There is a lot of confusion, misunderstandings, and misconceptions around the connection between blockchain and impact. What do I mean when I say blockchain? What do I mean when I say impact? I intend on clarifying all that here.
In this first series of articles my goal is to give the foundations for true beginners and make my way to the applications and why they’re interesting. If you know the basics, skip ahead and jump around.
The Basics
For most people "Blockchain" is indistinguishable from Bitcoin, and Impact is not clear as a category that has to do with environment and society. A good place to start would be to dive in to some definitions.
Below you’ll find a lot of explanations and videos. This is a very intro level explanation of some of these terms. Hopefully this inspires you to open some tabs, do some reading, join the discussion.
What do we mean when we say “Impact”?
Merriam-Webster:
“a powerful or major influence or effect”
But we’re not talking about that, we’re talking about impact in markets, business, philanthropy, etc. There is quite a bit of interpretation behind this term, but for the sake of this conversation we’ll start with impact as defined by Sir Ronald Cohen: “Impact is the measure of an action’s benefit to people and planet…it has social and environmental dimensions.”[1] Sir Ron borrowed this term from the Rockefeller Foundation that in 2007 rebranded “Social Investment” as “Impact Investing”.
Let’s take that sentence apart for a second:
- When we say action what we mean is actually an economic action.
- I take issue with the use of the word benefit in the sentence because, impact can be also negative.
- By people and planet we mean society and the environment.
- The word measure is actually most crucial here, as what we can’t measure, we can’t manage. And measuring impact is the heart of much of the conversations in this space today.
The Rockefeller foundation mentioned above defined it like this:
The Rockefellers aren’t talking about philanthropy but rather about an investment that creates a return. A helpful way to think of this is as a spectrum, between traditional investing, that requires a return on investment, and philanthropy (a donation without expectation of return).
We can summarize by saying that when we talk about “Impact” we mean:
“Any economic action that has an effect on society or the environment”
Which brings us to the next important definition, “Sustainability”.
What do we mean when we say sustainability?
Well, it kind of depends who you ask, but if you would ask the United States’ EPA they would say “Sustainability is based on a simple principle…to create and maintain the conditions under which humans and nature can exist in productive harmony to support present and future generations.”
That is a nice way to put it, but we could be clearer and say that it’s more like a Venn diagram with 3 main factors:
- Environment
- Society
- Economics
A common misconception is that everything environmental is sustainable. I beg to differ as so many environmental initiatives do not have the economic wherewithal to survive, hence, be sustainable. Many are dependent on funding from philanthropy, the state, public donations, etc. – that is not sustainable.
We can see that there is a clear connection here between sustainability and impact. At times, people use these terms interchangeably. I prefer the term impact as it includes the aspect of measurement and the possibility for negative impact, whereas, sustainability is mainly positive.
What do we mean when we say blockchain?
Put succinctly, a blockchain is:
“A decentralized, digital, record of transactions”
Lets break that down:
- Decentralized – There is no central authority organizing this record, instead, everyone is keeping tabs on the record and maintaining its authenticity
- Digital – it is digital data that is recorded, it happens over the internet, all over the world between multiple players.
- Record – it is a ledger, or a long record, that is unchangeable after each addition.
- Transactions - this ledger is a record of transactions that can be anything from money changing hands, to art and even land deeds theoretically. The record is a record of what went where.
Much has been written and said about blockchain, what it is, how it works, etc. There are plenty of guides, and if the above explanation was not enough (it’s not), then here are some YouTube videos to help:
They all explain the same thing, but sometimes different people need different materials to learn, I hope these help!
Why does blockchain matter?
Blockchain or Distributed Ledger Technology (DLT) is useful because, aside from it being a system of organising and storing information, it ensures several benefits.
In the UN’s report “The Future is Decentralized”[2] they lay out these main traits that make this technology meaningful:
- Immutability - Since multiple copies of a blockchain are kept and managed by consensus across a peer-to-peer network, no one peer can alter past transactions.
- Security - It is based in cryptography and is it's integrity is maintained by various disinterested parties.
- Verifiability - The combination of transparency and immutability allows us to satisfy full public verifiability: Anyone in the world can check for themselves that the rules of the system are being followed.
- Resilience - The distributed nature of the ledger makes it resilient. Even if many peers go offline, the information is still accessible.
- Transparency - The fact that all transactions are broadcast to all peers also makes the ledger transparent. However, the encrypted nature of the transactions means that privacy is also assured.
Blockchain vs. Cryptocurrencies
This “decentralized, digital record of transactions” that we mentioned is pretty great, but what do we transact on it? We can transact whatever digital thing we’d like. This first thing we started to transact is an arbitrary value called Bitcoin, the first popular cryptocurrency.
Thinking of Bitcoin as a physical coin is misleading, think of it more like your bank account, moving money around from one account to the next. No piece of paper or coin has gone anywhere, it’s really just a record at the bank (just like your real bank account!). Similarly to the US Dollar or a brick of gold, Bitcoin has value because people believe it does.
The difference between blockchain and crypto is that blockchain is the technological infrastructure (it is the road), crypto is the asset (the car driving on that road).
There are a number of different blockchains, competing with, and complementing, each other. Each blockchain uses a different method to incentivize use of it.
Imagine that if the road you drove on was a toll road. But this road would allow you to get toll credits if you maintained it. So if you picked up trash, fixed potholes, accounted for cars coming and going, you would get toll credits – that is essentially how cryptocurrencies are mined.
Crypto is merely the currency of a given blockchain or ecosystem on a blockchain. Crypto is what allows you to use the infrastructure, and also what it rewards you for maintaining it. The only difference is that this road only has validity so long as everyone wants to use and maintain the road. Otherwise, your toll tokens aren’t worth very much.
Where do blockchains and impact meet?
We are at the dawn of a technological revolution. The power and potential of this infrastructure can truly bridge meaningful gaps in our society, economy, and even the environment. There are many ideas being floated around in this new landscape, but implementation has barely begun. Every day new ecosystems and groups join, grow, and introduce novel concepts as to how we might use this innovation to change the world.
Blockchain Bridge is here to make the connections between the potential for impact, and the technologies and breakthroughs arising in the blockchain space. It is an exploration and experiment as to how we can use this technology to fix some of the problems that arise from our current economy, society, and environment.
Join me on this exciting journey to see what might happen as we bridge the gaps between these worlds.