Blockchain and the Bioeconomy: Potential Bedfellows?

Posted in: biobased

Blockchain technology is being deployed across a variety of sectors, but how well does it suit the bioeconomy?

Blockchain is the technology du jour, seeing rapid increases in its deployment across a variety of industries from banking to farming, a popularity driven by the recent successes of the Bitcoin virtual currency, which uses blockchain technology as its primary source of security. But what exactly is blockchain, when one strips away all the buzzwords around decentralisation and peer-to-peer transactions? And could use of blockchain be a boost for the bioeconomy?

What is blockchain?

Stripped down to its barest of bones, a blockchain is simply an electronic logbook or ledger. As its name would imply, it consists of “blocks” in a “chain”. Each block is simply a record of a transaction: a string of code indicating what has been transferred and to whom, along with a unique code, known as the hash. The chain is simply the complete list of all of these blocks. What, then, differs a blockchain from an ordinary electronic register? The key is in not only the hash, but in how the blockchain is stored.

Security features

A blockchain system is built in such as way as to ensure the records are both difficult to delete and difficult to modify. The former comes easily: every blockchain is publicly viewable, and stored separately on a large number of computers (known as the blockchain network). This makes blockchain records inherently difficult to delete, as a potential saboteur would have to remove the record from each computer individually. Not an impossible task, but one that would require a degree of effort so large it is unlikely to be attempted. It is here that one of blockchain’s emergent properties presents itself: it becomes more secure with scale.

The second feature, wherein records are difficult to alter, comes from the way in which blocks are processed by the network and added to the chain. Every transaction has a unique hash code, which is generated by a complex algorithm known only to the computers on the network. Every block includes not only its own hash, but the hash of every block preceding it in the chain, meaning if a part of the blockchain is altered, it becomes easy to spot, as the hash code will differ from what is expected. Thus, if one were to attempt to alter a record in a blockchain, one would have to likewise alter every subsequent block, generating new consistent hash codes. This is, once again, computationally intensive to the point of being functionally impossible, particularly if the blockchain continues to grow.

The last advantage of blockchain systems is decentralisation: unlike other systems wherein some central authority is responsible for maintaining and validating the records (a system that is susceptible to corruption), blockchain has no such authority. Instead, blockchain systems work on a consensus model, wherein once a transaction is completed, all the computers in the network work simultaneously to derive the next block in the chain, but only one will successfully do so, updating the blockchain when it does, in a process called mining. Which computer does so is essentially random, assuming processing power is approximately evenly distributed across the network. Thus, any computer on the network attempting to malignantly alter the blockchain by falsifying the data in the transaction (thus compromising the blockchain) would have a very low chance of doing so, meaning it would not be worth the effort for hackers to attempt to do so, unless they were somehow able to control the majority of the processing power of the network (known as a 51% attack). It is here again that blockchain restates its most powerful feature: it becomes a more secure system with increased scale.

Combine all of the above, and large scale blockchain systems are secure by virtue of being unappealing prospects to attempt to hack, and with no central authority, cannot be easily corrupted.

A tool for the bioeconomy’s arsenal?

At first glance, it may seem like technology such as blockchain may be far removed from something the bioeconomy would be interested in. When one talks about “technology” in a bioeconomy context, it conjures images of biorefineries and genetically modified organisms, rather than computers. However, a look at the bioeconomy at a system-level shows how blockchain technology could indeed be applied.

In any sustainable economy, credentials count: biobased products will market themselves based carbon savings compared to petroleum-based equivalents, biofuels will only receive government support if they can demonstrate a better carbon economy than fossil fuels, and feedstocks must be shown to not be contributing to indirect land-use change, offsetting their carbon benefits by resulting in rainforest being cleared. In many cases, it is in the hands of the producer of the biobased product to demonstrate to the appropriate authority those credentials, and said authorities have strict regulations on how this information must be reported, in an effort to prevent falsification.

A blockchain system here would have obvious advantages: an entire supply chain can be recorded in a single system, providing clear evidence of emissions factors throughout – information that would otherwise require an extensive life-cycle analysis to obtain. This would help to evidence the carbon benefits of biobased products at a much finer level of precision than would otherwise be feasible, reducing the need to “black box” sections of the supply chain when reporting emissions. The same could be said of any sustainability credential, not just emissions. This would benefit authorities by reducing the amount of admin required to check compliance, and would also aid other stakeholders by more clearly showing which areas of the supply chain could most easily be improved.

Blockchain also has obvious benefits to sustainability regulation systems that relying on market principles, such as the UK’s REGO and RTFO systems, whereby producers of renewable energy or transport fuels are awarded certificates that they can then sell to distributors. Since blockchain is specifically built to handle transactions, authorities could be confident that no accidental double-counting was occurring, and producers and distributors could be safe in the knowledge that none of their competitors were gaming the system, thanks to its security.

Concerns about scale and sustainability

However, while blockchain looks ideal for the bioeconomy in theory, there are several concerns that must also be addressed, as is the case with any new technology. The first is the obvious issue of scale. Good blockchain systems retain their security by virtue of being too large to reliably compromise. Bitcoin is supported by a network of millions of computers worldwide: a scale that rival cryptocurrencies cannot compete with. Bioeconomy stakeholders, however, don’t tend to be sprawling international enterprises able to support networks of millions of computers, and so any blockchain system developed within the bioeconomy is going to have inherently weaker security credentials. This can of course be solved by outsourcing the blockchain technology – as American biofuel producers Gevo have done – to third parties that can provide the network scale required for peace of mind. Getting third parties involved may trigger worries about security, but blockchain companies know that they are only viable on the market if they can be trusted, and so employ strict protocols of their own before computers are admitted to their networks to help mine the blockchain. The other offshoot of the outsourcing problem is that all members of the supply chain must be able to access and contribute to the blockchain, or its inherent benefit is nullified. This, as with any industry, is no mean feat when a supply chain spans multiple continents, and as with any ledger system, blockchain is not immune from user error (but could make it easier to track down such errors).

The second concern is a more oblique one, but one that must be at the forefront of thinking for a sector like the bioeconomy which relies on sustainability as a selling point. Since blockchain technology relies on huge networks of computers running intense programming in order to maintain its structure and security, this obviously requires a huge amount of electricity. It has been widely reported that the Bitcoin blockchain has an annual energy consumption in the tens of terawatt hours, eclipsing the energy consumption of many countries, and this is just one such system (albeit among the biggest). This, in turn, gives blockchain a large carbon footprint, which may well offset any carbon savings that arise as a result of employing the technology. There is a concerted effort from blockchain providers to address this problem, by either making the mining system more energy efficient, or by changing the consensus system from one that requires large numbers of computers to one that requires a much smaller number of trusted computers. How blockchain providers overcome this sustainability issue will no doubt have a large impact on how widely adopted the technology becomes.

It is important to remember though that blockchain is a relatively new technology, and one that was conceived as a foundation for cryptocurrency, rather than sustainability tracking. New applications for the technology are out there to be found, and so it is no surprise that bioeconomy stakeholders have had their interest piqued: for a sector that relies so heavily on reliable tracking and reporting, new technology to improve the efficacy and security of this is always welcome.

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This article was written by Bob Horton, Research Analyst at NNFCC.

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