You can observe two trends with food manufacturers these days:
- carbon footprint reduction
- blockchain deployment
While reducing the carbon footprint is good for the environment, blockchain allows better traceability of products throughout the supply chain. This has become a trend in the food supply chain after a number of food frauds were uncovered, including the horse meat scandal, the melamine crises, and the fipronil scandal. Using blockchain operations is aimed to reduce the opportunity for fraud in the food industry, which is a desirable endeavor. Except that reducing carbon footprint and using blockchain are not compatible. Let me explain why.
Why reducing carbon footprint and using blockchain are incompatible
If you are a gamer on the lookout for the fastest (and most expensive) graphic card, you may have noticed that there is a shortage. And it’s not because there are many new gamers. It’s because many of the high-end, energy-hungry graphics cards with their super-fast graphic-processor-units (GPUs) are used for cryptocurrency mining. And using GPUs is significantly less expensive than using the computers’ CPU. Cryptocurrency mining, like any other blockchain operation, consumes incredible amounts of energy.
How much energy is consumed by blockchain operations?
Since there are only few data available for how many blockchain transactions are currently performed in the food supply chain, we use bitcoin as a surrogate model for now. Just bear in mind that the underlying blockchain process of creating bitcoin transactions and transactions in the food supply chain is the same in terms of energy consumption. So how much energy does it take to create a bitcoin? Approximately 800 kWh. And to put this into perspective of credit card transactions: one bitcoin transaction requires as much energy as approximately 500,000 credit card transactions. A massive amount.
Looking at the current number of bitcoin transactions, it equates to 52 TWh per year. This is 92% of the energy Greece uses, or, in other words: if you were to use the energy needed for todays’ bitcoin transactions for Greece, you can power the entire country for more than 11 months per year. Similar data have been generated for Ireland by Karl O’Dwyer and David Malone in their publication “Bitcoin mining and its Energy footprint”.
What does this mean for food manufacturer and their carbon footprint?
The average US household uses around 10,000 kWh of electricity, according to the US Energy Information Administration. Using the EPA carbon footprint calculator, this equates to 121,000 lbs (approx. 54,884 kg) CO2 per year. So for the current amount of bitcoin transactions (52 TWh), this generates 628,391,025,600 lbs (285,033,374,588 kg) CO2 per year, a massive amount. And even if the food supply chain only uses a portion of what is required for bitcoin mining, it will still have a significant adverse effect on the environment.
This is why blockchain, in its current form, is not sustainable.
Should the food supply chain stop using blockchain?
The short answer is: yes, in its current form. And it’s not just the food supply chain. Any sector deploying blockchain operations will need to reconsider if using it in the current form is sustainable for their business. There are ways out though, and some companies are already working with the alternatives.
The current blockchain, developed by its inventor, Satoshi Nakamoto, is based on the “Proof-of-Work” (PoW) protocol. In simple terms, the participants of a blockchain system work by solving complex cryptographic tasks, thereby validating the transactions within the network (this is where the huge energy consumption happens). Once a sufficient number of transactions have been made, they are grouped into a block. As reward for those working in the system, each participant is awarded a number of bitcoins (or a fraction of a bitcoin). This kind of work is called mining, and the participants are miners.
One alternative to this is Proof-of-Stake (PoS). In PoS-based cryptocurrencies, the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e., the stake). PoS is a significantly less energy-intensive algorithm than PoW.
For environmentally-conscious food manufacturers and supply companies, it means that blockchain systems are not out-of-reach, but PoW should not be deployed if the carbon footprint is to be kept low.
