and establish water releasing standards for Bitcoin companies to avoid thermal water pollution.

Seulgi Kang

Replacing the proof-of-work mechanism with the proof-of-stake mechanism in blockchain-backed cryptocurrencies will contribute to environmental sustainability. However, even if this proof-of-stake mechanism has clear advantages over mining, the transition from an established network to a new consensus mechanism will be difficult (Reiff n.d.). According to CoinDesk’s report, the rush upgrade to a proof-of-stake blockchain of Ethereum causes disputes among miners (Foxley and Kim 2021). So, both Ethereum developers and miners should reach a mutually beneficial agreement and work together towards environmental sustainability.

As for the problem of energy consumption and greenhouse gas emission, Bitcoin companies can use electricity generated by renewable and clean energy, such as wind, water, and solar power, instead. El Salvador plans to use electricity generated from volcanoes to mine Bitcoin (Hernandez 2021). To reduce carbon emission in the traditional energy generation, the national government can impose a carbon tax “on energy sources that emit carbon dioxide” (Tsai 2020), which internalizes the negative externality of carbon emission. Also, the government can invite Bitcoin companies to the carbon market by setting carbon emission targets and establishing the carbon emission trading system for Bitcoin companies, which will be conducive for environmental sustainability.

Perspective 2: Government Management: Should we apply blockchain technology to government management?

Mina Sharon Myoi

By nature of transparency and safety, blockchain technology can be used as a powerful tool to fight against corruption and gain people’s confidence in the government. However, to establish a clean-fingered government, blockchain governance still requires supervision systems and institutions that ensure the veracity of the information (detailed solutions will be offered by Yeji Hwang).

To solve the problem of regulatory uncertainty and achieve efficiency in blockchain governance, the following solutions are offered. Firstly, establish a private blockchain platform with permissions for public services in blockchain governance. This platform will be supervised by trusted validators and distributed in a controlled way, so that the government can control the master ledger and data entry (Santiso 2018). Secondly, develop a well-established system for blockchain governance, including making application standards for blockchain technology, adopting financial insurance for blockchain applications, and formulating blockchain-related laws. Thirdly, analyze the conflicts and implications between blockchain technology and existing laws and regulations for blockchain governance. With experts studying laws and blockchain technology, try to think of possible ways that it can comply with existing regulations.

Yeji Hwang

Applying blockchain technology in government management will achieve great efficiency by reducing governance costs and bureaucracy. Blockchain governance should be widely used in public services for solving the problem of regulatory uncertainty, which is discussed by Mina. However, the shift to this updated and efficient governance system will cause unavoidable problems, such as reducing the staff. Under this circumstance, the government should make supportive policies for this shift, such as offering new job opportunities for re-employment.

For the problem of unreliable first data entries, there should be a gatekeeper to ensure the veracity of the information entered into individual blockchains (Santiso 2018). Possible solutions are establishing a supervisory bureaucracy that audits the data entries and using a job rotation system, in which workers will input different categories of socio-economic data. And these workers will never know the data category until they start working. Also, there should be an office for the public to report suspicious data and information.

Perspective 3: Ethical Considerations: Are there any ethical considerations when applying blockchain technology?

Taehyung Kim

By solving the problem of limited access, the blockchain application can contribute to equality by offering a platform where more people can get access to it. The education, digital and language gaps that Zhiyi has mentioned will also motivate people to learn blockchain technology, to offer digital equipment and learn English as well.

For the ethical problem of crimes and bias power, solutions, such as developing new programs for traceability and cracking anonymity, establishing ethical standards for applying blockchain technology, and enacting laws for blockchain crimes, will be helpful. However, I think the best solution for these ethical problems is human awareness of ethics and conscience. As Kenneth Arrow has discussed, moral obligations “have the fundamental role in a society” (Cato and Lutz 2018, 21) and are “very important to overcome failures of market economies” (1). Only when people treat others with equality, conscience, care, and morality, can these ethical problems be solved totally when applying blockchain technology.

Author:

Zhiyi Chen

Figure 4: Zhiyi Chen

Abandoning the ideology of Pragmatism and Utilitarianism, I think applying blockchain technology brings more intrinsic value for human beings beyond simply achieving environmental sustainability and government management. The application of blockchain technology makes human beings, who have critical thoughts, reform society and reconsider the human-technology relationship. The limitations and strengths of blockchain technology make people reflect and inspire them for further exploration.

However, to realize the ethical values of blockchain technology, people should first narrow down the education, digital, and language gap. The first thing that should be done is to enhance infrastructure construction by making equipment accessible and offering a stable network. International governmental organizations, such as the United Nations and the World Bank, and international non-governmental organizations could offer financial and technical support for infrastructure construction. When the digital gap is narrowed down, people can use online courses to learn blockchain technology and English. Also, volunteers who are fluent in English and specialists in blockchain technology can help people who plan to apply the technology.

Relevant Materials:

[1]Duke Kunshan is a world-class liberal arts university based in Kunshan, China, that offers a range of high-quality, innovative academic programs for students from around the world. It was established in September 2013 as a U.S.-China partnership between Duke University and Wuhan University.

[2]Duke University is a private research university founded in 1838 in Durham, North Carolina. It is ranked among the top universities in the United States.

Acknowledgments:

Design: Austen Li

Executive Editors: Xinyu Tian

Supervisor and Chief Editor: Prof. Luyao Zhang